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  • #561
  • Feb 22, 2012 1:56pm Feb 22, 2012 1:56pm
Quoting 2+2=4ex
Compared to a couple months ago, my carry trade account looks like a completely different account
Sounds good! I'm slowly clawing my way back up. Income is back up to almost $60/month again.
  • #562
  • Feb 29, 2012 9:06pm Feb 29, 2012 9:06pm
February is in the bag with a 36% return on equity.

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  • #563
  • Feb 29, 2012 9:12pm Feb 29, 2012 9:12pm
Quoting capitalist88
February is in the bag with a 36% return on equity.

Attachment
Nice comeback!
  • #564
  • May 2, 2012 6:47pm May 2, 2012 6:47pm
Huh... did I not put the March results here yet? Guess not. Anyway, here's the updated table. ROE for March was -25% and April was flat.

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  • #565
  • Jun 4, 2012 6:46pm Jun 4, 2012 6:46pm
May was horrendous, with an ROE of -44%.

This is that phase of the 10 year plan that I've discussed before, where the Euro cracks up and everyone floods into the dollar, thus providing me with great selling prices. At least that's the idea. After that, when everybody gets over Euro implosion, I'll be looking for crisis off/risk on mode, which is when people generally move out of the dollar. In addition, I think we'll see the Fed continue to monetize the debt, and that's gotta catch up to the dollar at some point. So there you have it.

I'm moving another $350 into the account this month, since I have some extra cash available and I can use it to improve my average entry points.

Here's the updated results table.

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  • #566
  • Jul 13, 2012 1:27pm Jul 13, 2012 1:27pm
But what if Oanda's not around in 10 years?

Imagine if they get into financial difficulty and you were given only a few days to unwind ALL your carry position.... not pretty imo.
  • #567
  • Jul 15, 2012 7:29am Jul 15, 2012 7:29am
Hi, Scott.

I believed that your existing carry trade would only have a leverage of 20 times due to limit set by Oanda.

Imagine if you would have a leverage of 50 times, your returns will be magnified.

Of recent, I had switched some of my funds to CMC Market. It offered 50 times for all the pairs.

I have long TRY/JPY. For 1000 units, my margin is $14 and my returns is $0.15 daily. After calculations, my absolute return is about 390%.

Regards,
Judy
  • #568
  • Jul 16, 2012 1:31pm Jul 16, 2012 1:31pm
Quoting Iro
But what if Oanda's not around in 10 years?

Imagine if they get into financial difficulty and you were given only a few days to unwind ALL your carry position.... not pretty imo.
I would just withdraw the remaining equity as cash and use that to open up the exact same positions at another broker. My position wouldn't change at all. "Paper losses" is a misleading concept. They're real losses right now, whether I unwind or not.
  • #569
  • Jul 16, 2012 1:32pm Jul 16, 2012 1:32pm
Quoting ultrameg
Hi, Scott.

I believed that your existing carry trade would only have a leverage of 20 times due to limit set by Oanda.

Imagine if you would have a leverage of 50 times, your returns will be magnified.

Of recent, I had switched some of my funds to CMC Market. It offered 50 times for all the pairs.

I have long TRY/JPY. For 1000 units, my margin is $14 and my returns is $0.15 daily. After calculations, my absolute return is about 390%.

Regards,
Judy
Hi Judy,

I know, I'm using much lower leverage. I try to maintain it at only 8:1.
  • #570
  • Jul 17, 2012 11:14am Jul 17, 2012 11:14am
Quoting capitalist88
Hi Judy,

I know, I'm using much lower leverage. I try to maintain it at only 8:1.
Scott,

What's the reason behind for maintaining 8:1?

I think that for carry trade, the higher the leverage, the more merrier will be the returns. Based on my previously post, I am literally earning at 1% daily. After 100 days, I would have earned back the margin and that position is "free" and generating passive income.

Regards,
Judy
  • #571
  • Jul 17, 2012 1:47pm Jul 17, 2012 1:47pm
Quoting ultrameg
Scott,

What's the reason behind for maintaining 8:1?

I think that for carry trade, the higher the leverage, the more merrier will be the returns. Based on my previously post, I am literally earning at 1% daily. After 100 days, I would have earned back the margin and that position is "free" and generating passive income.

Regards,
Judy
It's risk control. I'm not as concerned with what I'm making as with what I'm risking, and with staying in for the long haul. Remember the big plunge in equity I had right after the U.S. lost its credit rating?
  • #572
  • Jul 17, 2012 10:17pm Jul 17, 2012 10:17pm
Quoting capitalist88
It's risk control. I'm not as concerned with what I'm making as with what I'm risking, and with staying in for the long haul. Remember the big plunge in equity I had right after the U.S. lost its credit rating?
Scott,

I understand that risk control is important. What if you can have the best of both world, maximum leverage and no risk at all?

Take for example, EUR/AUD, based on major trend, I did a short at 1.25.
It continue to drop to 1.24, after that, I place a stop-loss at my entry point, 1.25. In this case, I am enjoying good carry with maximum leverage. If in the event that my stop-loss is hit, I do not loss a single cent while enjoying the free carry previously.

Hope it clarifies.

Regards,
Judy
  • #573
  • Edited 7:48pm Jul 18, 2012 5:35am | Edited 7:48pm
Quoting ultrameg
Scott,

I understand that risk control is important. What if you can have the best of both world, maximum leverage and no risk at all?

Take for example, EUR/AUD, based on major trend, I did a short at 1.25.
It continue to drop to 1.24, after that, I place a stop-loss at my entry point, 1.25. In this case, I am enjoying good carry with maximum leverage. If in the event that my stop-loss is hit, I do not loss a single cent while enjoying the free carry previously.

Hope it clarifies.

Regards,
Judy
If you set a stop loss, then you are not carry trading. The purpose of a carry trade strategy is to leave the position open to earn interest continuously. The only time you might close or reduce a position is to either lower your margin requirement (lower risk) or transfer the position to another currency that yields a higher interest rate. If you set a stop loss and get stopped out, then you have to renenter the position and pay additional (and unneccesary) spread. If you're not at the desk when the position closes in order to reenter immediately you will also lose the interest you would have made on the position for the time it was out of the market - aside from possibly losing position if the trade goes in your favor after hitting the stop. Also, what if the trade immediately goes into drawdown and never gives you a chance to set stop loss at breakeven? Not saying a strategy with stop loss for positive interest positions is useless or worse. That is up to the trader to determine based on their preferences.

Personally, I like the way Scott has planned and managed his account. He tweaks the exposure based on his margin levels. That way he can be somewhat aggressive in trying to build positions up quickly when the market turns in favor and becomes interest friendly. The positives are twofold. His entries are in early in the 'building-up' trend and can therefore accumulate exponentially. Which also allows for the interest to grow exponentially. It's based on the concept of add to winners and reduce from losing trades.

With that said, I too have a carry trade account however I manage it slightly different. I use more than 8:1 leverage to "squeeze" more interest out of my positions (relative to size). That can come with more risk if you're not careful. I also don't cut down positions. Instead I have a resorvoir of equity that I can tap into if I need to add to to keep margin levels safe. It's simple for me because it's in another trading account with the same broker so all I have to do is transfer it. That way it's also instant in case I need it there fast! As bad as the environment has been for carry trading the last few years, I have only needed to add/transfer money on two occasions and I've already been able to extract the amount from the first transfer back to the originating account.

Carry trading is a long term strategy. You have to prepare and keep in mind that things will change and could change drastically. My biggest concerns are broker going out of business and economy being stuck in a major rut for 10+ years. With the former being the larger concern. If the broker shall go out of business hopefully I can get the equity back quickly to place with another broker so as to not lose my position or time.
  • #574
  • Jul 18, 2012 12:55pm Jul 18, 2012 12:55pm
Quoting ultrameg
Scott,

I understand that risk control is important. What if you can have the best of both world, maximum leverage and no risk at all?

Take for example, EUR/AUD, based on major trend, I did a short at 1.25.
It continue to drop to 1.24, after that, I place a stop-loss at my entry point, 1.25. In this case, I am enjoying good carry with maximum leverage. If in the event that my stop-loss is hit, I do not loss a single cent while enjoying the free carry previously.

Hope it clarifies.

Regards,
Judy

It does clarify to a point, but I still have two questions.

1. What if it had gone the other way when you first entered?

2. If the stop is hit and you're out of the position completely, how do you re-enter?
  • #575
  • Jul 18, 2012 1:03pm Jul 18, 2012 1:03pm
Yes 4EX, that's pretty much my philosophy as well; I want to stay in the position at all times while just tweaking it to keep my risk controlled.

The position is like a coiled spring... when it's going against me I'm cutting its size, and that process can only continue up to some limit, so my risk is finite. When the position is going in my direction (which it hasn't done much lately), then I'm ADDING to it and the gains explode, with no definite limit.

And all through the entire process I'm accumulating interest which buffers my losses. Also, even though I reduce position size when price goes against me, when I start building it again I'm getting better prices, so my average entry size is constantly improving. So today's losses are in a sense setting me up for greater gains later.

EDIT: This last point is apparent from the charts on my site. Over the short run, I might be reducing my position as it goes against me, thus "buying at the top" a lot. However, the overall position is really a cluster of sells, and those clusters occur at higher and higher points as the pairs rise. So in the short run, I may be buying on the way up, but in the long run I'm really selling on the way up.
  • #576
  • Jul 18, 2012 6:46pm Jul 18, 2012 6:46pm
Looks like I never put up June's results. The ROE was 13% for June. Here's the updated table:

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  • #577
  • Jul 18, 2012 9:48pm Jul 18, 2012 9:48pm
Scott (or anyone else), do you have this spike on your USD/HUF chart from October/2011?
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  • #578
  • Jul 19, 2012 9:15pm Jul 19, 2012 9:15pm
Quoting capitalist88
It does clarify to a point, but I still have two questions.

1. What if it had gone the other way when you first entered?

2. If the stop is hit and you're out of the position completely, how do you re-enter?
Scott,

1. What if it had gone the other way when you first entered?
Prior going for a particular carry trade pair, I will do some analysis on it.
Take for example, TRY/EUR.
a. 1 year trend is up.
b. It is still on uptrend against the EUR, good for me.
c. Historically low is about 400 pips from current price.

If the trade went against me, I do not worry as I have a reserve of cash balance (equivalent to 400 pips losses). What is the chances to break the historically low? I would said it is pretty slim. Hence, I will continue to collect the daily carry.

2. If the stop is hit and you're out of the position completely, how do you re-enter?
Now I think using B.E. would be a better term. If my position hit B.E. I can
a. If I am available, I will look at the chart and re-enter appropriately.
b. If I am not available, I would have set another limit order to buy in at a better price.

Just want to share an experience which I had with EUR/AUD pair.
I enter at 1.22 region in Jan and it went against me about 800 pips. But I do not care at all as the major trend is still down. It started to drop since May, and now hovering at 1.18 region. A valuable lesson which I had learnt.

Best Wishes and Regards,
Judy
  • #579
  • Jul 20, 2012 1:29am Jul 20, 2012 1:29am
Quoting 2+2=4ex
Scott (or anyone else), do you have this spike on your USD/HUF chart from October/2011?
Nevermind, I also see the spike on the chart you put on your website.
  • #580
  • Jul 20, 2012 2:11am Jul 20, 2012 2:11am
Quoting ultrameg
Scott,

1. What if it had gone the other way when you first entered?
Prior going for a particular carry trade pair, I will do some analysis on it.
Take for example, TRY/EUR.
a. 1 year trend is up.
b. It is still on uptrend against the EUR, good for me.
c. Historically low is about 400 pips from current price.

If the trade went against me, I do not worry as I have a reserve of cash balance (equivalent to 400 pips losses). What is the chances to break the historically low? I would said it is pretty slim. Hence, I will continue...
Hello Judy.

Even though my philosophy is different than yours in regards to setting hard stop losses at breakeven, I think you bring up some valid points. First let me clarify that I'm not opposed to setting hard stops because I believe the br0ker might "hunt" it down, or any of that nonsense. If I were to close or reduce positions, I would just rather manage the floating loss and available margin with a loose approach and trim position sizes after checking the account on a regular interval. Something like Scott does now: check account at least once every 24 hours and take appropriate action when needed.

Now as I previously stated in another post, I don't ever reduce position size. I have taken the alternate approach of adding equity to increase available margin and protect the account from overexposure. I don't like to reduce any of the interest streaming in. I believe the odds are greater for a larger reward in the end this way. Although it could work against me if the position reducing traders are out of the market more often than not when price moves against them. Then they will save money and get in at a better price and with more available margin which effectively improves their average price exponentially. In this case they will build up faster and increase account more than I would in the long term. However this could go against them too if price goes in their favor while they are out of the market. I'd rather be in the whole time collecting interest and take my chances that way. Regardless, I will be building up positions when prices trend in our favor and collect more interest!

BTW, I liked your story where price went against you (as much as 800 pips) but the long term trend was still in your direction and eventually came back to even and then into profit! It brings up the point that carry trading and long term trends are investments more than anything and just require time. Lots of it.

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