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Fundamental trading. No charts or indicators

  • #1
  • First Post: Edited Jul 23, 2012 8:46pm Jul 18, 2012 12:15pm | Edited Jul 23, 2012 8:46pm
I'm tired of charts and magic indicators that doesn't work so in the coming days I will attempt to use the fundamentals to build a long term portfolio. Below you can see the currencies I am interested in trading.

AUD, CAD, COP, CZK, EUR, GBP, HKD, HUF, ILS, ISK, JPY, MXN, MYR, NOK, NZD, PLN, RUB, SGD, SEK, THB, USD, TRY, ZAR

I will combine high interest rates with low interest rates and if there isn't a big difference in interest rates I will combine a negative current account balance with a positive current account balance. I will not sell japanese yen or other currencies that often have periods of deflation and except from MXN I will not make a trade where I buy the currency of an emerging market and sell the currency of a developed market. I don't have enough money to trade but I will build a hypothetical portfolio and update this thread each month.

Update
I have decided to open a demo account with alpari and the list of currencies is reduced to 11.

AUD, CAD, EUR, GBP, JPY, MXN, NOK, NZD, SGD, SWE, USD

Carry trades That I want to buy
AUD/USD, AUD/CAD, NZD/USD.

Carry trades that I want to sell
USD/MXN, EUR/MXN, GBP/AUD, EUR/AUD, GBP/NZD.

Short current account trades
USD/JPY, GBP/JPY, EUR/JPY, CAD/JPY, USD/SGD, GBP/SGD, EUR/SGD, CAD/SGD, EUR/SEK, GBP/SEK, USD/SEK, EUR/NOK, GBP/NOK, USD/NOK.

I didn't find any buying opportunities where I combine a current account surplus with a current account deficit.

All of the current account trades have an interest differential of less than 2 % And the carry trades have an interest differential of at least 2 %.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #2
  • Jul 18, 2012 1:43pm Jul 18, 2012 1:43pm
with all due respect, interest differentials has zero to do with currency movements in this global economic environment. current account means nothing too. it is rather unfortunate. Global money flows is based on risk...as in risk on, risk off. Or like shomari likes to say, RORO.

even worse, the vagaries of the politician and there hopium does a lot to move the market...

If you are interested...http://www.tradingeconomics.com has raw fundamental data for you.

best of luck

--skynet.

Quoting Gambler180
I'm tired of charts and magic indicators that doesn't work so in the coming days I will attempt to use the fundamentals to build a long term portfolio. Below you can see the currencies I am interested in trading.

AUD, CAD, COP, CZK, EUR, GBP, HKD, HUF, ILS, JPY, MXN, MYR, NOK, NZD, PLN, RUB, SGD, SEK, THB, USD, TRY, ZAR

I will combine high interest rates with low interest rates and if there isn't a big difference in interest rates I will combine a negative current account balance with a positive current account balance. I will not buy japanese...
" It may mean something. It may mean nothing at all "
  • #3
  • Edited 4:00pm Jul 18, 2012 2:20pm | Edited 4:00pm
Quoting Skynet
with all due respect, interest differentials has zero to do with currency movements in this global economic environment. current account means nothing too. it is rather unfortunate. Global money flows is based on risk...as in risk on, risk off. Or like shomari likes to say, RORO.

even worse, the vagaries of the politician and there hopium does a lot to move the market...

If you are interested...http://www.tradingeconomics.com has raw fundamental data for you.

best of luck

--skynet.
I have looked at many different charts and my analysis tells me that if you combine the currency of a country with a current account surplus with the currency of a country with a current account deficit and that the interest differential isn't large then the currency of the country with a surplus generally rises more than it falls. If there is a large interest differential the money tends to flow to the country with a high interest rate. GBP/JPY is a good example. The UK has a current account deficit and japan has a surplus. For many years traders ignored the current account numbers because the interest rate in the UK was too attractive so GBP/JPY rose in value. When the interest rate was cut the pair fell off a cliff. Now the current account balances determine the direction of this pair.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #4
  • Jul 19, 2012 4:41am Jul 19, 2012 4:41am
Quoting Gambler180
If there is a large interest differential the money tends to flow to the country with a high interest rate. GBP/JPY is a good example. The UK has a current account deficit and japan has a surplus. For many years traders ignored the current account numbers because the interest rate in the UK was too attractive so GBP/JPY rose in value.
Interesting observation.

However I noticed from the chart that GBP/JPY has been on the way down since 2007. As far as I can remember, Japan is having 0 or negative interest rates for a number of years already.
Never Say Die
  • #5
  • Jul 19, 2012 4:44am Jul 19, 2012 4:44am
No chart?
  • #6
  • Jul 19, 2012 5:12am Jul 19, 2012 5:12am
Quoting Skynet
with all due respect, interest differentials has zero to do with currency movements in this global economic environment.
Pairs with positive interest rates difference like aud/jpy , nok/usd are raising during risk on sentiment and vice versa. This kind of portfolio will do well while major indexes are raising.
  • #7
  • Jul 19, 2012 5:31am Jul 19, 2012 5:31am
Good luck with your trading. Why don't you try a demo account - it would be easier to maintain the (hypothetical) portfolio, interests, swaps will be calculated correctly etc. Just because there's an interest rate difference, it doesn't mean you're making money sitting in the trade!
forget about tomorrow, just steal away into the night
  • #8
  • Jul 19, 2012 6:17am Jul 19, 2012 6:17am
Quoting spekitox
Good luck with your trading. Why don't you try a demo account - it would be easier to maintain the (hypothetical) portfolio, interests, swaps will be calculated correctly etc. Just because there's an interest rate difference, it doesn't mean you're making money sitting in the trade!
Do you of know a broker that offers pairs like CAD/ILS and EUR/RUB? I know that saxobank offers a lot of pairs but the demo account expires after 20 days. I need to use the demo account for at least a year.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #9
  • Jul 19, 2012 6:32am Jul 19, 2012 6:32am
Chances are you will not find all those pairs and crosses with the same broker. Oanda could be your choice anyway, they have lots of exotics and the demo never expires. And they never harassed me about opening a real account.
The question is, do you want to open an account or not. You can be fine either way, just a demo account is a step closer to the real thing than literally paper trading. Anyway, stick or twist, the choice is yours ...

Quoting Gambler180
Do you of know a broker that offers pairs like CAD/ILS and EUR/RUB? I know that saxobank offers a lot of pairs but the demo account expires after 20 days. I need to use the demo account for at least a year.
forget about tomorrow, just steal away into the night
  • #10
  • Edited 8:36am Jul 19, 2012 7:43am | Edited 8:36am
I have decided to use alpari as my broker and the list of currencies is reduced to 11.

AUD, CAD, EUR, GBP, JPY, MXN, NOK, NZD, SGD, SWE, USD

Carry trades That I want to buy
AUD/SGD, AUD/USD, AUD/CAD, NZD/SGD, NZD/USD

Carry trades that I want to sell
USD/MXN, EUR/MXN, GBP/AUD, EUR/AUD, GBP/NZD

I would also like to trade the following pairs but that is not possible with alpari.
AUD/SEK, GBP/MXN, AUD/NOK, CAD/MXN, MXN/SEK, MXN/NOK
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #11
  • Jul 19, 2012 7:58am Jul 19, 2012 7:58am
Good decision. I demoed Alpari for a loooong time, it's OK. I think the demo expired but I just re-registered and Bob was my uncle.

BTW I very much like your simple rules, like never sell the currency of a developed nation versus the currency of a not-so-developed nation.
It's just basic logic isn't it ... never bet that the poor will outperform the rich in anything ... except birth rates LOL

Happy trading!
forget about tomorrow, just steal away into the night
  • #12
  • Jul 19, 2012 8:23am Jul 19, 2012 8:23am
Quoting spekitox
Good decision. I demoed Alpari for a loooong time, it's OK. I think the demo expired but I just re-registered and Bob was my uncle.

BTW I very much like your simple rules, like never sell the currency of a developed nation versus the currency of a not-so-developed nation.
It's just basic logic isn't it ... never bet that the poor will outperform the rich in anything ... except birth rates LOL

Happy trading!
Especially now with the problems in Europe and money flowing into save havens. It is so bad that some of the save havens have negative bond yields.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #13
  • Edited 9:17am Jul 19, 2012 8:50am | Edited 9:17am
Short Current account trades
USD/JPY, GBP/JPY, EUR/JPY, CAD/JPY, USD/SGD, GBP/SGD, EUR/SGD, CAD/SGD, EUR/SEK, GBP/SEK, USD/SEK, EUR/NOK, GBP/NOK, USD/NOK

I didn't find any buying opportunities where I combine a current account surplus with a current account deficit.

All of the current account trades have an interest differential of less than 2 %.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #14
  • Jul 19, 2012 9:44am Jul 19, 2012 9:44am
Quoting rezky
Interesting observation.

However I noticed from the chart that GBP/JPY has been on the way down since 2007. As far as I can remember, Japan is having 0 or negative interest rates for a number of years already.
Maybe investors expected that the rate would be cut and got out of the carry trade before it happened.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #15
  • Edited 7:40pm Jul 19, 2012 7:18pm | Edited 7:40pm
I am thinking about whether I should open one account for all the trades or one account for the carry trades and one account for the current account trades. What do you think?

These are the trades I will make.

AUD/SGD, AUD/USD, AUD/CAD, AUD/GBP, AUD/EUR, JPY/USD, JPY/GBP, JPY/EUR, JPY/CAD, MXN/USD, MXN/EUR, NOK/EUR, NOK/GBP, NOK/USD, NZD/SGD, NZD/USD, NZD/GBP, SEK/EUR, SEK/GBP, SEK/USD, SGD/USD, SGD/GBP, SGD/EUR, SGD/CAD.

The first symbol in each pair is the currency that I will buy.

This list shows the percentage that I should trade for.
Attached Image
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #16
  • Edited 8:55pm Jul 20, 2012 8:34pm | Edited 8:55pm
Today I have decided to remove two currency pairs because it doesn't make sense to make a trade where I buy a currency and then make another trade where I sell the same currency. I have also calculated how many dollars I should allocate to each currency pair. I will start with 1 million dollars but I will not be fully invested because of rounding errors. I think that I will use 1:2 leverage but I will only invest the amounts listed below. The reason for using leverage is that I need a little extra money to make at least one small trade each month to prevent my demo account from being closed.
Attached Image (click to enlarge)
Click to Enlarge Name: Allocation.JPG Size: 82 KB
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #17
  • Jul 22, 2012 12:13am Jul 22, 2012 12:13am
Quoting Gambler180
I am thinking about whether I should open one account for all the trades or one account for the carry trades and one account for the current account trades. What do you think?
Good idea, you can track your progress better with separate (sub)accounts. Some brokers allow you to open subaccounts so switching is as simple as clicking a button.

Please keep us updated. I like your approach because of simplicity, seeking balance and the pretty pie chart
forget about tomorrow, just steal away into the night
  • #18
  • Jul 23, 2012 2:56pm Jul 23, 2012 2:56pm
I am thinking about whether or not I should use leverage. I wrote before that I would only invest 1 million but it is very tempting to use leverage so I can invest more. Why only earn 10 % in a year if I can use leverage to earn 30 %?
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #19
  • Jul 23, 2012 8:53pm Jul 23, 2012 8:53pm
I have just added a trade explorer to this thread. I decided to create a $100.000 account with 1:5 leverage and I used about 78 % of my margin(almost $400.000).
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #20
  • Jul 28, 2012 2:00am Jul 28, 2012 2:00am
1.1 % in the first week. Not bad
If slaughterhouses had glass walls, everyone would be a vegetarian!
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