Ideas for carry trade | Forex Factory

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Ideas for carry trade

  • #1
  • First Post: Nov 29, 2010 4:39pm Nov 29, 2010 4:39pm
Hi,

I am working on a carry trade strategy, incorporating money management and position sizing. However, I hope to gather enough ideas to develop the test plan.

At the moment, I have a small position of carry trade in AUD/JPY and TRY/JPY.

Welcome any constructive ideas from the amateurs/experts ^_^

Thanks and Regards,
Judy
  • #2
  • Nov 29, 2010 5:11pm Nov 29, 2010 5:11pm
Quoting ultrameg
Hi,

I am working on a carry trade strategy, incorporating money management and position sizing. However, I hope to gather enough ideas to develop the test plan.

At the moment, I have a small position of carry trade in AUD/JPY and TRY/JPY.

Welcome any constructive ideas from the amateurs/experts ^_^

Thanks and Regards,
Judy
yeah, they dont work in the long run. i would be glad to see any of your past results.
  • #3
  • Nov 29, 2010 5:30pm Nov 29, 2010 5:30pm
Quoting ultrameg
Hi,

I am working on a carry trade strategy, incorporating money management and position sizing. However, I hope to gather enough ideas to develop the test plan.

At the moment, I have a small position of carry trade in AUD/JPY and TRY/JPY.

Welcome any constructive ideas from the amateurs/experts ^_^

Thanks and Regards,
Judy
the problem in carry trades is that the basket sizes should be changed as soon as a currency values change. This means adding or removing the positions in order to keep the basket neutral.

The flaw in this system is - spreads and commisions which will eat all you (positive???) swaps.

One thought into consideration - good (clean) brokers most of the time do not offer kind swaps. Think a while where is a catch here...
  • #4
  • Nov 30, 2010 4:23am Nov 30, 2010 4:23am
Quoting whatfx
yeah, they dont work in the long run. i would be glad to see any of your past results.
Hi,

Can you explain to me why carry trade don't work in the long run?

Hope you can elaborate further.

Thanks and Regards,
Judy
  • #5
  • Nov 30, 2010 4:24am Nov 30, 2010 4:24am
Quoting Ulterior
the problem in carry trades is that the basket sizes should be changed as soon as a currency values change. This means adding or removing the positions in order to keep the basket neutral.

The flaw in this system is - spreads and commisions which will eat all you (positive???) swaps.

One thought into consideration - good (clean) brokers most of the time do not offer kind swaps. Think a while where is a catch here...
Hi,

Can you elabrote the part on "spreads and commisions which will eat all"?

I don't quite understand this portion.

Thanks and Regards,
Judy
  • #6
  • Nov 30, 2010 5:52am Nov 30, 2010 5:52am
Quoting ultrameg
Hi,

Can you elabrote the part on "spreads and commisions which will eat all"?

I don't quite understand this portion.

Thanks and Regards,
Judy
Look, having to make the basket neutral you will have to open and close new positions, thus paying more spread and commissions
  • #7
  • Nov 30, 2010 7:04am Nov 30, 2010 7:04am
The real problem with Carry Trades is that the market has no LONG TERM trends. Carry Trades works best when the market is bias the currency with the highest interest rates for a prolong period of time.

Check your Daily, Weekly, or Monthly chart on any pair and you'll quickly realize pairs are not trending. Even high interest rate pairs are not trending. In fact, some interest rate pairs are down.

The general idea of the Carry Trade is to put your money on the currency/country with the highest interest rate and profit off the Daily Interest. We'll take EURUSD for the past 10 years. Ideally EUR has always had a higher interest rate than USD.

Attached Image (click to enlarge)
Click to Enlarge Name: carry trade.PNG Size: 38 KB


With knowing EUR has a higher Interest Rate than USD, being a Carry Trade investor, one should be biased EUR. In the heydays of the Carry Trade from 2002 - 2008, shows optimum Carry Trade environment with EUR trending upwards. Thats upwards move is a classic Carry Trade as EUR held the highest Interest Rate. Carry Trade investors not only made profit from their bias EUR, but also made money on the Interest. Classic Carry trade setup.

The end of 2008 marked the end of Carry Trades. Remember the idea of Carry Trading is to only trade in the direction of the Highest Interest Currency. Looking at the chart, mid-2008, the EUR has been falling. Marking the end of the Carry Trade. Traders holding on the Carry Trade idea will primarily investing in USD, and paying out negative Interest in doing so.

Current EUR Interest Rate = 1.00%
Current USD Interest Rate = 0.25%

Technically the Carry Trade is still in effect as EUR has the higher Interest Rate but without a strong EUR bias in the market, the Carry Trade idea is debunked. This goes for most pair today. Most currency pairs look exactly like this EURUSD chart - no Carry Trades to be found anywhere in the market.

Now, one can look for Carry Trades opportunities on the short time frames by trading EUR bias but your interest payouts will be small. Carry Trade investors are use to collection thousands upon thousands of dollars in Interest due to holding their EUR positions longer. Its wasn't uncommon for Carry Trade investors to gain $100,000+ just off Interest alone. But trading the Carry Trade short term can still bring in very small Interest Rate profits. No really enough of an amount to justify Carry Trades. Ideally it can be done.

If you're serious about Carry Trades, you really need to look into trading AUDUSD and AUDJPY. the AUD has the highest interest rate of all G7 nations with USD and JPY holding the lowest, currently. The gap between AUD and USD JPY in Interest Rate is huge so there would be more of a Interest payout if you're bias AUD on those pairs.
  • #8
  • Nov 30, 2010 7:41pm Nov 30, 2010 7:41pm
Quoting Jhig

If you're serious about Carry Trades, you really need to look into trading AUDUSD and AUDJPY. the AUD has the highest interest rate of all G7 nations with USD and JPY holding the lowest, currently. The gap between AUD and USD JPY in Interest Rate is huge so there would be more of a Interest payout if you're bias AUD on those pairs.
Hi, Jhig.

Thanks for your detailed illustrations on the carry trade. In a matter of fact, I have started a small position on the AUD/JPY pair. Unfortunately, the pair drops by about 100 pips in a few hours after I opened the position.

Thanks and Regards,
Judy
  • #9
  • Nov 30, 2010 7:43pm Nov 30, 2010 7:43pm
Quoting Ulterior
Look, having to make the basket neutral you will have to open and close new positions, thus paying more spread and commissions
Hi, Ulterior.

Thanks for your reply. Now I got the picture. At the moment, I will be skipping the part on making the basket neutral.

Still figuring on the position sizing and cash management portion.

^_^

Thanks and Regards,
Judy
  • #10
  • Nov 30, 2010 8:08pm Nov 30, 2010 8:08pm
You could create a synethic long TRY/JPY position for a massive carry trade, long TRY/EUR, short EUR/JPY would achieve this, of course you would have to pay attention to the turkish economy.
  • #11
  • Dec 2, 2010 11:09am Dec 2, 2010 11:09am
Quoting fxarby
You could create a synethic long TRY/JPY position for a massive carry trade, long TRY/EUR, short EUR/JPY would achieve this, of course you would have to pay attention to the turkish economy.
Hi, fxarby.

Thanks for the suggestion. In a matter of fact, I have added TRY/JPY as a portion of my carry trade. Based on my sums, I can receive about 35% a year for the TRY/JPY pair. Beside than, I am also considering ZAR/JPY pair.

What is the rationale to long TRY/EUR and short EUR/JPY?

Could you please explain in detail if possible?

Thanks and Regards,
Judy
  • #12
  • Dec 7, 2010 8:48pm Dec 7, 2010 8:48pm
Hi,

Any more ideas?

Appreciate very much ^_ ^

Thanks and Regards,
Judy
  • #13
  • Dec 21, 2010 12:16am Dec 21, 2010 12:16am
hey judy.... there was a member here, timefreedom, that used to be quite handy with the carry trade deals..... check his attachments folder......

if something pays a unusually high positive interest there might be an unseen negative reason.....

some the aud and nzd pairs have potiential when traded with the trend..... both have stable economys....... gbpnzd comes to mind.....

swap is the icing...... trend is the cake......h
Attached Image(s) (click to enlarge)
Click to Enlarge Name: swap positive.jpg Size: 144 KB
Click to Enlarge Name: swap positive 30.jpg Size: 141 KB
to trade and code, keep both simple... no call to impress....h
  • #14
  • Dec 22, 2010 7:43pm Dec 22, 2010 7:43pm
Hi, hayseed.

Thanks for your suggestion. I will check if timefreedom is still active in this forum.

From the chart, it seems to me that GBP/NZD is on a downtrend.

May I ask, are you using a carry trade EA?

I am also enthusiastic on running an EA, however, I have no clues to find a reliable and effective EA which can works on the carry trade idea.

Regards,
Judy
  • #15
  • Dec 22, 2010 8:19pm Dec 22, 2010 8:19pm
hey judy...... timefreedom had a carry trade ea..... seems like it was called aphids...... never used it myself..... the carry trade bonanza was ending just about the time i became aware of it......

patience, over on the female trader thread uses the audjpy......

trends start and end rather abruptly.... the trick is to get on board as quick as possible..... ride till it ends then hop on another.....

i use ea's but the swap is not considered in the trades..... do keep track of it though, it can add up......h
to trade and code, keep both simple... no call to impress....h
  • #16
  • Dec 22, 2010 10:42pm Dec 22, 2010 10:42pm
Is it possible to hedge a Carry trade with FX options like Saxo or ISE?
AUD/USD,
I checked the cost of a ATM PUT options ( symbol AUM) is around 8% for 365 days period
If you hold a LONG AUD/USD position for 365 days all you can hope to get in term of interest is 3.8%

SO the answer is no I guess
  • #17
  • Dec 24, 2010 7:44am Dec 24, 2010 7:44am
Quoting hayseed
hey judy...... timefreedom had a carry trade ea..... seems like it was called aphids...... never used it myself..... the carry trade bonanza was ending just about the time i became aware of it......

patience, over on the female trader thread uses the audjpy......

trends start and end rather abruptly.... the trick is to get on board as quick as possible..... ride till it ends then hop on another.....

i use ea's but the swap is not considered in the trades..... do keep...
Hi, hayseed.

I deeply appreciated for your prompt reply. I did a search for timefreedom, it seems to me that he is not active in this forum anymore.

I happened to stumble on pipEasy thread. He is a fabulous person who shared his profound knowledge on his fx methodology. I will try to see how I could use his methodology and blend into the carry trade.

I strongly urge you to read his thread if you haven't come across it.

http://www.forexfactory.com/showthre...245149&page=25

Thanks and Regards,
Judy
  • #18
  • Dec 24, 2010 7:48am Dec 24, 2010 7:48am
Quoting moksha
Is it possible to hedge a Carry trade with FX options like Saxo or ISE?
AUD/USD,
I checked the cost of a ATM PUT options ( symbol AUM) is around 8% for 365 days period
If you hold a LONG AUD/USD position for 365 days all you can hope to get in term of interest is 3.8%

SO the answer is no I guess
Hi, moksha.

Thanks for the reply.

I have not tried fx options before, hence, I am not sure on the mechanism of it.

Currently, I working on AUD/JPY and TRY/JPY pair carry trades.

Hopes to improve my methodology over time.

Regards,
Judy
  • #19
  • Jul 28, 2012 5:55pm Jul 28, 2012 5:55pm
Just an update of my portfolio on carry,

Total Margin = $3882
Total Carry = $21 daily

My target would be $200 daily in order to achieve financial freedom and quit my job.

Regards,
Judy
  • #20
  • Last Post: Jul 30, 2012 4:23am Jul 30, 2012 4:23am
hi Judy,

you sure keep working on your ideas........wow, started in 2010 and now still going strong.

I could look at A/J for the interest, but the pair has already risen quite a bit from the low.
It`s anybody`s guess which currency paired with the yen will be best.

I am looking at G/J, more for the all-time low than anything else.

2008 high 251.00 2011 low 117.00 now 122.00

once the problems in Europe are out of the way, there is no reason why this pair should not make a significant recovery, maybe at least 50% to 184.00 in the next 3-5 years.

when price comes down to 120.00 I plan to open an initial trade a la pipeasy and bring it to BE quickly.

I wish you luck.
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