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Carry Trades and hedging

  • #21
  • Oct 28, 2016 3:28am Oct 28, 2016 3:28am
Quoting manosk
{quote} In all honesty I would be very careful to trade any crosses against GBP, where you are short GBP. It has already been beaten to the ground so you could have a very violent reaction. Stay with trades against USD. This offers good risk/reward ratios
I partly agree. UK is in panic without plan. The day it comes a plan I will reconsider. Difficult to trade when UK is in panic mode and I am not unprepared for big swings in both directions on this one. Morgan Stanley has target 1.15 for GBPUSD . I follow that expectation for now. I do not expect it happens immediately but middle term ( during 2017 - 2018) However I do not thing Sterling will strengthen much as it looks now. Spikes and shakeouts yes. So until fundamental change UK side I will stay in.

The other side of the trade is also a unstable one. However atm more stable then the UK imo.

Correlation to USDJPY is strong +87 on correlation index over the last 300 trading days. And I look in to that also as a hedging possibility. ( Long USDJPY also gives carry )
Trading in the shadow of SM
  • #22
  • Oct 28, 2016 3:37am Oct 28, 2016 3:37am
Quoting Earleone
{quote} I partly agree. UK is in panic without plan. The day it comes a plan I will reconsider. Difficult to trade when UK is in panic mode and I am not unprepared for big swings in both directions on this one. Morgan Stanley has target 1.15 for GBPUSD . I follow that expectation for now. I do not expect it happens immediately but middle term ( during 2017 - 2018) However I do not thing Sterling will strengthen much as it looks now. Spikes and shakeouts yes. So until fundamental change UK side I will stay in. The other side of the trade is also...
interesting perspective. 1.15 is crazy talk from MS, dont forget it is coming from 1.50. What will happen is the following: The UK govt will wake up very soon and start offering concessions to big corps and banks, etc, to lure them back or to avoid them leaving. GU will jump to 1.28. Concerning UJ it is a good approximation but in case the equity market goes to a risk off mode then we will see UJ back to 100 even to 95 even if the Fed hikes the rates. The point is that one needs to be very careful when he trades exotic currencies because correlation can break down very fast while fundamentals stay. For example see what happened to correlation of UC and USDRUB. They used to be in sync...and now??? Why isnt it any more?
"Bulls make money, bears make money, pigs get slaughtered"
  • #23
  • Oct 28, 2016 4:08am Oct 28, 2016 4:08am
Quoting manosk
{quote} interesting perspective. 1.15 is crazy talk from MS, dont forget it is coming from 1.50. What will happen is the following: The UK govt will wake up very soon and start offering concessions to big corps and banks, etc, to lure them back or to avoid them leaving. GU will jump to 1.28. Concerning UJ it is a good approximation but in case the equity market goes to a risk off mode then we will see UJ back to 100 even to 95 even if the Fed hikes the rates. The point is that one needs to be very careful when he trades exotic currencies because...
You might be right. But we would also call it crazy to go short in attached map at the bottom of the yellow rectangle. With hindsight not. ( Actually it was crazy )
The finance crises in 2008 I think will look small for UK compared to what they are in to now if they don't change direction qte quick. They will manage to keep some companys short term by luring them. But at the end all businesses will go where they have the greatest opportunities lont term. I honestly do not believe that UK is in a position to do that even if they want in the situation they are in now. They can still change it. But no signs of it yet.

I will lock in BE if I come to the position to do that. First bullet here is also unleveraged and I will scale in / average down .

Correlation between UC and USDRUB I think weakens because of the difference in interest rates. The USDRUB is a carry UCAD not. We also saw in beginning of summer that Rub did not follow Oil close for a period when UCAD did.
Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSDMonthly.png Size: 33 KB
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  • #24
  • Oct 28, 2016 5:00am Oct 28, 2016 5:00am
Quoting Earleone
{quote} You might be right. But we would also call it crazy to go short in attached map at the bottom of the yellow rectangle. With hindsight not. ( Actually it was crazy ) The finance crises in 2008 I think will look small for UK compared to what they are in to now if they don't change direction qte quick. They will manage to keep some companys short term by luring them. But at the end all businesses will go where they have the greatest opportunities lont term. I honestly do not believe that UK is in a position to do that even if they want...
All your points are good. To start from the last one about UC and USD/RUB, I agree that UC is not a carry trade really but due to oil there was very good correlation a while back (6 months ago) but then due to internal problems in Canada etc they diverged, meaning UC is not following closely the movement in oil although it should. And yes we see short term break downs in correlations like RUB and Oil in the summer as you mentioned but at the end and that is why I like exotic currencies, they always converge to fundmentals. As far as the financial crisis is concerned I wouldnt really compare it with anything we have seen before (I havent lived through the Great Depression but due to the lack of speed of the transfer of information the contagion to global markets was not dramatic anyway) but I have lived through 1998 LTCM crisis (Asian Crisis), 2000 DotCom bust, 9/11/2001, 2003 Iraq war, etc... and I was trading professionally all this time but the volatility with the exception of Sept 11 was not crazy. Things somehow were more predictable. 2008 was all over the place and the chart you show is interesting but I dont see why one would not go short at these levels... With Brexit I agree with you that what the Brits did was not very intelligent but their economy is big enough and if they start thinking strategically they could create another much more powerful Ireland (tax free region etc) just at the door of the EU. First rule is to start thinking...it doesnt seem they are doing that at the moment.. My point is that it is not clear how bad the whole Brexit thing is for GBP etc so already 20% devaluation in a developed nation currency is a lot. It was a shock result, blah blah, we understand that but since then it should have normalized. GBP remains undervalued.
"Bulls make money, bears make money, pigs get slaughtered"
  • #25
  • Oct 28, 2016 5:35am Oct 28, 2016 5:35am
Quoting manosk
{quote} All your points are good. ...
Yeah, Been here all off this periods too, and before Kid

Was in the equity market back in the 80th's just small fish. And daytrading 2000 - 2003 as amateur. you can imagine how that ended . Did not come back in the game before I found forex around 2011 so I probably saved some money in 2008 .

Lets see. I think everything can happen and change outlook if/when there come some gamechanger. Will not try to find the bottom. ( It can be here already or it is years away. ) .
Trading in the shadow of SM
  • #26
  • Oct 28, 2016 5:55am Oct 28, 2016 5:55am
Quoting Earleone
{quote} Will not try to find the bottom. ( It can be here already or it is years away. ) .
Wise words my friend. I just think now the cycles are much faster...its like life in fast forward.
"Bulls make money, bears make money, pigs get slaughtered"
  • #27
  • Oct 31, 2016 9:51am Oct 31, 2016 9:51am
I would personally stay clear of USD/MXN these days till after the US elections. If for any reason Trump wins it will plunge to 20 easily. There it will be a great opportunity for short since we know that Trump is not going to follow up with his ridiculous threat concerning the wall.
"Bulls make money, bears make money, pigs get slaughtered"
  • #28
  • Oct 31, 2016 10:03am Oct 31, 2016 10:03am
Quoting manosk
I would personally stay clear of USD/MXN these days till after the US elections. If for any reason Trump wins it will plunge to 20 easily. There it will be a great opportunity for short since we know that Trump is not going to follow up with his ridiculous threat concerning the wall.
Yes, Is bumpy. I follow polls with interest until election. If Trump wins I also think we see 20. He is a fantastic strategist and has stayer qualities. ( It is what I will say positive about him )

I do not think there is enough time for him to turn it around. But not impossible. I was qte sure it was done for him after the bus story. But he comes back.
Trading in the shadow of SM
  • #29
  • Oct 31, 2016 10:03am Oct 31, 2016 10:03am
Quoting manosk
I would personally stay clear of USD/MXN these days till after the US elections. If for any reason Trump wins it will plunge to 20 easily. There it will be a great opportunity for short since we know that Trump is not going to follow up with his ridiculous threat concerning the wall.
Another point on USD/MXN is that even in the absence of US elections we should wait for the pair to close the gap left at roughly 19.17 before entering short.
"Bulls make money, bears make money, pigs get slaughtered"
  • #30
  • Oct 31, 2016 10:05am Oct 31, 2016 10:05am
Quoting Earleone
{quote} Yes, Is bumpy. I follow polls with interest until election. If Trump wins I also think we see 20. He is a fantastic strategist and has stayer qualities. ( It is what I will say positive about him ) I do not think there is enough time for him to turn it around. But not impossible. I was qte sure it was done for him after the bus story. But he comes back.
What really works for Trump is that people in general dont like and dont trust Hillary (I dont want to take sides but I dont blame them). This makes things very murky and trading very difficult for all of us these 2 weeks.
"Bulls make money, bears make money, pigs get slaughtered"
  • #31
  • Edited 4:38am Nov 2, 2016 4:25am | Edited 4:38am
USDMXN

Are swimming qte heavy atm for my positions USDMXN.

I consider do a hedge or insurance.

Bookmakers give a 3.57 in Odds if Trump becomes President.

I can place my stop around 20.55 if taken out and Trump become President I go out BE for the trade.

There is some IF, Election will not be decided for long period because some things happens in some state. ( Like it was in 2008 I think )
.
My insurance is a one time fee. So I will have less profit on the trade if successful .

Any comments on this. Just some brainstorming, thinking from me atm.

Gap is closed and we are at next resistance level.
Trading in the shadow of SM
  • #32
  • Nov 2, 2016 4:31am Nov 2, 2016 4:31am
Quoting manosk
I would personally stay clear of USD/MXN these days till after the US elections. If for any reason Trump wins it will plunge to 20 easily. There it will be a great opportunity for short since we know that Trump is not going to follow up with his ridiculous threat concerning the wall.
we are not that far from 20 lol... and we still have some time till the elections
"Bulls make money, bears make money, pigs get slaughtered"
  • #33
  • Nov 2, 2016 4:40am Nov 2, 2016 4:40am
Quoting manosk
{quote} we are not that far from 20 lol... and we still have some time till the elections
Yes, the Poll really moves it

Poll is among 1100 people. Still less then 30% chance for Trump.

Hmmm.
Trading in the shadow of SM
  • #34
  • Nov 3, 2016 3:42am Nov 3, 2016 3:42am
Hedging is really cooling. Taking both sides is a risk management technique on its own. Sometime I just prefer scalping on smaller time frames with a very smooth trading platform.
  • #35
  • Nov 6, 2016 5:58am Nov 6, 2016 5:58am
Some news for Lira.

http://www.dailysabah.com/economy/20...ative-rates-bb

Forex factory news do very seldom publish news for Turkish Lira and Mexican peso / South African Rand. So I urge readers to publish when they see some essential news for this countries.
Trading in the shadow of SM
  • #36
  • Nov 9, 2016 4:55am Nov 9, 2016 4:55am
Quoting Earleone
{quote} Yes, the Poll really moves it Poll is among 1100 people. Still less then 30% chance for Trump. Hmmm.
USDMXN,

Manage to survive on USDMXN, but was looking bad a period during the FBI investigation of Hillary. Are now flat on this one and it became some small pips compared to what it coud have been if excpectetion with Hillary would have been the result.

EURTRY GBPTRY
I was beaten hard on TRY ( Has long hedges gold on swap free account so will see what will be final ) EURTRY I was closing out. brrrrr. Trump start as expensive President for me . Well it was calculated for as worst case and I was getting worst case. So move to next. Was doing some stupid averaging down . To many mistakes on the TRY trade. With the problems in Turkey friday and election US . UFFF.
GBPTRY is still running.
Attached Image (click to enlarge)
Click to Enlarge Name: USDMXNDaily.png Size: 34 KB
Trading in the shadow of SM
  • #37
  • Apr 12, 2017 2:34am Apr 12, 2017 2:34am
And flat on EURPLN for first time since September 2016 ( last position taken out at trailstop ) .

Very bad first positions. Panicked at top with a full hedge ( that was taken out again when I cooled down ) . Nice carry from the basket in total and satisfied with my trading for the down leg.
Attached Image (click to enlarge)
Click to Enlarge Name: EURPLNDaily.png Size: 53 KB
Trading in the shadow of SM
  • #38
  • Apr 12, 2017 4:24am Apr 12, 2017 4:24am
  •  Hpt
  • Joined Jun 2015 | Status: everybody trade at one`s own risk | 648 Posts
Quoting Earleone
And flat on EURPLN for first time since September 2016 ( last position taken out at trailstop ) . Very bad first positions. Panicked at top with a full hedge ( that was taken out again when I cooled down ) . Nice carry from the basket in total and satisfied with my trading for the down leg. {image}
patience is the key
from level to level - you need mental strength to reach the summit
  • #39
  • Last Post: Apr 12, 2017 8:34am Apr 12, 2017 8:34am
Thank you very much for your contribution here! Frankly, in my live trading account I have used all of trading styles unless hedging! Basically I am a retail Forex trader so, I can’t block my trading balance for a long time! Besides, scalping trading style is my favorite one; it produces quick money and here I can use short SL position!
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