Can someone evaluate my currency "strategy"?

Discussion in 'Forex' started by Saltynuts, Feb 27, 2021.

  1. I think its called net interest rate differential sef88. Trying to find the actual rates now.
     
    #11     Feb 28, 2021
  2. It is very weird, you would think the net interest rate differential is critical to any long term forex trading strategy. But I am not seeing them listed anywhere right off hand. I would have thought they would be everywhere.
     
    #12     Feb 28, 2021
  3. BKR88

    BKR88

    https://www.oanda.com/us-en/trading/financing-fees/
     
    #13     Feb 28, 2021
  4. El Trado

    El Trado

    Nope. You are right. The spread is all you pay. The spread might widen in less liquid time periods, and are wider for more "exotic" currencies, but spread (and a finance charge if you keep positions open for a while) is all you pay.

    I have traded a lot with Oanda and is happy with them.

    However, since a futures contract might cost you 2 dollars or something like that, and be the same regardless of size, if you are trading a $2 mill position or something it will end up being cheaper. But Oanda will be a lot less for smaller trades...
     
    #14     Feb 28, 2021
  5. El Trado

    El Trado

    Nope. Oanda does not have Argentinian Peso. Neither do they have Russian Rubles nor Brazilian Reals. Turkish Lira was removed a while back as well.

    The problem with those, is that the financing costs would be insane due to how Oanda calculates. So it would not work out as a "no-brainer" trade regardless if the direction pretty much never change
     
    #15     Feb 28, 2021
  6. BKR88

    BKR88

    Forex has swap fees (interest) which futures don't but currency futures have interest payments priced into via contango/backwardation so your position will decay based upon the interest rates.
    If futures didn't have interest rates priced in, it would be an arb trade to go long spot (on a currency with a + interest) to collect interest payments and hedge by going short the futures.

    Look at the futures prices of Swiss Franc & Mexican Peso. Franc is in contango as their currency has a negative .75% interest rate while Mexican Peso is in backwardation as their currency has a positive 4% interest rate.

    fx.png

    Canadian dollar futures are neutral as they have the same interest rate (.25%) as the US dollar.

    cad.png
     
    Last edited: Feb 28, 2021
    #16     Feb 28, 2021
    shuraver and sef88 like this.
  7. BKR88

    BKR88

    Futures charge a set fee for every contract so no savings by going with larger position size.
     
    #17     Feb 28, 2021
    shuraver likes this.
  8. Poljot

    Poljot

    #18     Feb 28, 2021
  9. sef88

    sef88

    Brokerages will usually add further costs on the rates. So futures still make more sense.

    https://www.interactivebrokers.com/en/index.php?f=46376
     
    Last edited: Feb 28, 2021
    #19     Feb 28, 2021
  10. JSOP

    JSOP

    Countries that are not printing money? Switzerland, China (relatively speaking), many of the Persian Gulf countries that are loaded with oil like Saudi Arabia, Qatar, United Arab Emirates... but the thing is printing money doesn't always automatically lead to a weaker currency as a currency's strength is determined by a variety of factors including political ones too. And even if a currency moves it might not move in a magnitude that would make trading in it profitable.
     
    #20     Mar 2, 2021
    tomorton likes this.