How many kinds of main strategies are there in FOREX trading?

Discussion in 'Forex' started by eltrco, Jan 13, 2008.

  1. Martingdale and anti-martingdale are methods of money management, they are not trading strategies.
     
    #11     Jan 14, 2008
  2. This refers to the practice of buying and selling currencies pairs such that all positions will usually be closed within the same Forex the trading day.

    Yes, less time in the market = less market exposure.

    The day trading idea comes from stock market. Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits.

    "Rapidly" = a super smooth equity curve due to short average length of trade and a high turnover of trades.

    In the "hope"??
    Most daytraders I know actually only trade strategies that have been extensively backtested and that are known to work.
    "Hope" refers more to the bottom drawer type investors.

    Day trading is extremely risky and can result in substantial financial losses in a very short period of time. Under the rules of NYSE and NASD, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.

    Extremely risky? lol.
    Daytraders are actually the guys that have the lowest drawdowns.
    With daytrading, theres not much open equity drawdown as you don't give the trade much time to move against you.
     
    #12     Jan 14, 2008
  3. Then don't trade with a market maker.
    ECN brokers dont care how you trade.
    The more trades = more commission for them.
     
    #13     Jan 14, 2008
  4. eltrco

    eltrco

    Arbitrage:

    Some people call “Arbitrage” as a risk free strategy. But other people call it as a trick which looks like the cat pawing chestnuts from a fire. But in theory, its risk is minimum in deed. We introduce three types of arbitrage strategies here:

    1, Triangle Arbitrage: Searching for two highly fast-moving pairs (like EUR/USD and USD/JPY), the price of a not-so-fast moving pair like EURJPY should always be derived by multiplying (or dividing, etc) the fast-moving pairs. So for example, if EUR/USD is 1.4871 and USD/JPY is 108.24, the logical price of EUR/JPY should be 1.2 x 120 = 160.96. But at the same time, the real EUR/JPY rate is 160.90. The slower moving pair lags behind the logical price, then profit opportunity comes.

    In practice currencies are quoted with a bid ask spread, so a trader should be careful that he is actually buying at the quoted ask price, and selling at the quoted bid price. Other transaction costs, such as commissions, might also invalidate the apparent free lunch.

    More pairs:

    AUD/CAD CAD/JPY AUD/JPY
    AUD/CAD GBP/CAD GBP/AUD
    AUD/CAD USD/CAD AUD/USD
    AUD/CHF CHF/JPY AUD/JPY
    AUD/CHF GBP/CHF GBP/AUD
    AUD/CHF USD/CHF AUD/USD
    AUD/JPY EUR/JPY EUR/AUD
    AUD/JPY GBP/JPY GBP/AUD
    AUD/JPY USD/JPY AUD/USD
    AUD/USD GBP/USD GBP/AUD
    AUD/USD USD/CAD AUD/CAD
    AUD/USD USD/CHF AUD/CHF
    AUD/USD USD/JPY AUD/JPY
    CAD/JPY EUR/JPY EUR/CAD
    CAD/JPY GBP/JPY GBP/CAD
    CAD/JPY USD/JPY USD/CAD
    CHF/JPY EUR/JPY EUR/CHF
    CHF/JPY GBP/JPY GBP/CHF
    EUR/AUD AUD/CHF EUR/CHF

    EUR/AUD AUD/JPY EUR/JPY
    EUR/AUD AUD/USD EUR/USD
    EUR/AUD GBP/AUD EUR/GBP
    EUR/CAD AUD/CAD EUR/AUD
    EUR/CAD GBP/CAD EUR/CAD
    EUR/CAD USD/CAD EUR/USD
    EUR/CHF AUD/CHF EUR/AUD
    EUR/CHF GBP/CHF EUR/GBP
    EUR/CHF USD/CHF EUR/USD
    EUR/GBP GBP/AUD EUR/AUD
    EUR/GBP GBP/CAD EUR/CAD
    EUR/GBP GBP/CHF EUR/CHF
    EUR/GBP GBP/JPY EUR/JPY
    EUR/GBP GBP/USD EUR/USD
    EUR/JPY GBP/JPY EUR/GBP
    EUR/JPY USD/JPY EUR/USD
    EUR/USD GBP/USD EUR/GBP
    EUR/USD USD/JPY EUR/JPY
    GBP/JPY USD/JPY GBP/USD

    2, Hedging Arbitrage:

    This technique is the safest ever, and the most profitable of all hedging techniques while keeping minimal risks. This technique uses the arbitrage of roll over interest rates (SWAP) between two brokers.

    One broker which pays or charges roll over interest at end of day, and the other should not charge or pay this kind of roll over SWAP interest. The main idea about this type of Hedge Arbitrage is to open a position of currency (Fore example, the highest SWAP GBP/JPY) at a broker which will pay you a high interest for every night the position is carried, and to open a reverse of that position for the same currency with the broker that does not charge interest for carrying the trade. This way you will gain the interest or SWAP that is credited to your account, risk-free.

    3, Netting Arbitrage:

    The main idea behind the strategy is, using differences between cross rates (such as EUR/USD, GBP/USD, and EUR/GBP) at different markets.

    For example, suppose you had opened the following positions:
    buy 1 lot EUR/USD at 1.4867;
    sell 1 lot EUR/GBP at 0.7600;
    and sell 0.76 lot GBP/USD at 1.9566.

    The netting/clearing gives the following results:
    Long EUR from the first pair and short EUR from the second pair gives zero exposure in EUR.
    Long position in GBP from the second pair and short position from the third pair gives zero exposure in GBP.
    Short position from the first pair ($148,670.00) in USD and long position from the third pair ($195,660.00*0.76) in USD gives you $31.60 profit without open positions and exposures. Simple? You tell me.
     
    #14     Jan 15, 2008
  5. I just had a quick look but at $10.00 a pip/tick wouldn't the bid/ask spread eliminate that "$31.60 profit" the second you open the positions.
     
    #15     Jan 15, 2008
  6. rockonag

    rockonag

    These "strategies" are a waste of your time.
     
    #16     Jan 16, 2008