I did not create that system, did not trade it and I dont master it, just tried to report it as well as I understood it. synthetic EUR/CHF ? No, not simply creating a synthetic EUR/CHF but trying to be in a neutral position. So not exactly buying Buy 1 EUR/USD and 1 Buy USD/CHF but something like Buy 1.00 EUR/USD and Buy 0.980 USD/CHF or whatever value needed to be neutral as I talk today and the 0.980 of today could become 0.985 next week (dont take these numbers for real they are just an example, instead of 0.98 it could be in fact closer to 0.95 or 1.03, no precise idea right now)
After reading again this thread and investigating what Electricsavant called the PICS method, I think that the idea I tried to throw in this forum has already been fully investigated and traded by Electricsavant and others. I am still confused with what he did or is still doing about his neutral account collecting interest has he is posting in multiple journals or threads. Unless he or someone is reading this last post can detail to me the history of his finding (Cash and carry / standart cash and carry/ PICS / new cash and carry / ... ) I will PM him today to try to understand better Denis
Well the way it works in carry trading is to try and create a basket of pairs so that you are spreading your risk around. You want to be long high yielding currencies and short low yielding currencies. Since the USD and to some extent the EUR are the most heavily traded currencies, they are also the most volatile and jump around quite a bit. Some carry traders would design their basket to be neutral on those pairs. That may be where you picked up the idea of it. All trading requires risk. If you don't have risk then you are fooling yourself that you are trading. All you are doing is spending money to open positions that can't do anything for you. This strategy can work very well at times. It would have made big bucks last year when the JPY went from 103 to 118. But as you are going to be heavily overexposed to CHF and JPY as a carry trader, you are always exposed to the risk that the carry trade will breakdown. At high margins, it doesn't take that much of a drop in pips to wipe out any gains you have made in interest. I still like the strategy and certainly have it in the closet for the most appropriate time. I'm just not sure that now is the right time to launch it as the expectation for continuing yield differentials between the USD and other low yielders is just not there. During a period when say there is a currency that has very low interest and another that has slightly more but is undergoing a period of monetary tightening ... well that's a great time to pull out this kind of trading.
Hi CFerret 15% looks good to me, I am just surprised we can get as much as this selling gold premium. Any precise reason why Gold and how do you arrive to 15%? Do you sell gold future using all your available margin and buy gold spot at maximum leverage for same amount, and you repeat the same trade every trimestre. Thanks in advance for your answer Denis
Actually, many commodities -- and gold definitely on that list -- are capable of routinely moving much faster, in % terms, than any (developed world) currency pair ever would. That's true on most time frames, intraday and up. Take a look at the last few months of spot or futures price action in precious metals, industrial metals, energies, softs (coffee, sugar), and so on.
Hi Late Apex, The idea with gold (and I agree it moves faster than major currencies) was to buy spot gold and sell a future contract to collect premiums and generate a return of about 15% per year according to a post somewhere above in this thread. If we do not use gold, we need to use a spot commodity and I dont know many spot available to retail traders (currencies, gold and silver, thats all I found) Can we do something similar trading commodities futures time spreads (buy july 06 sell dec 06 and rolling each month the short term future ? probably not for a great % return) Your opinion is appreciated Denis
Yes, It is terrible the pricing you get on the rolls, plus they do not pay you interest credit on the money you have deposited? does any Firm pay interest?
Not in general. In Switzerland, for example, bank accounts are never insured by the government. In fact, there are more shady swiss than US based forex brokers , imho.
Hehe, I was sceptical about this "interest free forex broker" thing right from the start... But: thinking about IB who offer both futures and forex trading from one account. I know that they do not offer Gold spot trading yet, so let's look at currencies such as NZ against the USD or GBP/JPY for which the CME also offers futures. Going long on GBP/JPY spot and selling the corresponding future, everything in one account...would that be a solution to the problem of having to transfer money from one account to the other in order to prevent margin calls ? Greetings, Marsupilami