Profitable Ideas on Carry Trades

Thanks again for the informative reply.

How do you scale the single GBP/CHF position properly?

Please share more ideas on other possible carry trades
or examples of other pairs such as GBP/CHF that have a relatively smaller trading range.

Do brokers actually pay the exact leveraged interest differential based on central bank rates or are there other considerations when executing a carry trade?


Quote from NoWorries:

To see this, you first have to understand that a "USD/CHF(3%) hedged with a long position in GBP/USD(0%)" is equal to a single GBP/CHF position (if scaled properly).

(On a side note: the benefit of the latter position over the former position is threefold:
- it uses half the margin
- you don't lose the interest bid-ask
spread on USD
- you only pay the spot bid-ask spread on one position)

The next thing you want to understand is the volatility of GBP/CHF. If you look up the historical range of the past few years you'll see it ranges from 2.10 to 2.75. What you have experienced in the past 6 months was a range of 2.33 to 2.46, i.e. a range that was 5 times smaller. If you have a strong belief that GBP/CHF will stay in this fairly small range, your "hedged" position might work out well. But as soon as the range widens, you'll start to see wild swings in your account equity.
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Pip and Scalp just put them on ignore, or buy a pair of "gentlemens pistols" and settle the insults that way. If you are doing well in your trading congrats. But I think there may be some valid questions regarding this strategy.

1. Volatility of the hedge on either leg.
It may work now but it will not work forever. So use it while it works but you need a protective exit and a way of identifying when you are entering a time of high volatility on either leg

2. "Juice" Be careful how you are leveraging, one day of volatility could wipe you out.

3. Continual diligence. FX, in my experience is the moodiest market I have traded, so you have to be ready to rotate pairs and strategies to match the mood of not only the market but the mood in the pair don't forget, TA is just measuring traders emotions.

Pip don't get discouraged, just ignore the negativity, but if someone tells you a strategy will not work listen and research, someone may be trying to save you some pain, albeit not in the most tactful manner.

ES my trading Bud what is up in the woodgrained van world of yours?

The Ever Venomous VIPER
 
Now I am disillusioned, I have fallen and can't get up, ES has sold out to the bourgeois, environment destroying, child killing, capitalist running dog, proletariat oppressing, reactionary right wing military industrial complex. :D

Did I leave anything out?

Oh yeah and you would think he would PM about this but Noooooooo.

The Ever disappointed VIPER
 
Quote from Cygnus Atratus:

True....but it still does not help their frustrations and daytime boredom/loneliness and thats where l would like to come in :D
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I am sure you could come up with a "business plan" for how to entertain them...
 
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