Spot Forex Spread/Hedge
- Thread starter hermittrader
- Start date
for the example I gave above (see 10/19 4:00 PM-ISH), I am convinced there is no real arbitage opportunity. I like trades that like that example because it goes after moves that are less obvious to most traders, and therefore possibly less attacked away by market partisipant. But I realistically do not expect to hedge all of my exposure in the interest earning position to be offset by the low yield position.
I mean if there was some perfect hedge like that > there is really no market more efficient than FX and partisipants like those in the forum would clearly step in to press the market to remove any profit potencial.
My point is that I THINK with trades as simple as this, you will always have to take a position in teh market, and you will always be required to accept some degree of risk in order to pursue profit.
(for the positin I took a while back - long gbpjpy, short chfjpy - my demo did well, I mean it would have if it did not expire on me. But only because we also saw a nice move up in gbpchf late-july/early-august too - interest plus some capital gains)
Spot FX Offset by Futures market
- After reading this thread though, I did really like the discussion about the merits of taking one interest earning position in the spot market - and taking an offseting position in the futures market (obviously all for the same underlying currency pair). That offsetting futures position of course would not earn or cost interest, and thus a trader might think your got a perfect hedge to rake in the rollover from the spot market.
- this thread has finally made me understand backwardian and contago (sp?) in a context I can understand. And understand why that hedge/spread/whatever is less than perfect too. The futures contract price will change to account for the interest the spot position is earning.
non-interest - interest accounts
Regarding non-interest/interest accounts - so, there are brokers that let you set up accounts that do not earn or get charged interest? Would you just go long GBPJPY in an interest earning account, and then short GBPJPY in the non-interest account. If it were that easy we could seriously open hundreds of millions worth of positions and just rake in the dough.
I don't see how oanda would do that, if they did they'd leak millions. Please let me know how we can take advantage of that.
Tom F
Very interesting topic!
I have been hedging for a few months now and am doing pretty well at it. I just started a new test account after trying many different combos.
The pairs I use now are USD/JPY, USD/CHF, AUD/USD, NZD/USD. Heres my setup....
I'm testing with a Demo on FXSol with a $10k account.
400 leverage: I use this leverage because it gives me more free margin.
10,000 lot size: With this lot size if i want a 100k position i just need to use 10 lots and i can adjust my positions by adding or closing 1 or 2 of the smaller lots.
I enter the market pretty much at random with 10 lots of each pair then I wait. I wait till the total value of the open positions is = about $100 to $500 in the green then I close all of them.
If the total value of the positions is about $500 to $800 in the red after about 6hrs or a day I open up another 10 lots of each pair and wait till i'm in profit.
I keep doing this till i am in profit or till i have a max of 50 10k lots open for each pair.(which happens hardly ever) If this does happen or if i do have a lot of open positions i just sit on it and rake in a very good amount of interest. I would say on average the $10k test accounts gain around $500 - $3000 a week.
The current test account i'm using that has been open for about 2 week increased by 48%. Not to shabby.
I have been hedging like this for a while and FOR ME its working great.
I'll try and get the account history up soon.
I have been hedging for a few months now and am doing pretty well at it. I just started a new test account after trying many different combos.
The pairs I use now are USD/JPY, USD/CHF, AUD/USD, NZD/USD. Heres my setup....
I'm testing with a Demo on FXSol with a $10k account.
400 leverage: I use this leverage because it gives me more free margin.
10,000 lot size: With this lot size if i want a 100k position i just need to use 10 lots and i can adjust my positions by adding or closing 1 or 2 of the smaller lots.
I enter the market pretty much at random with 10 lots of each pair then I wait. I wait till the total value of the open positions is = about $100 to $500 in the green then I close all of them.
If the total value of the positions is about $500 to $800 in the red after about 6hrs or a day I open up another 10 lots of each pair and wait till i'm in profit.
I keep doing this till i am in profit or till i have a max of 50 10k lots open for each pair.(which happens hardly ever) If this does happen or if i do have a lot of open positions i just sit on it and rake in a very good amount of interest. I would say on average the $10k test accounts gain around $500 - $3000 a week.
The current test account i'm using that has been open for about 2 week increased by 48%. Not to shabby.
I have been hedging like this for a while and FOR ME its working great.
I'll try and get the account history up soon.
Its just a matter of closing all pairs when the totals are in profit, and holding or adding more when in the red. The markets are always moving up and down so sooner or later the total value of the 4 pairs will be positive. You add more lots the farther they move away from each other over time to spread out the risk. The interest also helps a good deal.
Try it out on a demo for a few months. Its an interesting study in currency correlation. There are some good sources of info out there that show hourly and daily currency correlations. Just google it. FXstreet has charts that allow you to overlay the pairs which helps to.
48% in 2 weeks is a lot and can very easily become -48%. Big profits can always become big losses. Could always cut the amount of 10k lots opened down from 10 to 2 or 3. But why bother on a demo account? Its better to push your margin to the limit on a demo so that you can really see how much you should be trading when live.
The trick is hedging the pairs in a way that will keep you from going to far in to the red. I usually open most of my trades after a big move has happened on all 4 pairs. At that point the pairs are correcting and the total value of the four tend to move in to profit and out of profit very often. When the total of all are in profit you just close.
Try it out on a demo for a few months. Its an interesting study in currency correlation. There are some good sources of info out there that show hourly and daily currency correlations. Just google it. FXstreet has charts that allow you to overlay the pairs which helps to.
48% in 2 weeks is a lot and can very easily become -48%. Big profits can always become big losses. Could always cut the amount of 10k lots opened down from 10 to 2 or 3. But why bother on a demo account? Its better to push your margin to the limit on a demo so that you can really see how much you should be trading when live.
The trick is hedging the pairs in a way that will keep you from going to far in to the red. I usually open most of my trades after a big move has happened on all 4 pairs. At that point the pairs are correcting and the total value of the four tend to move in to profit and out of profit very often. When the total of all are in profit you just close.
Lol. If you want safe FX is not the way to go.
I used to use EUR/USD and GBP/USD instead of AUD/USD and NZD/USD to hedge the other to pairs but found that most of the time GPB/USD would move way to far from the other pairs. Plus the problem with GBP/USD and EUR/USD is the have a high negative interest when going long as opposed to NZD/USD and AUD/USD. Thats a very big factor.
I started testing this method so that i can find the best way to get a high daily interest rate while keeping my open positions from moving to far in the red. Making profit off the sum of the 4 pairs being in profit was just iceing on the cake. But as it turns out most of the profit made is from closing all 4 positions at once. I would like to 2 more pairs to hedge vs. the USD but the interest of the other pairs going long makes it not worth it. Also USD/CAD does not correlate well with the other pairs.
I would like to know if anyone knows of a charting software that i can use to overlay 4 currancies in 1 chart. Anyone?
I used to use EUR/USD and GBP/USD instead of AUD/USD and NZD/USD to hedge the other to pairs but found that most of the time GPB/USD would move way to far from the other pairs. Plus the problem with GBP/USD and EUR/USD is the have a high negative interest when going long as opposed to NZD/USD and AUD/USD. Thats a very big factor.
I started testing this method so that i can find the best way to get a high daily interest rate while keeping my open positions from moving to far in the red. Making profit off the sum of the 4 pairs being in profit was just iceing on the cake. But as it turns out most of the profit made is from closing all 4 positions at once. I would like to 2 more pairs to hedge vs. the USD but the interest of the other pairs going long makes it not worth it. Also USD/CAD does not correlate well with the other pairs.
I would like to know if anyone knows of a charting software that i can use to overlay 4 currancies in 1 chart. Anyone?