If you want to earn interest you have to keep tabs on which way to trade, but also the bias, because you don’t want to short a pair that is trending up just to earn interest.
For example USD’s interest rate is .25% and CAD’s is 1% which means to earn interest I’d have to short the pair. Effectively I’m borrowing USD at a lower interest rate to buy CAD…Then when I close the trade, I pay back the USD with the CAD which earned a higher interest…so I would earn .75% of my position size per day… which is the difference between .25% and 1%.
Here’s a table I setup in Excel that shows which ways to trade a pair to earn interest…hopefully I have it right. The next possible interest rates changes are in March.
Yes one of my trades cost me interest in spite of all my positions being supposedly swap friendly, but it doesn’t show which pair…I would suspect it was EURGBP as they are close. I guess they also have different rates depending on which way you go…like price has a dual bid/ask rate.
Unfortunately Oanda doesn’t show the swap in MT4 like the way you describe. I will have to contact their customer support and see what I can find out.
If I had been trading mini lots, that interest would have been $16.00, and $160 with standard lots. It all adds up
Just one comment - why you don’t try picking just 1 or 2 strongest pairs compared to going for 4 or more pairs?
You see it for yourself with more open trades you pay more spread, swaps fee… not to mention less time to focus on each pair?
You had GBP in 3 out of 4 pairs when you could put GBP against strongest one or 2 and not pushing for putting it up against 3 other currencies.
AUD and NZD are closely correlated and you see your profits with GBP/AUD were double compared to GBP/NZD so you could just choose if AUD was stronger than NZD to just open GBP/AUD trade and not also GBP/NZD.
Hi Jimbo,
This portfolio method of trading I’m using is best explain here: 301 Moved Permanently. I am doing it slightly different with my pairs selection criteria, but still the logic is the same…you just never know which pair in a correlated setting is going to take off in spite of one’s best analysis. Theoretically I should have way more trades open at a time than what i did …lol, but maybe I’m over thinking it and should let it go too…the others are making way more gain than I am
I find myself at one of those critical junction moments…all (3) trades that I opened last night are in the red zone, their combined loss verging on the 2% limit, while separately not.
EURCHF (2/5) - 30
GPBUSD (0/7) - 70
AUDUSD (3/7) -70
The strongest reason I currently have for holding them open, in hopes that they turn back, is their strength relationships which highly favours shorts…this will be a good test of that theory. The difference with these trades could be that I opened them too early with a breakout bias, instead of waiting for a pullback and then a bear bar signal to enter…that’s my OTE…lol…which then hopefully avoids what I’m going thru now. How it avoids it is that it would have probably gotten me in at the prices they’re at now…and if it’s still going to fail me, the ultimate failure point would be a lot less of a “loss” than it will be from where I actually entered from…which will be more than 2% if I hold out to find out.
I also traded against the interest differential which favours long trades so I’ll be paying interest too. :20:
Hmm just went fast on my own calculation of currency strength and yesterday GBP by my calculation was at same strength or even gained compared to USD so I’d rate GBP/USD as neutral.
Can you explain your criteria how you got for yesterday GBP to be strongly bearish and USD strongly bullish
cause even price action was up and MACD was and is still all the time going up?
I use a strength analysis as described here: How to Create a “Trading Edge”: Know the Strong and the Weak Currencies | DailyFX and accordingly, GBP has a 0 score and USD has a 7. Where the oscillators are, are not part of the analysis, but I agree that they were/are in the oversold area…I use DeMarker but same behaviour. Hopefully price won’t go up as much as the oscillators do, which would give a bearish divergence…:51:
I automated that analysis in MT4, getting the data directly off the charts and displaying the results …and it still says that GBP is very weak and USD is very strong.
The swap is paid via someone else holding a certain position or a certain currency. So that means if your getting paid it came from someone and oanda shaves a little off the side but if your paying the swap you get the full brunt no easing or anything. Still… interest in a bank which is what 1-2% at best for a month when your getting 0.002% compounded per day which is only great if you have a large capital with them and your the one touching and destroying other people with your money not the bank and their loans to people
I have loosened up my pair selection to now include 15 pairs according to the strength analysis and see how that fairs. As long as the currencies are 3 rankings apart, they will be considered. The strength table is currently showing:
So I will be watching:
Longs: AUDCHF, NZDCAD, NZDCHF, USDCAD, USDCHF, USDJPY - (all earn interest)
Shorts: EURUSD, EURAUD, EURJPY, EURNZD, GBPAUD, GBPCAD, GBPUSD, GBPJPY, GBPNZD (some earn, some pay)
(Pairs may get changed as strength table changes during the week)
I closed my AUDCHF short for -116 (-$11.60). - will now look to re-enter long.
2 trades still open:
GBPUSD short +60, I have a stop set in profit, but it may be too close and get hit…if it does I will look to re-enter
AUDUSD short -6. - not on my watch list so will try to exit in profit.
I was taking a look at the Strength Table indicator. Are you using it on the same TF you are trading on? If so, maybe you could run the Strength Table on a higher TF than you are currently trading for a stronger bias. Unless it isn’t TF specific, then ignore this post.
I’ve done something similar, and it increased profitability, in terms of profit factor, by 25-50%. Much like a range/trend filter, it was more optimal to have it run on a higher TF than the one the system traded on. That’s just from my own research though…
Edit: Just read the DailyFX post, and it being on the 4H TF.
Hi Clark,
Thanks for the suggestion. No I’m trading the daily, and the strength analysis uses the H4. Once I get some kind of track record to compare it to, then I can start tweaking but otherwise I really don’t have much of an established profit factor yet. Maybe by the end of this month. However that would probably mean using the weekly t/f for strength analysis if I stay on the daily, or do the analysis on the daily and move to the H4…hmmm…lol
Yeah, I would definitely consider taking a look at the weekly as a filter rather than a TF lower than the one you’re currently trading. But it’s definitely interesting that you’re doing your strength analysis on a lower TF. I’ll have to play around and come up with something. Back to coding.
