Just stopped by this thread. I’m always interested to learn more about some more or less exotic pairs and thanks for sharing. I think this great if you find some niche for trading, but if you are just starting playing around with currencies – this is a smart idea to stick with the classical one.
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After catching the previous move up I re-entered long last night:
(5m time frame):
(1h time frame):
My short is still open and carry collected is at £261.
@Pipersson and @Eroedon,
yes, there are four main difficulties in trading exotics with high carry such as TRY, ZAR, IRR,and ARS:
- fewer brokers offering these currencies;
- lesser liquidity and higher spreads;
- larger leverage required to enhance carry profit (due to smaller pip-value);
- as a result of 2) and 3), holding long-term may incur larger drawdowns.
Managing carry counter-trend (with negative floating P/L) is psychogically hard but also sometimes not such good value for money.
Always leave some part of your funds free to take advantage of shorter-term moves in the opposite direction (NB: negative carry) so that you can enhance your equity while waiting for positive carry positions to slowly accrue value.
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With only two days to the Turkish Bank’s rate decision, EurTry (and UsdTry) broke through important resistance and in the last 24hrs, before and after the weekend break, seems set to rise further.
We can see the latest surge in pairs like this (meaning, a drop in Lira value) in two ways: that the decade-long bull trend we saw until August 2018 is set to resume; that the current uptrend is a short rebound and that the 20,000-pip downtrend we saw from August 2018 is set to continue.
I hit my long profits late last week and opened a new long, while continuing to hold my short for carry.
Hi there
Interesting piece of news: US to end preferential trade status for India, Turkey
The Office of the US Trade Representative considers Turkey “sufficiently economically developed that it no longer qualifies”.
That sounds like the removal of the preferential trade status is a “positive thing”.
How will it affect the currency in the short term tough? As a short term reaction I could imagine a TRY bearish move…
Update on my positions: Closed short USDTRY with losses due to strong bullish movement last wee. Still holding on to my short EURTRY.
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Pipersson
there is no clear link between fundamentals and technicals at the moment, or at least, not going forward.
The downgrading of the Lira in the first half of 2018 was accompanied by constant newsfeeds about
Turkey’s financial troubles: those troubles have not gone away, in spite of what the central bank has done.
This proves that currency markets are fickle and there can be periods where a currency breaks free
of fundamentals, such as the Lira’s 20,000-pip bull move from September to November 2018:
trying to retro-fit and shoe-horn these moves with some sort of fundamental or sentiment drive is
not very helpful when it comes to trading.
It will suffice to say that when fundamentals and the direction of trade are in conflict, and/or where
correlated assets that have up-to-date volume data do not move in a straight line, it is time to either
go down to short-term trading or to stay away completely until all things realign in a clear way.
For me, the Lira should still lose value in the sense that the country’s financial troubles are still
very much there for all to see: however, the cheap Lira in August and its carry potential were too
difficult to resist for those with serious funds and that is how we got to where we are now.
These things are beyond our control, as I learnt the hard way in 2016 with GBP/NZD and Brexit,
namely which way ‘the market’ (which is an overly simplistic news term that means nothing or everything)
decides to position itself in the wake of an economic or news announcement with regard to a particular
asset: there are logical and illogical moves, trends and trends-within-trends, all of which can wipe you
out while you still hold true to your beliefs that fundamentals should not back this asset’s behaviour at
all (and yet that is the way that asset is behaving right now, completely ignoring fundamentals).
There is also the conflict of different ‘experts’, some of whom always have an explanation for everything
but who may be analysts without any money or trading account on the line when such moves happen,
which means that they can get it wrong many times over but continue to walk away unharmed from
their opinions.
Given all this, I ignore fundamentals unless volume data from correlated assets to the currency
are moving in line with the spot currency price AND with fundamentals: in other words, if
big-item fundamentals (e.g. a country’s credit score or its central bank credibility or its inflation) say ‘bearish’
but the currency is bullish, then I go with the currency momentum and ignore fundamentals: if the two
coincide, then it will give me further confidence in the currency’s direction, at least until the two things
start diverging again.
I hope this explains my point of view a little more clearly!
Turkey’s central bank held its rate at 24% in
its decision today:
The currency was sold off as a result, giving a boost to Lira pairs such as EurTry (hourly chart screenshot):
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Good morning everyone!
It is very, very early… I am commuting on a near-empty train and was looking at the charts,
so while having a bit of time on my hands I wanted to add a couple of thoughts on TRY.
First of all, why do I look at MSCI Turkey? Because MSCI measures a basket of very liquid, well-capitalised stocks for each country and is therefore a good proxy for sentiment:
Obviously it has the advantage of reliable volume figures, unlike the TRY futures over at CME Group. It also has a high correlation with the Turkish Lira, so that when the index goes up or down so does the Lira, generally.
Here is a graph showing the hourly chart for the MSCI Turkey (ETF) at Yahoo Finance; the last grey band on the right shows price action for yesterday, with mostly red volume bars. The trading day goes from 9.30am to 3.30pm New York time for this ETF, therefore you will not get actionable volume or pricing 24 hours a day like for spot fx TRY, but if you need confirmation for entry it provides you with six hours of active volume data.
Here is a comparative chart showing EURTRY and the MSCI ETF index, where the
inverse and near-perfect correlation between the two assets is clearly visible (the MSCI
is the blue line):
Secondly: I may have been focussing more on EURTRY of late, though the thread title would suggest otherwise. HOWEVER, I can assure you that there is little difference in price action between the two, as you may see from the following combined chart of USDTRY (blue line) and EURTRY (candlesticks):
The main difference between USDTRY and EURTRY is not in pricing but in swap/carry: given that the difference between the ECB’s interest rate and the TCMB (Turkey’s central bank) is greater than that between the Federal Reserve and the TCMB, it pays better money to hold short on EURTRY than on USDTRY.
I hope that this helps clarifying things a little.
Happy trading.
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My latest EurTry long position is building momentum: the target is the green dotted line, just under the current level of the 200-day moving average (pink curve).
Quickly mounting negative carry will eat into profits, therefore the quicker the target is hit
the higher the profit margin will be!
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After a decade of Turkish Lira depeciation that caused a constant, stock-like bull run for Lira currency pairs, things ground to a halt between September and November of last year: investment poured back into a heavily depreciated Lira and a 20,000-pip drop was seen in Lira pairs.
In the new year, however, things are not so certain, because in last five trading weeks, as in the chart below (Eur/Try weekly), a 2,200-pip bull run has put a question back in the debate: is the decade-long bull run starting over again, or is this a brief pause before the downtrend from September-November 2018 resumes momentum?
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The pair continues to rise, having climbed about 3,300 pips since the 1st February and now coming up to touch a former big resistance level (orange line) AND the 200-day moving average:
Stratospherically bullish, EurTry has today pierced through the 200-day moving average and shot past it by some distance:
The moving average is the pink curve, the orange line is a strong weekly level from the last few months and the yellow level is the next strong resistance.
The daily candle today measures 3000 pips so far.
Closed two long trades today and another yesterday.
Account back over 6k.
Looking at the MSCI Turkey ETF, the first three hours of trade today show
massing sell volume accompanied by a large move down, which means that
it is a genuine move with real volume behind it (one of Wyckoff’s principles):
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Update on my account…
Sharpe ratio and other measurements (not included in this screenshot) are starting to show positive performance of my approach. I managed to bring drawdown to a smaller size (it peaked to 29% and now
is at 16%) and I continue to trade conservatively after a big win.
Here are some of the ways in which I have been trying to better manage my equity:
- setting targets on shorter-term trades;
- after a win, using a smaller (usually half) size for a trade immediately after, to minimise profit loss;
- diversifying approaches (e.g. holding a long-term, positive-carry position while also holding short-term,
negative-carry positions) on the same currency pair; - regularly use related-assets volume data to gauge trend strength;
- avoid trading in periods of a currency pair’s incoherent, indecisive, and choppy conditions;
- use stop-losses on shorter-term trades to absorb potential whipsaws;
- accepting irrational trend-within-trend, short-term reversal as opportunities for profit;
- pay less attention to fundamentals if there is a mismatch between a currency pair’s trend and
the sentiment in news items / economic forecasts for its country’s future: a prolonged mismatch
means more reliance on technical features than news-related drivers.
With all of the above, I am improving my trading.
It is not easy: even just managing one currency pair there are constant decisions to be made,
for example:
- how long to hold on to a trade in gross profit but in net loss due to negative carry;
- how large a trade size should be used when there is clear momentum in one direction;
- how wide a stop-loss should be, and which type (fixed, dynamic (and what kind of dynamic));
- when not to use a stop-loss (e.g. on long-term positive-carry trades);
- when to double up on risk - less and less now but occasionally the opportunity may come up;
- when not to trade at all;
- when to sit and watch an intra-day trade and when to step away without active observation;
- how to set targets in relation to negative carry connotations for a multi-day trade.
I hope to continue building a positive expectancy for the account.
I will keep you posted as I go.
Happy Trading
PipMeHappy
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Hi PipMeHappy
Thanks for sharing your performance and lessons learned. Interesting read!
The huge bullish surge on Friday hit the SL on my long-term short position EURTRY (carry trade). Yes, I even use SL on my long-term position when trading EURTRY or USDTRY. I am just not comfortable trading the TRY pairs without a SL, since these “1000-pips-jumps” seem to occur once in a while.
At the moment I have no open positions. Since I am only interested in long-term trades, I will wait for the pair to loose the bullish momentum. My entry signal is a crossover of the 10 and 20 day EMA.
Overall one can say that my first experiment with TRY pairs was not succesfull in terms of profit (total of -1760 pips). However, I learned my lesson (I hope). I missed the exit point (there I had about 500 pips of profit). With other pairs I ususally exit when the MACD line crosses the signal line (26,12,9). With these pairs I got carried away by the carry trade and I wanted to hold onto my positions even though my exit signal was popping up. I underestimated the impact of the price movement against the carry.
As I said, I will take a pause until I have an entry signal again for a short trade. Next time I will apply the exit rules I use for other pairs.
I am still very excited about these pairs.
Cheers
Pipersson
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@Pipersson Great to hear from you, you are on my same wavelength, trying to hang on to those carry-positive positions as long as possible.
Truth is, if we got our timing wrong with this it could go against us for years before carry and pip-profit would align: however, for the medium term, waiting and accruing carry even with negative pip-profit is worth a shot if there may be signs that your timing is slightly off by a few weeks/months but in the right direction.
The challenge is always trying to free capital for shorter-term trades while leaving some equity locked into a longer carry trade: a bet on a shorter-term trade, with bad planning, could mean too little margin left to absorb shocks (those “1000-pips-jumps”, as you called them) and jeopardising the carry trade with a margin call.
Some of my losses earlier this year were due to choppy conditions where the bullish leg had not quite been clearly launched and I got trapped going long on false starts. Momentum is always best when trying to trade against a losing trade, i.e. by betting in the opposite direction and closing a positive trade and take off the equivalent portion from a losing trade, gradualling reducing it. It is a risky strategy and it is a juggling act but it can reduce losses overall if volatility/momentum is available.
All the best!
PipMeHappy
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@Pipersson Did you see the 2300-pip drop today?
Down to a strong level (white line) and stalled:
have you gone short?
The drop today stalled at the 200-day moving
average as well as the aforementioned strong
level:
The Turkey MSCI ETF today stalled after an initial rise backed by strong buying volume: this means that the momentum in the EurTry or UsdTry has dried up:
The Turkish local/regional elections may or may not be a factor for the stall to persist through the week, but it is too difficult to mix politics and currency direction, so I will not even go there!
Interestingly, XU 100 BIST today has been falling sharply and yet EUR/TRY has been falling too:
these two have an inverse relationship and have had it for as far as you can look back in time:
what has made this relationship blip today, or rather, how long will it last?
I entered a small long on EUR/TRY but it has fallen sharply, however I would be curious to see
how it will close today before I make any decision.
Ah, now I know why…
By the way, EurTry yesterday and today has fallen by a total of 4400 pips…