The swap rate for selling Lira last night was insane: I got whacked with a whopping £-234 for holding my 25k long overnight on EUR/TRY!
I tried to work out what it would cost but the swap fluctuated by the minute on top of a wildly swinging spread ranging from <100 to >300 points: I decided to hold on and see if normal liquidity may return today.
I made some smaller long trades and covered about half of that overnight negative swap. I will try to manage things as best I can until the local Turkish elections at the end of the week.
PipMeHappy
Look at the swap rates:
for long overnight holding: £ -621 (10k position);
for short overnight holding: £ 129 (10k position).
Unbelievable !
Hi PipMeHappy
Of course I’ve seen the drop :).
However, I decided to stay at the sidelines until this blows over … way too wild for me :). I’ll stick to trading my majors and major crosses for now.
I am still hoping to set up a long-term short trade on a TYR pair lasting at least a couple weeks. I am waiting for my entry signal (EMA crossover) but I will only enter after the market calms down.
I wish you good nerves during this wild period!
All the best
Pipersson
Very sensible, @Pipersson
I just closed two longs with a total (incl. negative swap from yesterday for one of them)
loss of about £1100: I decided to do this and free up equity to open a large secondary short to take advantage of the extraordinary positive swap overnight and to stop
hemorrhaging money overnight going into tomorrow, given the crippling swap rate for longs.
I will see how the plan works out for me.
Take care!
Crazy times, lost about 2k via negative spread and pip loss combined.
Yesterday/today both longs and shorts will incur a negative rollover/swap!
I cannot wait until these elections are over… Two days to go…
Voting has now finished and ballot boxes will soon be opened for vote-counting; follow the results in real time here:
http://www.hurriyetdailynews.com/secim/31-mart-2019-yerel-secimleri/istanbul-secim-sonuclari
After the massive Lira swings in the days before the local elections,
there have now been five days with long upper wicks worth thousands
of pips: these wicks all retreated below the 200-day moving average,
as this picture shows:
What this picture also shows is that the black broken lines that I had
put in a few months ago are still valid, namely a 4000-pip range that
EUR/TRY is still unable to break.
The massive swing high that we saw three weeks ago was not a true
break and due to unprecedented conditions that were not to last.
Alongside professional traders caught in the Turkish banks lock on
Lira liquidity in the run-up to the elections, I was lost in turbulent
conditions. Trying to stay on the ‘right’ side of these movements
proved very costly and I lost about £3k on my demo account.
Prior to these conditions, the pair had been rising for about five weeks
and it seemed set to rise further. Right now, the tables seem to have turned
and we may be back to Lira strength: I am short EUR/TRY once again, possibly
for a few weeks, trying to rebuild what has been lost, and assuming more stable
conditions post-elections.
The MSCI Turkey ETF has shown big buy-volume swings (green columns) in the
run-up to the elections, but the ETF price stayed flat: then, there was a pick-up in
price, this time with a modest volume, which may explain the move south in EUR/TRY
since the start of the week:
The main lesson here is to learn when to stay out of trading in unknown market conditions
(rather than trying to weather the storm). Holding short would have been a better outcome,
but then again there were signs of the uptrend continuing: difficult judgments had to be made.
2 Likes
@PipMeHappy. Hey mate long time. Are you doing carry trades and trying to hedge your risk with a highly correlated/uncorrelated second pair? If so I am doing some stuff on that now, it looks interesting maybe we can swap notes.
Cheers
How’s your trading going as of now, you appear to be on the right track as this post is a few months older now
@Coocheeboy @ropunzel
Thanks, good to see you both.
I am having mainly two difficulties:
- March-April has been tough due to the elections and massive day dojis showing indecision in direction;
- the ten-year Usd/Try and Eur/Try uptrend unwound by 20000 pips from September to Christmas of last year, after which there was a five-week move up before election anxiety kicked in;
- after liquidity returned to some normality, at first there were about six days of long wicks and day candles closing below the 200-day MA, after which there now seems to be a sharp return to Lira devaluation and to the move up that I mentioned earlier;
- deciding to continue a carry trade heavily against spot fx movement is difficult, for the following reasons that I learnt by doing this now for months and months:
a) you have limited funds and leveraging up an illiquid pair such as EurTry means that to significantly boost your carry trade earnings you have to be heavily invested into a single position;
b) if you were to take advantage of shorter, upside moves by buying Eur/Try or Usd/Try, you would need to close the carry (sell) trade in order to unlock enough margin on your account to give decent leverage to a day (buy) trade.
What b) above entails is that long positions in these pairs should only be done intraday, given the heavy negative swap that you would incur by holding overnight; on the other hand, if the prevailing trend is heavily to the upside, in order to continue holding a positive carry trade counter-trend you will eventually have to cut your position bit by bit, each time taking off some of the carefully accrued carry earnings…
The conundrum is this: I am not interested in day-trading this pair to the upside but I am having to do this if there is continuation of the uptrend, in which case do I only carry-trade when a significant down-trend or correction occurs?
I know that banks and professional FX desks have been buying Lira for its high interest but they do not have to go through the spot-fx sh*t that we retail traders have to go through as they buy Lira through other instruments (options, bonds, etc.)… in other words, they have means to bypass the spot-fx price fluctuations. So the question is: is the true carry trade actually possible for the spot fx retail trader?
1 Like
@PipMeHappy
Try this trade on a Demo, trade these 2 Pairs simultaneously:
- USDMXN - Short
- EURUSD - Short
The combined rollover today for 10 lots both pairs will be circa 168.66 x 3 = 505.98 (triple rollover day Wednesday). The two pairs will roughly hedge each other, although the correlations of profit between the two is only~ -54%.(i.e. other pairs make better hedges)
Hold the positions till just after market open (take the rollover) , then wait till the combined PnL on the two trades (excluding rollover interest) is positive, and the spreads normalise for each pair then get on both.
Normal spreads should be:
USDMXN ~ < 10 pips
EURUSD ~ < 1 Pip
It might take up to 24 hours for the combined PnL to be >= Zero. In the worst case a few days = More + Positive Carry Interest.
So are you basically making a synthetic pair, i.e. the equivalent of shorting EURMXN?
Based on this set of rates Forex Rollover Rates | Jp Holdings
you would get £104.9 per standard lot shorting EURMXN.
According to Oanda’s heatmap, there is a weak USDMXN - EURUSD correlation on all timeframes
except the weekly, as per attached image:
There could be blips in the correlation, as was the case in XU100 BIST / MSCI ETF TUrkey and the
Lira pairs in the days before after the March local elections … These could be expensive when risk
would double as EURUSD and USDMXN would align.
Just saying, no system is broken until it is! Will you test your theory for a few days and get back to me
on the actual returns? Have you already run this for a few days?
Hey wassup. The pairs are USDMXN & EURUSD. I chose those two because you have an affinity for USDMXN from the previous post with that title so wanted to use something you are familiar with.
Other pairs are much better for this.
I use a custom correlation based on the profit change per lot candle to candle, rather than based on the absolute prices candle to candle. That looks at the correlation of the central/important property. And can also be broken down into correlation by volatility or strength of move and correlation by direction.
Swap Rates MT4
USDMXN (Short) =
SymbolInfoDouble(“USDMXN”,SYMBOL_SWAP_SHORT) x 0.1 x PnL1Pip1Lot x LotSize
EURUSD (Short) =
SymbolInfoDouble(“EURUSD”,SYMBOL_SWAP_SHORT) x 0.1 x PnL1Pip1Lot x LotSize
Try these in MT4 if you use that; 10 Lots both ways should come to as in above post.
Happy hunting.
1 Like
I think this system has to be forward tested…
Pip value is uneven: currently 100k of EurUsd would give you a £7.66/pip whereas for Usxn it would be £0.41/pip… If you went negative fifty pips with EurUsd with ten lots you would have a floating loss of 76.6 x 50 = £3830, versus a floating UsdMxn profit of just £205.
Even with good rollover/swap from UsdMxn, if things did not rebalance soon you could be stuck in a large negative floating position for some time, unable to collect the swap until things rebalanced enough to close positions in net profit.
Of course, UsdMxn typical daily range is far superior to that of EurUsd, so you may have four or five times the EurUsd movement, and it may well be that in our example the £205 floating profit would be more like £820 or more…but, still, it would be much less than the floating loss from EurUsd…
How much different would this system be from just entering a short position on EurMxn or UsdMxn and just waiting until positive carry was aligned with positive pip-profit?
