I hear your point and I am not sure that I agree with you. I welcome opinions from a wide range of places just look at this very thread and also this recent one:
but when [Removed due to a Forum Policy violation] lectures me on a topic that I happen to know very well, and is completely wrong on that subject then that annoys me.
I do not want the advice of [Removed due to a Forum Policy violation]. He never makes any reasonable points. Everything he says is just about him, his ego and his projection as a superstar trader on this forum, never constructive advice that you can appreciate that
said individual has taken the time to understand what you are saying
said individual is now responding to your idea with their counter.
There are many people that I have reached out to on this forum usually in private messages, who from their posts seem competent and to have knowledge in areas that I do not and can learn from.
Okay. Taking your point on board let me leave an open mic for charlie to thrash out his point.
I believe you were saying that the Carry Trade and or an Option hedge was equivalent to a Martingale. I donā see it, so introduce me to your perspective on that.
Shuuuuuuā¦Everyone listen. Charlie is about to say something.
He said no such thing. Look again, and see what he was replying to, which was presumably the sentence he quoted.
He said that having a stop-loss which is 10 times the size of your take-profit target is similar to Martingales in that both are about postponing a disaster while taking plenty of small profits.
And he was right. They do indeed share exactly that similarity.
Which is why they tend to appeal to the same people.
He had a good point and he made it well, I thought, but you still managed to miss it.
Never mind. Look, I only posted as a āpotential peacemakerā because of the way you attacked someone Iāve known and respected for a couple of decades. Itās nothing to do with me really.
Maybe Iām wrong, but I doubt it very much indeed, myself, after what I saw as your hysterical overreaction to his post above.
In fact it even looks like heās now removed the post in which he made a rather constructive and helpful suggestion to you. Thatās a pity, but I canāt say I blame him. Oh well.
Thank you for your post and making your potential bias known. I get very annoyed with Charlie because of his caustic and presumptuous posting style. In this particular thread I have been having a conversation with PipMeHappy about what is effectively Carry Trading. Trading the Swap on the short positions on USDTRY which happen to be very high.
The basic point was that, with no real edge at all, taking the short position overnight when there is a triple rollover of the interest Swap, automatically introduces edge into the trade. The main risk in that trade is, having taken the Swap interest, if the market moves against you. So the point of having the proposed 12 pips TP and 120 Pips SL assuming a random market, was to:
allow room for the spread widening that often take place just after market close
trying achieve a +90% win rate on the trade based on a small TP and larger SL, which is basically a scalp, because you are only really after the Swap interest.
Evidently my guy charlie hasnāt even bothered to read the post before condemning me as a trader with a rather hypocritical sneering reply.
I get your point so to clarify this is what we are talking about. A scalp trade with the SL 10 times larger than the TP still has no edge, despite the fact that you are more likely to win more frequently.
Let us assume that you enter a trade with TP 12 pips and SL 120 pips, and for argument sake or ease of calculation there is no spread and no broker commission. So working just based on the distance the market would have to move to hit you TP or SL and assuming a random market, the probability that you will hit TP is:
120/(12 + 120) = 0.909090ā¦ or 91% - let us say 90% and therefore the probability that you will hit stop loss is 10%.
if you enter a normal trade configured like that where the profit when you hit TP is Ā£100 say and the loss when you hi the SL is Ā£1000 then the expected value should look something ilke this.
(0.9 x 100) - (0.1 x 1000) = 90 - 100 = (-10) - No Edge
So we are trying to see if you can find edge with a 3 times rollover on the Swap interest. So the Swap interest for USDTRY with a 120 pips SL (& Ā£1,000 risk) is roughly Ā£250; if you hold the position overnight (10pm) that is the interest that is applied to the trade. So going back to the same trade configured as a scalp the profit if you hit TP is now 100 + 250 = Ā£350 and the loss if you hit SL is now 1000 - 250 = Ā£750.
Now the expected value for the trade should look like this:
(0.9 x 350) - (0.1 x 750) = 315 - 75 = (240) - there appears to be edge.
The problem is:
the spread usually widens
many people must do the carry trade
other unknowns
So how do these factors come together to erode the edge that should be built into the trade. I believe that you can only find that out by forward testing to see if the results match up with the theory.
Sorry to see some animosity but this is the stuff of forums, it happens very quickly and unexpectedly, but also just as easily dies down and people then tend to forget what can be really silly arguments over nothingā¦ Essentially everyone thinks that they are unique and will not be talked down, especially in a field where everyone can trade even the same instrument, same statistical approach, and still have a different, personal approach to the next person. This is why having ādiscussions around tradingā often results more in arguments and insults than in constructive learning, because in the end all the matters, like Ropunzel says, is not validation by your peers and feeling good but whether you yourself can test your system and find that it is profitable.
To answer your question, Ropunzel, I am currently out of UsdTry as it has been chopping about for one trading month, but if you do have positive results with the rollover-only system, please post your thoughts afterward. In FXCMās demo, for example, the triple rollover is on Wednesday night and rollover across the week does not reach your account straight awayā¦ sometimes it is about 10.30pm (UK time) before it doesā¦ That is more than half an hour of widening spread and extra riskā¦ So that is long enough to be stopped out, even at the 120 pips you mentionedā¦
I am currently in a USDZAR short, collecting swap on the short sideā¦ Keeping an eye on ZAR futures and trying to see if support will break to the next level down.
Greetings, thanks for the post. I use IC Markets and they are pretty good so far, both with execution and spread. Their triple rollover is on Wednesday if you hold the position at exactly 10:00 pm UK time the interest will be applied to your account by 10:01.
I am still to write an EA to automate the trade but I will do so soon, I do think this might fly but I guess you only know if you try. USDZAR, what is the swap on that. I havenāt looked at that pair.
When you say Wednesday night for FXCM do mean Wednesday open (Tuesday night) or actually Wednesday.
Hello Ropunzel, good luck. I do not know the spread theoretically, only for my current position which I have recently cut to Ā£1.51/pip (from 1.75/pip) and is yielding about Ā£20/night, with Ā£60/night between Wednesday night and Thursday morningā¦ so Ā£140/week.
I watch four pairs (the ones with the highest ATR of all the ones I can access through FXCM):
USD/SEK (Swedish Krona); USD/MXN (Mexican Peso); USD/TRY; USD/ZAR (South African Rand).
I used to watch USD/CNH but since I discovered these pairs trend-trading has finally become a reality. Of course these pairs also experience consolidation periods but their moves are individually very strong and if you (as I am trying to do) filter out direction to align it with positive rollover, you can really maximise on earnings.
I am always clear that all I know is self-taught and that I am back to demo trading at present; what keeps me motivated is trying to achieve a decent track record to be able to justify going live in the future. Also, if you can handle spot forex successfully you can handle pretty much anything because with no centralised volume data, no clear market value (like you do for company shares with value being tied to earnings reports, company news, etc.), and so much noise, it is a miracle if anyone survives spot forex at all. Some good people that I got to know through BP have all left spot-forex and moved to commodities, stocks&shares (e.g. E-mini S&P), etc.
I am just sticking with spot forex because it is all I know and I want to see this through, but I am aware that potential of trend-trading is limited and a lot of patience is requiredā¦ and there can be a lot of random action that you do not see with the kind of buy-and-hold shares/indices.
What is your trading goal? Income supplementing; practising for retirement investing; etc.?
Income supplementing and capital growth would be the goal. When you say BP you mean British Petroleum? I have a cousin that works there not sure what eh does but he is close to the traders maybe you know him.
I am looking to diversify into other asset classes at the moment, I think periodically opportunities arise that are no brainer trades but that might be limited if you can only access the markets in one area. I understand what you mean about the brutalities of FX compared to other asset classes and I wonder if that is not a good sign to move on to the lower hanging fruit.
Oh BP okay. Never seen that used before. Makes sense I guess. I am in touch with one x BP guy on skype whom has moved into ETFs. How many trades can you get in on without simply doubling down on previous bets due to the correlations so far I have been able to find a subset of just 4 pairs with a low enough inter correlation to actually have 4 āuniqueā positions. mind u that is not including the exotics.
The forum at āfutures.ioā might suit you. Theyāre not all futures traders, there, but many are certainly professional and successful. Itās a busy forum.
Itās well moderated. Any suggestion of anything promotional, or nonsense-posting, or pasting-in is deleted on sight and immediately, and its contributor with it. You might think thatās why its traffic and participation-levels grow continually, with high-quality threads, but I couldnāt possibly comment.
Iām Dutch (but have lived in both the US and the UK before). I was thinking of the US āHouse of Cardsā (Netflix) and had forgotten it was originally British.
Yes, correlation of pairs is unavoidable and the Oanda āheat mapā is an excellent tool for cross-class/-currency correlation checks over different time periods to track constancy or change.
My four pairs have sometimes very individual, counter-trend moves to general USD sentiment, reacting more to their own price levels than anything, but I only take one trade at a time now, so I do a lot of looking and waiting but take very few trades.
For my next live trade, I am keeping an eye on GBPUSD for the 50 - 100 day window. Subsequent trades will be limited to the set with low inter correlations with Cable, and I find that frustrating because there might not be any good (obvious) opportunities there.
For the demo testing I am looking at USDTRY for the Carry Trade and I am also experimenting with using options as a hedging tool to optimise the R:R for longer term trades. So far I have found that there is a potential to introduce edge into a trade by optimising the R:R where the losses are limited but the profits can run.
So for example I got in short on NZDUSD on the 6th. if I hit the TP the PnL will be 16k whereas if the market travels exactly the same distance but instead to the SL the max loss will be 4k. The option costed 4k.
On an FX only trade the R:R would have been 1:1 but with the option the R:R is now 4:(16 - 4) or 1:3. I am trying to find the best way to use it starting with:
Trading Window -shorter term 7 - 20 trading days or longer term 50 + trading days
Is the option overpriced compared to the loss that it protects and the likely future volatility
What kind of trades should I couple it with - at the moment I am thinking trend trading breakouts.
What is the overall PnL if the price does not breakout of the 4k PnL range - that depends on how far we are away from expiry and the delta if the PnL is positive but less that 4k then there is a marginal profit on the trade + the option because the option retains its price + a negative pnl which grows at a slower rate than the spot price. if the PnL is negative but over -4k then the reverse is true: marginal loss.
Is it better to cover 100% of the losses or slightly less or slightly higher
Can you find other ways to reduce the option cost - perhaps if the trade is longer term you might find opportunities to momentarily scalp the other direction on the inevitable corrections as the market trends in the opposite direction - what are the risks involved with that.
how much of you account balance can you put at risk with multiple open positions. The point of locking in your downside risk with an option would be to increase the lotsize of your FX trades, so how much of your account balance should you stake per trade now that the risk might be only 20% of what it would have otherwise been. and how many positions can you enter with those stakes, even if you get the money back on the option ou ideally want to keep you FX trades open until expiry otherwise you have and FX trade that is closed whereas the option is still moving around, which means you have more exposure.
