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Thanks for that, appreciate. Below is a long winded
response, but will probably save me answering a lot of questions in the future
:)
(Herbert this is also in response to your post
requesting info)
As for interest, in each currency a pair pays
the interest applicable to that currencies i.e NZD currently pays 6.7%, JPY pays
0.1650%, AUD 5.2%, USD 3.1%, MXN 8.7% and so on.
Now a properly managed & diversified basket of
currencies allows you earn interest with little risk. You buy/sell currencies
that no matter which way they move will earn you interest and cancel out the
fluctuations on that pair.
These are known as carry trades.
An example, for sake of simplicity using one
currency pair. I look for, in this case negatively correlated pairs. i.e one
moves up, the other moves. The higher the correlation the better.
Now NZDUSD & USDJPY have a 100 day correlation
of -90
Therefore I buy both currencies in such a ratio to
give me a synthetic cross of NZD/JPY. The US$ component is nil.
Now NZD is paying 6.7% on the bid. JPY is charging
0.165% on the ask. Now I've in fact bought X amount units of NZD
& Sold X amount of JPY.
In FX you earn interest on the base currency (
the one on the left and pay interest on the other ( on the right)
So the interest in this case is 6.5% *payable* to
me. If the interest rates had been the otherway around i.e NZD 0.165 & JPY
6.7 I'd be *charged* 6.5%.
Now to purchase say 10000 units of each currency
requires AU$443 margin. I'm earning approx $1.80/day in interest. Without
compounding that's $657/yr.
So the whole idea of carry trades is to buy/sell
pairs that:
a) diversify and balance out your basket i.e not
highly correlated between the pair groupings.
b) Buy/sell highly correlated individual pairs that
will always be interest positive or neutral.
I use Oanda as my FX broker. They are one of the
very few I'd trust as they have a fine track record and many advantages over
most so called FX "bucketshops" They also pay interest second by second unlike
say IB that only pays on monthly balances. If you wish check out the Oanda
forums as there is a wealth of info there from a number of traders that use
carry trades to generate a substantial amount of their trading income. An Aussie
known by the nym ~chaffcombe has a page discussing his strategy http://users.bigpond.com/morleym/
Also check some of these Oanda links I'd
posted earlier in another forum discussing carry/grid trades
cheers
----- Original Message -----
Sent: Saturday, September 17, 2005 9:43
PM
Subject: [amibroker] Re: Strategy code
help please
Steve. Basically you have a spread -- I don't use them
myself, but
I'm sure other AB users do. You'd have to open charts in
both CHF
and EUR. The AFL in the CHF chart would compute CHFPLUS = C
-
Foreign ("EUR", c); and the AFL in the EUR Chart could compute
CHFPLUS = C - Foreign ("CHF", c); Then you would sell in either or
both charts when the PLUS variable was greater than your hoped for
value. You can optimize the 2 PLUS variables and backtest,
including either 1 or both charts. Seems pretty
straightforward.
I don't trade forex -- what is the interest you
speak of?
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