HELP WITH FX SWAP type tactic

Alexander0884

Junior member
47 5
Hi,

I am not entirely sure if this is the correct way of expressing it but basically the idea is that I open simultaneously a BUY and SELL order at the same price for the same amounts.

So say I pickout 2 pairs such as GBP/EUR and GBP/CHF on the pair with the faivourable interest return I buy, on the pair with adverse interest return I sell.

Theoreticlaly I should be getting interest from both contracts (please disregard ACTUAL rates as those pairs are purely example), and any price discrepancies should come to offset each other? I know this is a very crude tactics, however I wanted to know if anyone can contribute any ideas into something like this to make it a potential, viable option for investing with less risk.
 

Martinghoul

Senior member
2,690 276
What you say doesn't make sense fully. If you choose two different pairs to profit from the carry, why do you expect the price discrepancies to offset? Trading GBP/EUR vs GBP/CHF isn't gonna work that way.

In general, yes, you can do carry trades and many people do them. Problem is that they work until one day they don't and everyone blows up.
 

Alexander0884

Junior member
47 5
Right, I am sorry as I am at work and do not always express myself fully due to time restrictions in between posting/alt tabing when boss walking past etc.

What I mean is, is it possible to pick out particular currency pairs whereby one pair has Interest accrued on BUY and the other has Interest Accrued on Sell (Basically both earning interest and are opposite) AND at the same time those currency pairs work in such a way that they counteract with each other.

Ergo you are hedging your first trade but making interest from both trades simultaneously?

Its just theoretical I mean if we think about it, I wouldpick a pair, and look for a pair that is directly proportional to the initial pair. FOr example OPEC countries; say I went long on their currency during a period where oil is on the Long trend; I could pick another currency of a different OPEC country and go short; ideally this will hedge me if the market moves against me, but at same time the Currecy pairing would yeild interest in both conracts.

Sorry I am quite new to this and just theorycrafting, looking to make low risk investments etc you know the story. Really I just want to learn adn see if anyone thought of this before.
 

Martinghoul

Senior member
2,690 276
Well, yes, in theory you could do trades like that and yes, they might be good trades. However, no matter how you slice it, you'll be trading two different ccy pairs. So you will be paying for the carry that you receive with the risk of having mark-to-market volatility. There's no free lunch, but you do have the right idea, generally speaking. You just have to be careful with your assumptions.
 
 
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