Forex trading strategies - bunny cross, woodies cci, 10 pips a day

I frequently read that great traders are very patient as they wait for the best setups. (Without worrying about what defines one of these great trade setups in this discussion..) They trade less and aim for larger risk-reward ratios. Since they are trading less and winning more, they are paying less spread per avg profit (as measured in a ratio) compared to more frequent traders.

Now in leveraged forex, we can bring another very interesting element into the picture: interest positive trading! How does this effect the overall profitability? I’ve been thinking about this lately. Mostly I’m wondering how I can study this aspect mathematically.

Is this why there are a lot of people advocating “interest positive trading” only? If you don’t do this, are you simply trading more often? Going against the philosophy of waiting for the best possible trades?

Yes on one hand you will give up potential opportunities that may end up being great trades. But there will be others where your payments in interest will cut into your higher reward ratio just like frequent trading adds more spreads.

Does anybody have any ideas or previous studies to build upon?

found on oanda web site > under interest…

Let us consider two specific examples:

Trade 1: Buy 1000 units EUR/JPY @ 91.7308 on Monday Jan 1, 2001 at 12:01am

Applicable interest rates:
Assume that the following interest rates apply for Monday Jan 1, 2001:
EUR – 4.76 / 4.81 %
JPY – 0.28 / 0.38 %
Note that the borrowing rate is quoted first, followed by the lending rate, and that interest rates are quoted in percentage points per year.
Calculate duration of trade:
Now assume that the trade is closed at 5:45am later the same day on Jan 1, 2001. The amount of time the trade is held open is 20580 seconds (= 12:01am – 5:45am), or 0.00065214 years (20580 secs / 31557600 secs—- there are 31,557,600 seconds in a year).

Calculate interest obtained on EUR:
For calculating the interest obtained on our EUR position, we use the following formula:

units * lifetime (in years) * EUR borrowing interest rate (%/year) * conversion to USD
If we plug in the appropriate numbers, we obtain:

1000 * 0.00065214 * 4.76% * EUR/USD bid exchange rate
= 1000 * 0.00065214 * 0.0476 * 0.8423
= USD 0.0261
Calculate interest charged in JPY:
For calculating the interest charged on our JPY position, we first note that we effectively are short 1000 Euros worth of Japanese Yen, which, with the exchange rate of 91.7308 is 91730.8 units of JPY (= 1000 * 91.7308) on which interest is charged. We then use the following formula similar to the one used above:
units * lifetime (in years) * JPY lending interest rate (%/year) * conversion to USD
If we plug in the appropriate numbers, we obtain:
91730.8 * 0.00065214 * 0.38% * JPY/USD ask exchange rate
= 91730.8 * 0.00065214 * 0.0038 * 0.00918
= USD 0.00209
Difference between the two interest amounts:
The account will be credited by the difference between the interest to be credited and the interest to be debited:
$0.0261 – 0.00209 = USD 0.02401
Note that in this case the customer is collecting significantly more money than they are paying, due solely to the discrepancy in interest rates between the base and the quote currencies. In this instance, the base currency (EUR) interest rate is higher than the quote (JPY) interest rate, which is referred to as a “discount” quotation.
If the inverse were true (base currency interest rate lower than the quote currency interest rate), the instrument would be said to be quoted at “premium”.
Trade 2: Sell 2000 units GBP/CHF @ 2.5882 on Monday Jan 1, 2001 at 04:00am

Applicable interest rates:
Assume that the following interest rates apply for Monday Jan 1, 2001:
CHF – 3.18 / 3.28 %
GBP – 5.97 / 6.00 %
Note again that the borrowing rate is quoted first, followed by the lending rate, and that interest rates are quoted in percentage points per year.
Calculate lifetime of trade:
Assume that this trade is also closed at 5:45am later the same day on Jan 1, 2001. The amount of time the trade is held open is 6180 seconds (= 04:00am – 5:45am), or 0.00019583 years (6180 secs / 31557600 secs)

Calculate interest obtained on CHF:
For calculating the interest obtained on our CHF position, we first calculate the number of CHF units the interest is applied to: 2000 GBP units worth of CHF with the exchange rate of 2.5882 is 2000 * 2.5882 = 5176.4. Then we apply the following formula again:

units * lifetime (in years) * CHF borrowing interest rate (%/year) * conversion to USD
If we plug in the appropriate numbers, we obtain:
5176.4 * 0.00019583 * 3.18% * 0.5606
= USD 0.01807
Calculate interest charged in GBP:
For calculating the interest charged on our GBP position, we again use the following formula similar to the one used above:
units * lifetime (in years) * GBP lending interest rate (%/year) * conversion to USD
If we plug in the appropriate numbers, we obtain:
2000 * 0.00019583 * 6.00% * 1.4516
= USD 0.03411
Difference between the two interest amounts:
The account will be credited by the difference between the interest to be credited and the interest to be debited:
$ 0.01807 – $ 0.03411 = – USD 0.01604
Since the amount is negative, the aggregate interest is charged to the account.

Your interest in what “factors” affect currenciy prices in speculative market has many answers….
most of which have been covered already.

there is ONE area however not mentioned here and I will try to be as brief as possible.

World Econonomic Events (Qrtly GDP, Mthly PPI, Trade Balance, etc. and Monetary policy (Fed Funds Rate, MPC Decisions…etc) are the most powerful events that help you “time” when the next most important “time” to sit in front of a screen and what for the next trend to form (some belive that the market is so fast these days and the level of insider knowledge is so pervasive that one can also look for some of the most pwerful trends to occur, actually BEFORE the actual news events, such as I have described above////that is a very probable occurence as it is observed very frequesntly that large “mystery” trends do in fact get baked into the speculative market well before a singificant event occurs. This also helps you to be prepared that at the time of such event does actually arrive, the market goes bonkers and becomes irrational…meaning the oppsoite outcome in the short term is often observed….completely out of whack with the “news” you here…This is commonplace in alsmost all markets…the cu7rrency commoidities market shows this feature for longer periods/..that is the big difference…as the econmic thoerist might explain…the currecy spot market has “long tails”....meaning trends tend to remain in force for long periods….What I am explaining is that these trends can start to take shape before the event even occurs and in some instances you will see the trend completed even before the event occurs…

how weird is the3 spot market…eh?

Anway, there is one other area that is also not mentioned in some of the clues provided by others…

thius has to do with game theory and outright competition…here is an explanation…

Everyione cannot be right about the market…it is competitive and only a small percentage of players can win…that is a fact…we must assume that the percentage is variable, but is never a majority of players…

Along those lines, one has to assume that the narture of “pre-baked” trades are placed well into the future based on specualti8ve outcomes of not just the news but also how the “herd majority” will respond to such news….

In this regard, you must often in order to be a successful trader, ignore events in a rational way and determine (AS PRECISELY AS POSSIBLE) how the majority will respond to the news.

This is bot necessaril;y being a contrarian trader at all…In fact, since we can assume that the majority traders are going to be wrong….then you have to fact the fact that the majority actually holds a real contrarian trade strategy at all times….No other way to explain how very few traders make a lopng term profit !

It is not a coin toss inh this area. The confusion begins when technical traders forgo such market behavior aspects of the herd pyschology that is so pervasive in the markets….They assume that this is the random nature of the markets…nothing could be further from the truth…The truth is that the market is made fo winners and lowers….common speculators insists that fundamental news coupled with their favorite tech tool will provide the “edge” over the competition, when alsmost all modes of techynical analaysi and findamental news inteerpretation are known by all players that use them…In this way, the ”*****” majority is attemtping to claim pips in the same fashion…with only money mangement and lots of false luck and hope to unwind the losses they experience.

So how do you presume to trade against the majority losers? The answers sho9uld be very simple and even my 5 y/o makes the connection….be different…Do the oppsotite of what you “think” is the rational thing to do with the “facts” that you have …..”facts that all majority traders have, by the way”..treat this information just the same as you would treat economic news release…you rationalize the position./direction that is most obvisous and then…trade agressively against that notion….

This is trader method series 1000….this is actually the first level….the other 9 levels take more time and money to discusss in this forum…but as you go along…and jhopefull survive this first semester of training…you get to advanced topics…even if you are not looking for them…be certain you will get an education if you pay attention to details….the things that are not popular and that are seldom discussed are your answers…and the best way to experience that is to live it.

Indicators that most influence the US dollar value:

1. Employment Situation Report:
2. International Trade
3. GDP
4. Current account
5. Industrial Production/Capacity Utilization
6. ISM Report – Manufacturing
7. Retail Sales
8. Consumer Prices
9. Weekly Claims for Unemployment Insurance
10.Productivity and Cost