Swap Trading Strategy

New comment
 

I wanna mention a trading strategy that combine considering swap fixed income and currency pair Hedge.

As we know, AUD has higher interest rate compared to USD, JPY, or EUR. and CAD has a middle interest rate. If we hold a position for a long time, swap as kinda fixed income is very considerable.

Therefore, I wanna test a strategy that include:

 PairBuy swap
 Sell swap
 lots
 AUD/CAD+0.48
-
 1.0
 CAD/CHF+0.18
-
 0.2
 CAD/JPY+0.16

 0.2
 EUR/CAD
+0.26
 0.2
 GBP/CAD
+0.14
 0.2
 USD/CAD +0.14 0.2


we can trade AUD/CAD as center, in which means sell CAD, meanwhile buy CAD as Hedge. It seems to be buy and sell CAD in the same time, but when think about swap income, this strategy is kinda powerful.

according to recent swap point that is showed in table 1, we can calculate the yearly income without considering the FX rate changing:

 PairBuy swap
Sell Swap
lots
 Daily income
 Yearly income
USD yearly income
AUD/CAD
+0.48
-
1.0
 4.8AUD 1752AUD 1822.08USD
CAD/CHF
+0.18
-
0.2
 0.36CAD 131.4CAD 131.4USD
CAD/JPY
+0.16
-
0.2
 0.32CAD 116.8CAD 116.8USD
 EUR/CAD - +0.260.2 0.52CAD 189.8CAD 189.8USD
GBP/CAD
-
+0.14
0.2
 0.28CAD 102.2CAD 102.2USD
USD/CAD
-
+0.14
0.2
 0.28CAD 102.2CAD 102.2USD
TOTAL


2.0
   2464USD


People might be strange that what do u mean by "Without considering the FX rate changing", aren't we trading the FX rate changing, which means high risk and high return? well, it depends. 2.0lots equal 200,000USD. if your broker provide you 100times leverage, you can only pay 2,000USD as margin.

 lotleverage
 margin[USD]profit[USD]
profit/cost ratio
2.0
1
 200,000 24641.23%[fixed income]
2.0
10
 20,000 246410.23%[best risk profit ratio]
 2.0 25 8,000 2464 30.75%[profitable]
2.0
 50 4,000 2464 61.5%[risky]
 2.0 1000 2,000 2464 123%[high risk]


From this table, we can see, 20,000~8000USD is very profitable in this strategy. the profit/cost ratio will be around 10%~30%. The characteristics is that,(1) you have already hedged the CAD, so the rate changing is not that big (2)you can change the leverage freely (3) while hedge the risk, u can have high return by swap

My conclusion will be that, FX is high risk, but whether we can find a mildest way to become better?

New comment