So, I open at e.g. Alpari 18 pairs (1 lot each), each pair in the direction of positive swap. At the same time I also open the same pairs and lots at ODL Securities, but in oposite direction than at Alpari. This way my trades are 100% hedged.
How do you determine "direction of positive swap"?
My understanding is that this is the profitable direction. But with the same sucess trend may turn in the opposite diection and in this case amount of swaps will be negative and you'll have loses (in total).
EA to open pairs
I am experimenting with 100% hedging system ran on two brokers accounts. One broker pays/charges swap and the other does not (or very small). It is not a new discovery and there are basically two problems:
- swap trades requires to have big account, at least $10K+
- find reliable broker with low or no swap
I can find good brokers that pay swap, like FXDD, InterbankFX or Alpari. I found one that does not charge big swaps or no swaps at all. It is ODL Securities. They look like a big reliable and reputable company, but I have no experiences with them so I just experiment with their demo account. It's been a couple of days since I have no swap on all my open positions. I wonder if that works like that when I have live account.
Now, the strategy: most of people take the pair with biggiest swap and open only that one. My strategy is to open 15 - 20 pairs, so they hedge themselves a bit (one goes up, one goes down...). If I would open only 15 lots GBPJPY and it fluctuates 500 pips in a few days that would blow up one of my accounts, but having opened 15 pairs can let me keep my swap trades opened for weeks, possibly, which is what we want in order to collect swap.
Alpari: EURUSD - sell, ODL: EURUSD - buy
Alpari: USDJPY - buy, ODL: USDJPY - sell
I then let it open for as long as possible. When one of my account's margin is close to 100% I should close all the trades. Then withdraw the money from winning account and fund losing account. The difference of winning vs. losing is my profit. The profit is positive swap + sometimes there are pricing discrepancies between broker quotes that work in my favour.
Now, how big profit I can get? Depends how much I can fund my account, but in percents it is around 8% per month (only swap), which is not that bad, especially when considering there is no risk, since it is 100% hedge. The only risk is the broker company where you have your money.
I opened 18 positons at Alpari and ODL securities on June 16 and today's balances are like this:
ODL Securities: -$8,128 (free margin 396% yet)
TOTAL: +$2984 (it is only 6 days opened, daily swap is +$140)
I have standard demo accounts there with $100K, but $50K would be enough for these numbers. So, if I had $5K live accounts, I would be nearly $300 in profit just in 6 days.
It is obvious the profit is not just swap (currently swap profit is $566), it looks like price feeds are different and they play in my favour.
I would like to ask the audience what you think about this system and if you have any experiences with ODL Securities. I would be able to have 2 $5K accounts, but I am careful where I put my money.
Greetings, Would your EA operate on two accounts simultaneously, or does it open/close the account positions independent of each other. I assume they are not linked.
Hi good idea , did u ever heard about trading balance ? only collect lot rebate with hedging each currency ...
Forex Indicators Collection
No Free Lunch
Greetings, Yes you are right, this is indeed a risk-free money making machine and you will see great returns using demo accounts. But when you apply and trade the real Islamic-style account (after approval) you will be quickly shut down using this strategy. All brokers mention the possibility of 'immediate termination of swap free status for abuse without prior notice.' What 'abuse' could they be talking about?? Well, its certainly not scalping...their example of abuse is holding only negative swap for extended periods of time. These accounts were not set up so the client could 'save' on the swap. They were set up because swap trading violates certain religious laws for certain traders. Even though the broker is not interested in your belief system, they do expect the account to be traded with a mix of positive and negative swap. You might last 2 or 3 weeks with your live swap-free, but thats it until they pull the plug. Sorry traders.
Simple, brokers have a table where you can clearly see their swap rates. Example here Interbank FX - Trading Tools > Swap Rates
On the other broker account you should have smaller swap rates or none, in order to make this strategy profitable.
So, if you take short EURUSD you get little positive swap for each day the positions is open. Swap cannot turn negative on opened position.
No, I have two accounts at two brokers. Those are independent. I have one EA on each account. You have to watch them both and when the balance of one of the accounts is too low, you simply close all your positions - on both accounts at the same time.
The script only helps to open or close all postions quickly. It is possible to do it manually, since seconds do not matter here.
I am not sure why would brokers mind keeping your positions open for as long as you want. As far as I know brokers make money on spread and you can keep your positions open as long as you have enough margin.
There are brokers that offer no swap policy, such as Crown Forex, but I do not trust them. Their conditions are too good.
Also, if you read my first post I say that for this strategy I suggest broker that has different swap policy. One has firm swap rates and the other one has dynamic swaps that depend on day to day difference.
It is true that islamic types of accounts are offered by some brokers but those accounts have bigger spreads or they charge commissions instead. I never suggested to go for islamic account. I am not a muslim, so it is not even possible for me...
a posting I made more then a year ago on the oanda forum:
Before you venture into this method, even though the numbers seems attractive, there are several things you need to consider:
1) Used margin = money used for position collateral at an interest-paying broker like O.a.n.d.a, or even I.n.t.e.r.b.a.n.k.F.X or any other broker with same positive rate of overnight rollover interest rate. Say $200, like the website says, with a 1-2% of overnight rate paid to us.
2) Hedge margin = money used for hedging at a non-interest broker like F.X.C.M & M.a.r.k.e.t.i.v.a. This is used to keep your money from disappearing when the market goes against your position.
3) Buffer margin = remaining money used to hold interest-paying position from getting stopped out when the market goes way far against us, more than th used margin would allow.
4) Interest rate on leverage. From ElectricSavant's spreadsheet, best is to long AUDJPY at 1:50 which equals to 250% per annum of collateral margin without being compounded back. Yes, 250% wow!!!
- in order to profit from the interest, you need the interest-paying position to be active at ALL TIME, even though the trade goes against us in pip.
- the best condition is when the hedge account blows up in the end (yes, zeroed!), as we have the market going our way along with the interest rate, all in the same account. this way we save the hassle of wiring the money back
- the worst condition is when market goes to the hedged direction, especially before we get the chance to pile up on interest. That account gets fatter on pip differential, while the interest account drowns quickly (slowed by interest). In this scenario, we need to pump more money before it gets stopped out and stops the interest from flowing. Remember, pip move go faster than interest.
- Let's do some math. If, for example, our interest position is long EURUSD and EURUSD dived 2000 pips like in 2005 (1.38 to 1.18), our $200 collateral in interest account would've gotten a margin call - unless we have more money than the collateral still available. How much? Well suppose on 1:50 leverage, 1 pip = $1, $200 can only sustain a 150-pip negative swing. U need to stock up for the 1850-pip remaining.
$200 on 1:50 lev = $10K position (roughly) at $1/pip = -150 pips before a 25% remaining margin call. If we were to sustain a 2000 pip drop this year (or may study from annual movement range statistics), we need to supply $2500 more in the interest account.
OK. Now pay attention.
$200 for interest collateral (O.a.n.d.a/ I.n.t.e.r.b.a.n.k.F.X /etc.)
$200 for non-interest hedge account (F.X.C.M/M.a.r.k.e.t.i.v.a/etc.)
$2600 for interest account margin buffer (or for non-interest account, incase market goes the other way)
$40 x 2 account withdrawal fee = $80 (fixed cost), may be more if we need to juggle margin by transferring between account but provide less margin buffer - dont forget time needed for wiring money! It needs to get there in time before position gets liquidated by broker.
$200+$200+$2500+$80 = $3000
250% of $200 = $500
$500/$3000 * 100% = 16% roughly ... where did that 250% pa go?
- another scenario, where we reinvest everyday to increase the interest riding position like in the website. Well, you'll need to hedge the same amount to your non-interest position as well. So, you may appear to have more money, but unfortunately, u need to provide the same amount to hedge it with.
I'm not saying that it doesn't work. It does, and it should. But it's really not as attractive as you think and you need to juggle the margin manually. Perhaps better for conservative fund management growth rate or banking in the fixed income sector (25% or less annually), but not attractive for small capitals who looks for 50% or more per quarter.
However, the good side: you cant lose. Just think of the broker as another banking facility.
Igor, thanks for your interesting post. I absolutely realize this is not a high yield strategy or get-rich-quick. I realize you need remarkable capital to perform this strategy.
In spite of that I find it very interesting because it is almost risk free (if I consider my broker reliable and honest).
My addition to this strategy was that I open 19 (or so) different currency pairs (each in direction of positive swap on one account and opposite on "no swap" account). This is to make more time for the strategy to last, which is crucial thing, since we need to keep it open for as long as possible (to collect everyday swap). 19 different pairs go in their directions, each of them, hence you get a mix of positive and negative positions on your account. Your total unrealized P/L might get more balanced to keep your positions open (you avoid getting to margin call too quickly).
I have not tried it on live accounts yet because I have not found reliable broker with no swap. Do you think F.X.C.M & M.a.r.k.e.t.i.v.a. are reliable enough to trade with them? Thanks!