"Reliable and constant forex profits"- That's what the authors of the system claim. - page 9
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Yeah, whatever with the rollovers. I also believe that their presence/absence does not affect the result very much. At least compared to the 30% p.a. yield stated here.
But then I can't figure out the catch. It seems that if you calculate everything mathematically, you really get a risk free return.
Let the investor has the equivalent of 5K zelenium. He splits it evenly into 2 deposits: one in roubles, the second in euros. The EURUSD rate = 1.300. Respectively, on one account will be approximately 2170 EUR, on the second 2830 USD.
On the EUR account, he buys 0.1 EURUSD lot, and on the dollar account, he sells 0.1 EURUSD lot. The exchange rate is the same - 1.3000.
Now consider two possible events, calculating the profit/loss:
1) EURUSD rises by 2,000 pips (to 1.5000)
EUR account: (1.5-1.3)*10000/1.5= +1333
USD account: (1.3-1.5)*10000= -2000.
Total on the accounts: 3500 EUR + 830 USD
2) EURUSD falls by 2000 pips (to 1.1000)
EUR account: (1.1-1.3)*10000/1.1= -181818.
USD account: (1.3-1.1)*10000= +2000.
Total we have on the accounts: 350 EUR + 4830 USD .
It seems obvious that in both cases we have more in total than we had in the beginning (5000 quid). And it does not matter which common currency to convert to. And by the way, the lot size could be 0.11, and then it would be even more. Or did I miss something?
As for the ruble rate for this period, it may change for better or for worse. That is, the odds are 50/50, because we do not forecast it, so statistically its impact is neutral.
So what is the catch? What is the profit here? More precisely from whose pocket? :)
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It is all wrong, as all my following calculations. I calculated the initial amounts in EUR and USD incorrectly, hence all this nonsense.
Read my previous post. I like this proof. It's easy and elegant, no matter what you say. And it compares favourably with paukas's proof, which requires a 1:1 leverage exchanger. Besides, it doesn't contain tedious numbers.
P.S. There is a catch in your proof: "in both cases we total more than we had at the beginning(5000 quid)". Why should the purchasing power of this amount be higher than the previous one?
Read my previous post. I like this proof. Easy and elegant, no matter what you say. And it compares favourably with paukas's proof, which requires a 1:1 leverage exchanger.
P.S. There is a catch in your proof: "in both cases we total more than we had at the beginning(5000 quid)". Why do you think that?
Well, if we bring everything to dollars, it will be in the first case 3500*1.5+830 =6030 and in the second case 350*1.1+4830 =5215
I certainly understand, you might argue that in the first case the parity purchasing value of the dollar might go down. But not that much.
So I don't see the catch.
And as for your "elegant proof", unfortunately there are no concrete numbers and calculations, and without that it's hard to accept it as proof.
By the way, I noticed a flaw in your theoretical proofs. You say that Buy EURUSD = Buy EUR + Sell USD. But in fact, we are borrowing a certain amount of USD and buying EUR with it.
And they are not needed there. And, most importantly, don't care about the purchasing power of the dollar, don't give a damn about it!
The main conclusion is this: the average of the sum of the two "opposite" operations of the authors of the system is always negative. And they do not differ from each other in any particular way.
I do not deny that profit on such "system" is possible. It will simply be statistically compensated by a slightlylarger modulo loss.
P.S.
According to your scheme, Buy EURUSD = Buy EUR + Sell USD.
No, you misunderstand. My buy designation (EUR_1) literally says: buy EURUSD on account #1 with the deposit currency EUR. I have clarified the post with the proof.
No, you do not understand. My buy designation (EUR_1) literally says: buy EURUSD on an account with the deposit currency EUR with account number 1. I have clarified the post with the proof.
So that's why it's hard to understand your theorising, where you denoted what there... And I gave a concrete life situation with calculations.
Moreover, if you yourself admit that earning from this system is possible, then how do you even understand your evidence, which allegedly disproves the possibility of earning? :)
You'd better give me a situation similar to mine, with other figures, where you would get a loss. Then we could talk about something concrete. The theories are often more complicated in reality than they seem at first glance.
I myself do not believe in fairy tales either, so I would be glad if the myth is dispelled. But so far I don't see why. I suspect that the reason is the absence of rollovers, and perhaps because of this the loss in the second case was much less than it should have been in case of rollovers.
You will not be able to undermine the value of my elegant proof with your serpentine, "life" arguments. And I'm not going to talk to you on your imposed terms just yet, because I don't like your "proof" at all: it rests on the shaky sand of the purchasing power of the surviving account's currency, which you don't know how to calculate at all. And it's also based on some lefty rollovers.
OK, here's an even simpler reasoning for you. Suppose the EURUSD exchange rate is 1.3.
Open a buy 0.1 EURUSD on an account with USD currency.
We open a sell order with 0.1 EURUSD on a EUR currency account.
Wait for the EURUSD to pass through 2,000 pips, and close both positions simultaneously. Let's assume that the result is positive (for certainty - in rubles).
And now we do a trick with our ears:
We return to the moment when both positions are opened and, at the same EURUSD exchange rate, we open in the same accounts, in addition to those mentioned, positions with exactly the same volume , but opposite to the first two. After 2000 pips we close all 4 positions simultaneously.
Question: what will be the total result of closing four positions?
The answer: minus two spreads on one account and minus two other spreads on another account. No matter how you calculate it, it is still negative, even in Tougars. It means that the second two positions will be closed with a loss that is modulo larger than the profit of the first two positions. This alone dispels the myth about invariable profitability of the system.
And now - the main question: what positions must be opened to make profit - the first pair or the second?
Tired of reasoning, I decided to calculate :
Let an investor have an amount equivalent to 5K greenbacks. He splits it evenly into two deposits: one in quid, the other in euros. The EURUSD exchange rate = 1.300. Respectively, on one account will be approximately 2170 EUR, on the second 2830 USD.
Approximately, but not quite 2170.00 EUR * 1.3 = 2821.00 USD.
Total We start with 5 651,00 USD or 4 346,92 EUR.
Meat:
1) EURUSD rises 2000 pips (to 1.5000)
EUR account: (1.5-1.3)*10000/1.5= +1333
USD account: (1.3-1.5)*10000= -2000
Total we have on the accounts: 4000 EUR + 830 USD
Total on accounts we have 830 USD and 3 503,33 EUR = 1 333,33 + 2 170,00
Total Finish : 830 + 3 503,33*1,5 = 6 085,00 USD or 3 503,33 + 830/1,5 = 4 056,67 EUR,
Total Profit : + 434,00 USD or - 290,26 EUR
2) EURUSD fall by 2000 pips (to 1.1000)
EUR account: (1.1-1.3)*10000/1.1= -181818
USD account: (1.3-1.1)*10000= +2000.
Total on the accounts : 350 EUR + 4,830 USD
Total have on accounts : 4 830,00 USD + 351,82 EUR
Total Finish : 5,217.00 USD or 4,742.73 EUR
Total Profit : - 434,00 USD or + 395,80 EUR
What to make of it ...
That's it, the questions are off the table. I have found my mistake. The initial amounts in EUR and USD were incorrectly calculated. In the end it was not 5K, but much more. So I wash my hands of the shame :)
Theoretically the entire proof may be described as follows:
profit_USD = (EURUSD1-EURUSD2) * ContractSize
profit_EUR = (EURUSD2-EURUSD1) * ContractSize / EURUSD2 = -profit_USD / EURUSD2
In short, it is buttery :) As much came in, so much went out. I don't know why I stumbled on such a trivial thing... I was working too hard...
The scheme will work on interest rate differentials . Do not ask where it is just a thought out loud.
We go to a bourgeois bank and take a loan at 3-5% interest.
We go to the local exchanger and change it for roubles.
Deposit rubles at an annual 10% interest rate at the bank back home.
register on the RTS, sell futures on the bourgeois currency (as a hedge against the price)
In a year, everything in the reverse order total profit 3-5% per annum in currency without initial investment.