Discussion of article "Statistical Carry Trade Strategy"

[Automated-Trading]

New article Statistical Carry Trade Strategy is published:

An algorithm of statistical protection of open positive swap positions from unwanted price movements. This article features a variant of the carry trade protection strategy that allows to compensate for potential risk of the price movement in the direction opposite to that of the open position.

Author: Ruslan Lunev

[Heroix]

Ahem, but there is no guarantee that the synthetic will remain flat. I will say more, it will definitely come out of it, as soon as a new lot ratio is selected for the history segment. Thus, in this context, trading on swaps on two pairs is reduced to zero... or to pair trading... where MM comes first.... where MM comes first - the system of fills and other chips.

When it comes to curry trading, you should ring pairs. The simplest ring is two majors and their cross. Let's say EURUSD/GBPUSD/EURGBP. But will you choose pairs so that their total swap is > 0?...?

In general, the article does not reveal the topic.

[hrenfx]

In its purest form, Carry Trading boils down to finding a market-neutral portfolio with a positive swap. Neutrality is necessary to avoid market risks. At the same time, it is desirable that the costs of entering the portfolio are covered not so much by the positive swap as by the predictable volatility of the portfolio itself.

There is a different vision (hypothesis) of Carry Trading:

The direction of serious efforts to prevent such a perverse way of making money. I.e. the real interrelations between currency rates come from the desire to prevent the profitability of such a strategy. This means that the weights of a real long market-neutral portfolio do not come from mathematically found interrelationships of several currency rates, but from the refinancing rates and turnover of each currency.

P.S. Look at what is happening with swaps on a great market-neutral portfolio consisting of just one FI: EURCHF....

[Ruslan Lunev]

Heroix:

Ahem, but there is no guarantee that the synthetic will remain flat. I will say more, it will definitely come out of it, as soon as a new lot ratio is selected for the history segment. Thus, in this context, trading on swaps on two pairs is reduced to zero... or to pair trading... where MM comes first.... where MM comes first - the system of fills and other tricks.

The article is not about guaranteed flat, pair or portfolio trading, fills and casts and other manipulations. The article is about statistical curry trading, i.e. making money on positive swaps. No guarantees are mentioned in the text of the article.

Heroix:

If we talk about curry trading, we should ring pairs. The simplest ring is two majors and their cross. Let's say EURUSD/GBPUSD/EURGBP. But will you pick pairs so that their total swap is > 0...?

There is no point in talking about looped curry trading. Total swaps there are strictly negative. Checked.

Heroix:

In general, the article does not reveal the topic.

The article does not cover the topics you mentioned, but only the stated topic of statistical kerry trading with a specific strategy, which the EA calculates and gives as recommendations.

[Ruslan Lunev]

hrenfx:

At the same time, it is desirable that the cost of entering the portfolio be covered not so much by the positive swap as by the predictable volatility of the portfolio itself.

Sorry, but you have the wrong article. The strategy proposed in the article does not predict anything, as stated in the "Warning" section. Predictable earnings with this strategy can only be on positive swaps and only until the swaps change. Unfortunately, I am not aware of any algorithm that can be used to manage volatility or at least predict it in financial markets. Therefore, the article proposes an algorithm for a certain repayment of volatility due to mutual correlations occurring on separate currency pairs and quoted in some liquid currency.

hrenfx:

There is a different vision (hypothesis) of Carry Trading:

The direction of serious forces to prevent such a perverse way of making money. That is, the real interrelationships between currency rates come from the desire to prevent such a strategy from being profitable.

Sorry, but Curry Trading is not a vicious way of making money, it is a legitimate one. Refinancing rates are regulated by central banks to attract investors, i.e. those who want to make money on them. Another thing is that there is a certain risk that investments will turn out to be unprofitable due to the movement of quotations towards negative swaps. Therefore, the article proposes a method of repaying such movements, regardless of where they will move.

[hrenfx]

ruslun:

I understand you perfectly. Unfortunately, it's not mutual. I will refrain from explaining my point of view.

[Ruslan Lunev]

hrenfx:
I understand you perfectly. Unfortunately, it's not mutual. I will refrain from explaining my point of view.

I don't understand what kind of reciprocity could be expected if our opinions don't coincide?

I proceed from the assumption, confirmed by trading experience, that volatility is difficult to predict, so I propose in my article a method of at least partially eliminating its influence, in order to make money on quite predictable positive swaps with less risk, at least until the next meeting of regulators.

You claim that supposedly volatility can be made predictable.

It is quite obvious that with such diametrically opposed points of view, there can be no agreement between us.

[Heroix]

ruslun:

.....

I proceed from the assumption, confirmed by trading experience, that volatility is difficult to predict, so I propose in this article a method of at least partially eliminating its influence, in order to make money on quite predictable positive swaps with less risk, at least until the next meeting of regulators.

.....

Do you realise that you will lose more on synthetic movements, if you fail to enter, than you will earn on swaps?

[Aleksey]

Heroix:
Do you realise that you will lose more on a synthetic move, on a bad entry, than you will gain on swaps?

Do you realise that the author is making assumptions?

The basis for statistical kerry trading is based on the following assumptions:
1. The movement of currency pair quotes should be in the direction of positive swaps.
2. If two or more currency pairs are quoted in the same highly liquid currency, their correlations are positive. Consequently, it is possible to dampen quotation movements at the expense of multidirectionally open and positively correlated positions.

i.e. if you open in the direction of positive swaps, not only the price will be pulled in your direction, but swaps will grow. That's not arbitrage, that's "carry trading"

I didn't know about the first point. It's a useful thought.

So, if the assumptions are correct, the strategy makes objective sense.

Respect.

[Heroix]

pronych:

1. Do you realise that the author is making assumptions?

2. i.e. if you open in the direction of positive swaps, not only will the price be pulled in your direction, but the swaps will increase. This is not arbitrage, this is "carry trading"

I didn't know about the first point. It's a useful thought.

So, if the assumptions are correct, the strategy makes objective sense.

Respect.

1. I understand, I don't see their point. There is no benefit, only harm.

2. Delusion again. Enough of this chatter already. "Thought is useful" etc. - it's all to hell. Only practice shows what is valuable:

Let's take EURAUD cross and specification from DC A. Swap short = 1.14, long = -1.4. Not bad swaps. So what? Quotes don't care about that:

However, it does not prevent some people from flying in the clouds of their assumptions and thoughts.

[jcbrosse2]

Automated-Trading:

New article Statistical Carry Trade Strategy is published:

Author: Ruslan Lunev

Hi Ruslan 

 

I just wanted to know if it does open trade at all ?

and thank you for your article about carry trade .

 

JCB