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9/31
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Economic basis
As Central Banks slowly start to play on the piano of interest rates, interest rate differentials in different currencies become, again, attractive for carry traders.
A carry trade in its basic structure involves a credit in low yielding currency and the investment of this credit amount in a high yielding currency.
A naïve carry trade simply follows the rate differentials. A more sophisticated carry trade looks for reason and shelter. For example a special country has a well-defined exchange-rate-policy, meaning, that the exchange-rate for its domestic money vis a vis another country or a set (basket) of countries shall deviate only xy basispoints from a defined target rate.
For achieving such a goal Centralbanks apply interest rate policy. Historical examples are the European Currency Unit (the predecessor of the EURO) or the long-term peg of the Swedish Krona to a basket of currencies.
A current example are the efforts by the Swiss Centralbank trying to prevent further appreciations of the Swiss Frank, by dictating even negative interest rates.
The trade
Foreign Exchange contracts are a simple way to effect such an “Interest Rate Arbitrage”. Instead of exch…
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hrustiashka avatar

good article!

skyisthelimit avatar

Good information about carry trades.

Sebine avatar
Sebine 18 Apr.

Good job!:)

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8/31
Ranking
Hello everyone, I am a new member of the great Dukascopy community and this will be my first of many articles. I feel like this is the perfect subject to start with because the explanation of a carry trade brings us back to the very basic fundamentals of forex trading. So here we go!
Definition of a carry trade:
A carry trade consists of borrowing money in a currency with low interest rates and investing the funds in another currency with higher interest rates.
This is a pretty straightforward definition, but let's use an example to put this information into context. If the interest rate of the European Central Bank is 0% while the US Federal Reserve is 1,75%, the interest rate spread would be 1,75% (1,75% - 0%). In this example, we would borrow Euro to invest in USD therefore the net yield of the carry trade would be a gain of 1.75% or 1,750$ a year for 1 lot traded.
How does this apply to trading?
Borrowing and investing in different countries would be way too complicated for an individual to do alone. This is why we do business with brokers. They can give us access to trade almost all the currencies in the world. As we know the FX market operates in pair, meaning that if you inv…
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Diana29 avatar
Diana29 29 Apr.

Nice job!

Sanju777 avatar
Sanju777 29 Apr.

good artilce

Sasha_spicy avatar

good one!

Maxim3 avatar
Maxim3 30 Apr.

useful article!

rajwinder avatar
rajwinder 30 Apr.

Well written, Good Luck

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26/44
Ranking
Одной из основных стратегий торговли на форекс и инвестирования на валютном рынке является операция carry trade. Суть ее многим известна, это получение прибыли за счет удержания позиций по определенным валютным парам по которым есть большая разница по процентным ставкам. От слова carry или удерживать. По сути трейдер открывая позицию по валютной паре, продает валюту по которой процентная ставка равна нулю или меньше или незначительная, и приобретает ту по которой Центробанк установил высокую процентную ставку, в результате трейдер получает прибыль в виде свопа за удержание позиций. Это распространенная стратегия инвестирования, многие банки и крупные инвесторы и инвестиционные компании используют ее, часто они просто одну валюту конвертируют в облигации государств, номинированных в национальных валютах, например, банк продает доллары США своих клиентов за российские рубли и покупает государственные облигации России и получает по них хороший процент, а после погашения облигаций конвертирует сумму и проценты в рублях обратно в доллары США. Конечно же это выгодно, только если за долгий срок курс валюты или валютной пары не снижается, ну а если он еще и укрепляется и это приносит допол…
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anna_n avatar
anna_n 6 July

хороший материал!

Natalia_Kisenko avatar

Very interesting article!

FXRabbit avatar
FXRabbit 19 July

Good article!

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26/69
Ranking
Fundamentals still supportive!
Lira versus Yen did not go quite the way I had expected for November, mainly due to suprise US elections outcome. As it was not a fundamental reason for TRY or JPY, the general reaction just occured later - during the current week. 7th and 8th of december were when both lines I sketched previous month (resistance and downtrend) were succefully broken. I believed more and more that it had to happen as the situation evolved. There were no real fundamentally bad news from Turkey, except the President being against Central Bank's decisions. Finally, the negative terrorism and coup-like streak of news from Turkey seem to have ceased for a while, or even for a longer time.
We had Current Account deficit tightening to -1.68B (11 Nov), Budget Balance ameliorating to -0.1B (15 Nov, from -16.9B), most of rates in Turkey hiked on 24 Nov together with steady Manufacturing Confidence (103.7 24 Nov) and Capacity Utilization (staying 76.4% 24 Nov). On 29 Nov we have seen foreign arrivals decline stopped a little (-25.8% from -32.84%) signalling maybe a start of reversal of tourism stagnation. Trade balance also improved (-4.16B from -4.36B, 30 Nov), exports rose to …
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ak10 avatar
ak10 10 Dec.

Useful knowledge for trading.

Beto avatar
Beto 13 Dec.

Very technical and fundamental bias, really good job.
Only I think you could put at the end a very short conclusion about your theory to make it easy to all that people how do not like more even the technical analysis.
Best regards.

arjaq avatar
arjaq 13 Dec.

Beto  , what exactly do you mean? TRYJPY is not a very technical (still technicals do work here to a certain extent) pair in general, it moves basically driven by fundamentals or risk sentiment. What should a conclusion consist of here?

VictoriaVika avatar

Good luck in article contest, nice job.

k_morocco avatar
k_morocco 16 Dec.

great analysis , liked your fundamental point of view

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10/65
Ranking
1. What drives the pair?
One of the important fundamental factors driving the pair is safe haven versus yield search. We must remember though, that New Zealand is not a high risk country! This is why we can see NZDJPY going up sometimes in spite of JPY currency index going up too. Both countries are 'far' from the rest of the world and both are 'isolated' as they are 100% insular. Although initial reactions to events like Brexit make JPY or CHF appreciate against everything, after the first moments NZD and similar currencies also go up, as they give better yield while not being affected that much by general pains of economy and politics.
Let's see relevant data for both countries when it comes to trading the pair:
  • New Zealand
  1. Politics: Constitutional monarchy with parliamentary democracy. Constitution is not codified. British monarch is the head of state.
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ak10 avatar
ak10 23 Nov.

Useful method, Ito new for me.

Uliana_Alexandrova avatar

Very interesting!!!

brilliant avatar
brilliant 24 Nov.

I like those pairs too

marina2016 avatar

хорошо)

FXRabbit avatar
FXRabbit 14 Dec.

Good article!

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4/66
Ranking
It’s been a tough few months for currency traders. Choppy markets haven’t produced any major trends. This got me thinking into ways to make money when the market is not moving. This is the first installment of my multi-part series on trading for income.
What is Trading for Income?
Trading for income covers a broad range of ways to make money regardless of market conditions. Trend following excels during high volatility. Mean reversion strategies do better during ranges. Trading for income is supposed to bridge that gap and offer some ‘’stable’’ income. Please keep in mind that there is no free lunch in the markets. Just like with the other two strategies, trading for income has some serious drawbacks as well. More on this later in this article.
The Carry Trade
The carry trade was a very popular method of trading before the 2008 Financial Crisis. A "Carry Trade" is executed when you borrow a currency that has a low (or now negative) interest rate, like the Japanese Yen or the Euro. At the same time you buy a currency that has a relatively high interest rate. You make a profit of the interest rate differential between the two currencies, also called Carry or Rollover.
In a …
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rajib217 avatar
rajib217 12 Apr.

so nice

ClauTrade avatar
ClauTrade 18 Apr.

Good article... I like it! well done! :)

Kivetat avatar
Kivetat 19 Apr.

Good job)))

Natali_Niyazova avatar

great job

ALSALAMY avatar
ALSALAMY 27 July

nice

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17/58
Ranking
Introduction

One year ago, the EUR looked bullish as ever as many expected EURUSD to reach 1.50's and beyond. It was in July of last year that it had started it's initial descent, which has continued right throughout the past year.
Last year I wrote an article titled A Comprehensive Fundamental & Technical Analysis on EURUSD (Please click the link to read). It outlined some of the reason we could see some downside in the pair.
Euro Outlook
In the previous article, we looked at fundamental factors, such as inflation. In fact, this graph was posted in that exact article.
Figure 1 - Euro Inflation as of July 2014 - hovering at 0.5%

Since then, we have seen the ECB Implement several measure including rate cuts and QE. The main argument for the July 2014 article was that the Eurozone was facing a period of disinflation. Let's see how it is doing today.
Figure 2 - Euro Inflation as of July 2015 - Down 0.3% from July 2014

How is it possible that after all of ECB's efforts, we are sitting at an even lower inflation rate? Well in all fairness, inflation is a global concern at the moment which has been fueled by a sharp drop in oil prices. At the same time, EUR is one of the few currenc…
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Forex_champion avatar

Very good work +1

WallStreet6 avatar

Very interesting article giving some ideas for trades and the reasons behind it!

anna_n avatar
anna_n 31 July

smart man!

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6/58
Ranking
The entire financial system is going to be put at test in an no so distant future and since Greece has been on the front stage for such a long time I think it's time to address this issues and give you my own perspective on this matters and what would be the implications of an disruptive event like Grexit.
There are many times that nothing happens for a long period of time until all of a sudden everything happens at once and what is more important the markets are paying attention and we get extreme moves like we saw last week.
For traders who operates in the FX Market it's easy to understand that Greece debt problems was that they converted their debt from drachma to euro and then the currency rose from 80 cent to $1.60 against the US dollar. This effectively doubled their debt in real terms and now servicing that debt is almost impossible without a serious debt haircut.
  • Greece Referendum

Since I'm writing this article over the weekend I have no idea what the outcome of the referendum would be. So, you may be asking yourself what is this Greece Referendum all about, and in simple words is this: Greek people are being asked to vote on whether to accept/ or not current proposal fr…
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Lyubant avatar
Lyubant 22 July

great!

Agnessa26 avatar
Agnessa26 27 July

Good Job!

anna_n avatar
anna_n 27 July

very smart, very!

Metal_Mind avatar
Metal_Mind 27 July

This is a never ending story. It may be prolonged by the EU ,,unity sentiment,,  but in my opinion the result will probably  be an exit just one costing a few hundreds billion euros more. Great points made as always.

WallStreet6 avatar

Great article! Nice approach to the topic! Now we know that with Greece nothing is definite and there may be even more turnarounds eventhough the situation seems resolved.

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11/43
Ranking
What ever happened to the carry trade? Back in the middle of 2007 I was just a year into my trading "apprenticeship". I just had just blown my first account and was trying to find the perfect system that will make me a millionaire overnight. I knew a friend who was just starting out in trading, lets call him Bob. "Bob" got into forex trading by hearing about the "Carry Trade".What is the "Carry Trade" ?A "Carry Trade" is executed when you borrow a currency that has a low interest rate, like the Japanese Yen and at the same time you buy a currency that has a high interest rate. You make a profit of the interest rate differential between the two currencies, also called Carry or Rollover.The prime example for a so called "funding currency" for the past decade has been the Japanese Yen. The Bank of Japan has kept interest rates in the near zero range for close to 15 years now. See the chart below for this.As can be seen on the chart, Japan's interest rates stayed in the 0%-0.5% range all throughout the past decade. Even to this day Japan has one of the lowest interest rates of the world ranging at 0%-0.10%.Back in 2007 there were a lot of currencies with "high" interest rates. The more…
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Ivolux avatar
Ivolux 20 Dec.

Interesting read, guess we all know what happened next, huge crash all the way to 120.00

scramble avatar
scramble 24 Dec.

funny your avatar followed by the title of the article in the contest home page :)

scramble avatar
scramble 24 Dec.

and nice article of course!

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18/38
Ranking
Introduction of this mannerThere are millions of traders who want to reach a profit on their investments, but since it is a zero sum game, and there are a lot of big banks, and so on, you must do everything you can not to be on the loss side of the market movements.The more the knowledge is the more the profit? No, there is no sure money in these circumstances. If it was, someone would use a big fund with a vast leverage and would get all the money of the investors.. But it is impossible, and it shows the impossibility of sure trade, too.What about the basis?Today, I am going to share a useful manner of trading the forex market.The principles what I used as base to this manner:If a monkey opens positions in the market, with 10 pips profit and 10 pips loss, it will be probably a successful trader, for a time, and some time later makes a loss and again profit, it will go around the base capital, and proceed nowhere. Sometime show +-10-20% profit/loss, but then turn back.If you do the same with a strategy, tied to some MA, or pivot points, it will be not the same. What will happen? Theorically, you will not have larger chance to be successful. If you had, it would be the same what I h…
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Lincoln avatar
Lincoln 10 Oct.

Thanx for sharing your opinion. There in no easy trade.. :) It is a must to analyze the situation for a long while before make any trade, so I can just suggest to watch what is happening and be ready to act. If there is no plan, there is no trade.

doctortyby avatar
doctortyby 16 Oct.

You seem to be imporving your writing style. I like the aspect of this article and of course the information provided is very useful. I also recommend long term analysis and trading with low risk and a good reward risk ratio. But the SL has to be large enough to leave room for the price to move before taking your forecasted direction.

Lincoln avatar
Lincoln 16 Oct.

Thanx, I have been learning english just for 10 months, I spend a lot of time to try to write as understandable as possible.. It is good to hear that I am improving, It is on my way to prove, and share my opinions, and I wish the best for you, your article and webinars are excessive, I hope you all the best!

pichou avatar
pichou 17 Oct.

forex is not a zero sum game. it is a negative sum game. the brokers keep the spread

Lincoln avatar
Lincoln 17 Oct.

Yeah absolutely, this is one of the most important pricliples on what my articles based on. If I am not mistaken I wanted to share this view as well. It is on the side of long term trading that the expenses are much more smaller.

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4/38
Ranking
This article will describe this long term trading strategy, used mostly by institutional investors, highlighting rewards and risks in a simple way, to make it possible for you to use it as well. With carry trade you can make or lose money even if the price of a currency pair remains static for a long time. It will also help you understand the reasons behind some of the market's moves, especially during volatile and risk-off periods.____________________ ► What is carry trade? Even though it's possible to have carry trades in a variety of financial instruments and investments, the basic premise is the same. Positive carry trade occurs when someone borrows an asset with low interest rates to finance the investment in an asset with a higher return. For example, borrowing money at 2%, and then investing the funds in an asset that pays 5%. This is easily done in the Forex market, because currencies are traded in pairs, so a positive carry trade is obtained when a trader buys ("carries") a high interest rate currency (for example, AUD), and sells a low interest rate one, such as JPY. Negative carry trade, as expected, is the opposite. This situation happens when the yield of holding an…
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bmg avatar
bmg 30 Oct.

Good article

brazandeh avatar
brazandeh 16 Dec.

You really are a Special FX!.Thank you so much for the clarification

SpecialFX avatar
SpecialFX 17 Dec.

You are welcome brazandeh, I am glad you liked it! :)

brazandeh avatar
brazandeh 22 July

Is it rally possible to get pips by carry trade?If I understand it correctly, so as a position to be profitable , the value of positive carry trade must be higher than the spread of that instrument and at the same time the direction of that position must be in favor of the market.Am I right or did I miss something?

FXRabbit avatar
FXRabbit 14 Sep.

Thank you for writing this article and sharing it with us!

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