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Reasons Why Forex Traders Lose Money

A commonly known fact is that most forex traders fail. In fact, it is estimated that 96 percent of forex traders lose money and end up quitting. DailyFX found that many FX traders do better than that, but new traders still have a tough timing gaining ground in this market. To help you to be in that elusive 4 percent of winning traders, we have compiled a list of the most common reasons why forex traders lose money.

Starting Advice

Do not try and beat the market!The market is not something you beat, but something you understand and join when a trend is defined. At the same time, the market is something that can shake you out if you are trying to get too much from it with too little capital. Beating the market mindset often causes traders to trade against trends and overlords their account which is a sure recipe for disaster.
Low Start Up Capital
Most currency traders start out looking for a way to get out of debt or to make easy money. It is common for forex marketing to encourage you to trade large lot sizes and trade highly leveraged to generate large returns on a …
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MOHAMEDALLAM33 avatar

Skif  thanks :)

Aviator avatar
Aviator 11 May

very good

Verona888 avatar

Nice work!

mohmmed11 avatar

good job

anashape avatar
anashape 19 May

interesting article!

orto leave comments
43/65
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A typical conversation with a ‚Wannabee’ pro trader goes like this:
Me: Soooo, what’re you doing?
Wannabee: I’m gambling on forex ????
Hahaha… no.
This statement is apparently innocent and most Wannabees tell it as some sort of a joke, but the truth is – it’s a dangerous one. Do you know why? Because it shapes your actions. Yes, the way you think and talk about yourself shapes your actions.Have you ever talked to a professional trader? If you ask one what does he do on forex, he will tell you:I’m making money.Notice the difference? He is totally aware of the risk and he knows he’s gonna lose some money in the process, but, he still states that he earns money. You will never hear him calling himself a loser.There’s a reason to why professional traders make money on Forex – experience, good trading methodology, good risk management etc, etc. But there’s also one factor that usually slips away unnoticed.
Have you ever talked to a professional trader? If you ask one what does he do on forex, he will tell you:
I’m making money.
Notice the difference? He is totally aware of the risk and he knows he’s gonna lose some money in the process, but, he still states that he earns money. You will…
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gargantua avatar
gargantua 21 Apr.

very interesting

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13/30
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Do not listen to your heart - listen to your Forex broker!
On example of trading with Dukascopy.
This article will be based, on my own experience in trading.
Preface.

All traders know, that the main part of success trading is finding and choosing good Forex Broker. We have many articles about the criteria of good brokers and if you are reading this article here, on Dukascopy web site, you are in right place. When you open your chart in Dukascopy you see: Forex, Fun, Social. I want to add one more – helpful. Dukascopy not only wants to attract you to trade, Dukascopy wants you to trade successes. This is one of the main part in my article.
Today I will give to you all examples of how Dukascopy helps traders to be success. In addition, what can be happened if you will not follow your broker, if you do not listen to him.
Main part: Dukascopy wants you to make money.
Dukascopy team made great job to help to you to make money. They have all instruments to start with Jforex platform, Dukascopy TV, Dukascopy support and etc. Nevertheless, in my opinion, the main part here are news. You can learn all fresh news in one place. You can read them, see them and even discuss.
However, t…
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Mani avatar
Mani 19 Jan.

nice

anna_t avatar
anna_t 21 Jan.

great! nice job

bharatholsa avatar

Excellent write up )) Agree with your views ))

MobNaga avatar
MobNaga 25 Jan.

O.K. I will watch it for trial.
btw, Are you appearing in DukascopyTV?

SalviLeana avatar
SalviLeana 31 Jan.

Great !

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18/33
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In my previous article, I outlined the key themes overriding the FX markets for the beginning and covered a few currencies. In this piece I will look at the remaining currencies.
AUD outlook
The Aussie is possibly one of the most interesting currencies to watch throughout 2015. With so much going on, the AUD stands to have quite a volatile year.
Many of the key drivers of the AUD are expected to have sizeable shifts next year such as US interest rates, or Chinese growth and given so many variables it will be very difficult to have a prediction for the AUDUSD in 1 year time.
Negative factors for the year ahead are as such. Looking at the 5 year real yield, we can see a strong and tight fit to the AUDUSD
With higher US rates, and higher market risks (and volatility), the AUD's yield pick-up becomes less and less attractive.
Furthermore, Weak Chinese demand has led to far far lower demand in the construction sector in the domestic economy. This can be clearly reflected in the decline in Iron ore prices (below) which are down some 40% in 2014 and has a less than promising outlook for 2015.
However it's not all bad for the Aussie. Lets consider for a minute we are a large (non-US) real …
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foreignexchange avatar

Good Job

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6/33
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As we head into 2015, a few themes dominate the FX market and they will have substantial impacts on to currencies
  • Firstly, Oil prices will play a hefty role in determining monetary policy, as well as inflation expectations. So far this year, Oil is down some 36%

  • Secondly, the market is still underpricing US hikes... now we may see a change to the fundamentals, but as it stands the US rate market is still way of the pace of the Fed and Taylor rule estimates Looking at each currency bloc in turn we can see the potential moves.

GBP outlook
Near term risks for GBP are on the downside as remaining bulls capitulate with the weakening inflation picture. The basing of inflation would mark the low in market rate expectations and set the GBP base as well.
A potentially doubly hung parliament adds to well flagged uncertainty around May’s General Election. Investors don’t see any positive outcomes for GBP, with a Labour majority/coalition bad for business and Conservative majority/coalition raising prospects of Brexit.
When we look at risks going forward, the options space is pricing in some interesting moves for next may... if we look back to the scottish referendum it is far less signific…
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ostin avatar
ostin 12 Dec.

Cool!

mimuspolyglottos avatar

Thanks Adrian. Good material for a discussion as always. In general, Q1  is quite simple to trade if we could escape sell-off in stocks. Some political tensions emerge in Achilles' land again and I will be really suprised if it sets the fire across the south. During low liquidity conditions several pairs could really overshoot and give us a chance to capitalize on it. I expect currencies exposed to energy export will find a bottom and be attractive at future valuations again in 1Q,  still not sure if they'll be reversal against USD. 

fullmoon avatar
fullmoon 17 Dec.

Where did you took all those nice looking charts from? The first screenshot looks like Bloomberg, but the last 4?

khalidamassi avatar

nice to read.

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16/19
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It’s a hard fact to swallow sometimes but the fact is that the markets are only 20% trade 80% speculation. I often find unless there is HUGE economic data a trend will not turn on sixpence. Common sense should always be applied as should the trend!
The above image is nothing special and can be commonly found though-out the FX market. The concept of stop hunting isn't a new one, and it should not be confined to the conspiracy files. It is something easily found on most charts and is easily exploited. Why is it easy? Because these pattern are easily seen on longer term charts and therefore harder to hide... You can’t hide a long term trend!
The best question to yourself is why would a trend suddenly spike or turn, take out stops and then continue with the original trend? We all know why! But we struggle to believe it because it goes against normal trading strategies.
The big players own the market, there is no point in arguing this fact, large players when in tandem will move markets; and always to their advantage. Why not spend 50 mil to move a pair to a price where you know there is 500 mil of stops and therefore cheap prices too take advantage of and send it in the other direct…
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Elani avatar
Elani 20 Oct.

Yeah, I agree with you when something goes against the normal flow in the market then there has to be reason for it

ANABEVZ avatar
ANABEVZ 20 Oct.

RobFX Wish you always have right answers on your questions!

ANABEVZ avatar
ANABEVZ 20 Oct.

RobFX Wish you always have right answers on your questions!

peachynicnic avatar

Thanks for your article. It is very informative with detail explanation and chart! A brilliant one indeed! Thank you so much!

VictoriaVika avatar

RobFX Thank you for article! We can see here your great dedication and effort!

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12/19
Ranking

Introduction
This article will serve as a precursor to my next article in the series, where I go into detail describing my Bollinger Band Breakout Strategy. The article aims to provide a good foundation on Bollinger Bands as a technical analysis tool.
Bollinger Bands are named after the creator John Bollinger. As pictured on the right.
He is a technical analyst that developed the tool as a measure of volatility. He has wrtten a book titled "Bollinger on Bollinger Bands" and is considered the foremost expert on the subject.
He also currently runs a website and has a pay service where he analyzes the markets for setups as per different bollinger band strategies he has developed.
Without going into excessive detail on the construction of Bollinger Bands, to briefly illustrate I will provide some examples of different types of setups and information that can be obtained from the bands. The bands themselves are a measure of volatility based on previous price action. They utilize the simple moving average and the amount of data to be measured back is input by the user. The standard settings, and often the default is based on a 20 period Moving average.
I will illustrate some of the com…
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MobNaga avatar
MobNaga 30 Oct.

bbnads, I like too.

alincik avatar
alincik 31 Oct.

Well done! Good luck!

WallStreetBlog avatar

Interesting!

Valeriia_Novikova avatar

Thanks, useful article ! My best wishes to you!

forexfunction avatar

nice explanation .
this is really helpful for us.
we want more article like this.

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10/23
Ranking
Today I will write very personal article for me. I think that we need to share our experience on market, if we are real traders.
I am sure that most of those who will read it, will do not understand me, and my action, and will say - "You're an idiot!". Anyway, I honestly will tell you about it.
August 20, 2012, had very little time to 13 September 2012, when QE3 was launched in the United States, and Eurozone debt crisis would be finished. Two events, after which the dollar began its non-stop fall down. At that time, I had some problems in my life about which I will not talk in this article. Let me just say that I was very angry at the whole world, and even on the market, although it is very silly.
The market does not know anything about our existence, it does nothing to spite us. In all our losses we must blame only ourselves. I understand it now, and I knew it at the time. However, I went on principle. I decided that I could beat the market. I decided that I could be more stubborn than the market. And August 20, 2012 I made short EUR/USD trade, at the 1.2459 level. As I recall, take-profit was only 1.2409, just 50 pips. And I did not use stop-loss. I decided that I was going …
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Maksim_Chelnokov avatar

peachynicnic p.s. Strong storm at this moment in Macau / Zhuhai. I think in Hong Kong the same. I hope you at home and closed all windows. I forgot to close the window when walking out of home - and when i return 2 hours ago - half of my apartment was flooded with water, and I need to paint one wall))

Airmike avatar
Airmike 16 Sep.

Maksim - nice article. I know exactly how you felt. every single trader has to do own mistakes to learn. smart people say its better to learn from mistakes of other. but it doesn't work so well. now you know what you don't want and its just question of time to find painless way :) you can check my article about collecting and cutting exposure. maybe can help.

Maksim_Chelnokov avatar

Airmike  Thank you, i will check your article)

bharatholsa avatar

Nice article - thanks for sharing your experience with us ) To err is human - but to accept that you have erred requires courage. Bravo !!

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3/21
Ranking
2014, for the most part, has been an interesting albeit quiet year for the FX markets. G10 volatility is the lowest in the post Bretton Woods era. However, while some Global macro firms are struggling, in actual fact, its been a perfect year to trade upon these ideas.
So what is Global macro? - Simply, its looking at the fundamentals of a country or area, and trading based upon the findings. Whether its in the Equity markets, the fixed income world or even in FX. Fundamental analysis is the cornerstone of investing, as has been as long as trading has existed.
Global macro is really considered a strategy, alongside the likes of Equity Long/short, Event drive, Arbitrage, Volatility... So far, this year Macro funds have performed very poorly, averaging -2.83% across the major Hedge funds.
In FX, the key determinant of a currencies value is how central banks act, and their policy. Whether they are hawkish or dovish impacts both the supply and demand for currencies , and simple economics. So far this year, there has been substantial divergences in central bank policy. And if we can correctly predict *where* they are going from here, then trading in FX becomes really simple.
If we consi…
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Daytrader21 avatar

I think Paul Tudor Jones described current trading environment the best: "Manic depressive trading in a volatility-compressed world." He made this comments few months back at Sohn conference. You can't argue with the macro trading king:) when he say:"Macro trading is about as difficult as I’ve ever seen it in my career.” By the way that "inverse gaussian distribution curve" of perception of monetary policy standing looks quite interesting. I've seen one presented by the guys from dailfx, a bit different than yours but of course each with his own view:). Nice article as always.

Elani avatar
Elani 20 Aug.

well as a beginner I need to learn more in order to understand how to invest with a global macro mindset but thanks for the article  it gave me some basic understanding of it.

mimuspolyglottos avatar

Thanks one more time. The divergence on CBs policies means only one - higher volatility. The wider gap - the higher volatility. Rubbing my hands.

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3/23
Ranking
Introduction:
I’ve written a lot about Carry, and its uses in trading FX recently. In this article, I will look at how most efficiently to structure a carry portfolio across the varying risk levels. A simple re-cap of what FX carry is, is that you buy high yielding currencies, while simultaneously selling low yield currencies, in order to receive the difference in interest. The idea behind this comes from interest rate parity pricing of forward FX contracts (I went into detail here), but basically, the future value of a currency should discount any interest rate difference. I.e. at its heart, when you buy a higher yielding currency, the main objective is not that the currency increases in value, just that it stays above the forward value of the currency so that you gain Carry. However these particulars are not too important, what is important is how we structure a portfolio to suit our needs most effectively.
As discussed previously, the generic go to carry portfolio for G10, is buying the top 3 yielding currencies, whilst simultaneously selling an equal amount of the 3 lowest yielding currencies.
As a reference point, here is a table of 2Y swap rates for the currencies within th…
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gino32 avatar
gino32 21 July

do you use technicals? japanese candlesticks? on major time frames to filter only pairs with healthly bullish trends and bearish trends? or do you hedge techniques using negative correlated assets? or both?

WayneZhou avatar
WayneZhou 21 July

Awesome,great work .....

AdrianWS avatar
AdrianWS 21 July

gino32 hi, thanks for the question. a) I would hope to avoid that situation via active management of the portfolio (3rd step) b) however it is inevitable that losses do occur from time-to-time. With carry, patience is the key. in that situation, I would most likely leave my portfolio alone. Carry is *not* zero-sum in the long run, you do make money, hence patience being key. c) I will incorporate all that you mention, and more fundamental analysis into the discretionary holdings so that I get as much alpha as possible using the skills that I have, but at the end of the day, carry is king.

Airmike avatar
Airmike 26 July

Very good article as always.

MyiDEA avatar
MyiDEA 31 July

good job

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13/23
Ranking
Introduction :
I've looked at the Carry trade in short bursts across previous articles, but I thought I should have a more detailed look at them this time around. Furthermore, I want to explore some other possibilities around the carry trade, such as the best way to bet against it and so on.
First of all though, we need to consider that carry is in fact a very powerful aspect, it really is. I will demonstrate this by first looking at the Argentine Peso. Now the ARS is no ordinary currency, sure. In fact it currently has a yield of around 32%! as shown by this chart.
We must remember that in late January this year, the ARS crashed 15% in one day. A huge move, something frankly unthinkable for a major currency such as the EUR or AUD. This huge volatility is why traders and investors demand such a high interest rate.
But even though the ARS had a devaluation event earlier this year, it is still positive YTD. That is, if you had bought the ARS on January the 1st, you would have made money.
This to me is an absolutely incredible reminder at how powerful carry is! As even after a currency crashes, the interest afforded to you still means you profit.
A longer time series shows the quite …
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mimuspolyglottos avatar

Is the first chart in ARS terms or in USD terms?

AdrianWS avatar
AdrianWS 8 July

The implied yield one? doesn't really matter as its a %. But it is calculated with USD being the base currency. Likewise with the total return graphs, they are USD base.

mimuspolyglottos avatar

I meant second one. Having problem with my new monitor in portrait mode. Thanks.

Airmike avatar
Airmike 14 July

very nice article. put options and carry is one of my favorite strategy,  but I am going to trade AUD , definitely :)

Tinktank avatar
Tinktank 20 July

Very nice article! I still remember when carry trades were very popular some 5years ago when the US interest rate was above 4%. It was a lot easier trading the USD/ JPY.

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14/23
Ranking
On Saturday July 5, the World Series of Poker begins it's annual tournament. Which inspired me to write this article. I had called my cousin, to wish him good luck in the tournament. He's flying out to Vegas to participate after successfully placing within the top 50 last year and taking home over $200,000!
In our conversation, we talked about his career as a professional poker player and I started noticing some major similarities to my top day to day priorities as an FX Trader. The intention of this article is to outline the distinctions, and ultimately point out the advantages the FX Trader has over a Poker Player!
Poker "OUTS"
The more challenging job of the Poker Player is constantly calculating what is referred to as "Outs". This term is used to described cards that can come on board to make a winning hand for the player, and the percentage chance the player has to catch that hand.
Let's look at an example,
The Player's hand so far is not very strong, only a high card. But if another heart comes on board, the player will have made the top flush, and most likely have the winning hand.
So the outs for the player in this case is a heart. Keeping in mind we are already show…
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Jignesh avatar
Jignesh 11 July

Likerty I think the speed of the game can make it boring sometimes if players take long between turns, but the people reading can be fun.  I'm with you though, I'll trade FX any day over poker.

Ange_Farouche avatar

I was read this article with great interest. I am far from poker and forex trade, but if i decide to go in for smth. this article will be helpful to choose.

Jignesh avatar
Jignesh 11 July

Thanks Ange_Farouche !  If you're interested in poker, you can always try out the Dukascopy Poker games.  They have 2 daily contests and the buy in is free!

alifari avatar
alifari 16 July

Very interesting article, well done

sukeshroy avatar
sukeshroy 21 July

interesting article,when you tired of forex trading then play poker for some refreshment.

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14/30
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Intro:

It is no surprise to anyone that the FX markets are dead right now... We are glad when the EUR moves 50 points these days. Gone are the days of the 300-500 point daily swings of 2011 - at least for the foreseeable future anyway. In a year such as this one so far, it is beyond critical to adapt our horizons in a realistic way.
This year has been so against consensus it is crazy. Going into the year, everyone was expecting the USDJPY to rally towards 110, the Nikkei to hugely outperform and Global rates to be rising, and fast. Yet none of these have happened. USDJPY is 4% lower, the Nikkei is a huge -11.15% down (in USD terms) and US 10's are 40bps lower. So it is fair to say that this year has been a tough one, one of the toughest in terms of alpha generation since 2008 in my opinion.
Here is JPM's FX volatility index.
As we can see it is very low, and still heading lower, and given the lack of any huge events its not a surprise.
In a previous article here I discussed how to use Volatility to aid in trading, and this article, while similar will focus on how we need to adapt to low vol environments, giving a few tips I've learnt from my times trading both high and low vol per…
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Daytrader21 avatar

mimuspolyglottos you're right the FX volatility is just dead, when you're used to 2009-2011 kind of volatility environment this market is a big pain:). AdrianWS  eurchf market has been distorted by the SNB cap so it make sense for the IV to drop sharply. When it comes to FX correlation when one broke it tends to trigger a domino effect.

AdrianWS avatar
AdrianWS 21 Apr.

Daytrader21 of course its skewed, and that's why I used it in my example because it was a large number (~3) when considering other pairs, the relative Implied vol could be 1.2x or 1.5x and it would have been a weaker example. But the theory remains correct underneath and this is how one risk-adjusts trades in a cross-asset enviroment. and @mimuspolyglottos what you say is perfectly true, couldn't put it better myself :)

luke1973 avatar
luke1973 24 Apr.

To me in Low Vol Environment you better sit on your hands  and do nothing money is made when there is volatility.That is story

Airmike avatar
Airmike 24 Apr.

very nice article as always :)

Elani avatar
Elani 29 Apr.

Good written article!

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1/30
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Intro:

There are many Short term trading strategies - many of which can be seen with various articles here, they range from simple Moving average crosses, to using overbought/oversold signals and many, many more technical indicators. Broadly speaking, a rules based strategy involves no skill and this applies to both shorter term and longer term strategies. However, market participants need to know when to use each - for example, using RSI is unlikely to work to effectively over the course of 20 years, but can work quite well on a 30-minute chart, likewise using any of the three main multi year strategies fail to work on shorter term timeframes.
Here is a quick look at some simple short term strategies and their backtests (tested on the AUDUSD), while there are some profitable ones, sharpe ratios and Max DD's are awful and thus these will fail in the long run.
Long term FX strategies:

As highlighted above, there are literally 1,000's of techniques that are used in trading, yet only 3 have stood the test of time, these are as follows; Carry, Value and Momentum. I will look at each one individually to explain what they are, and why they have been successful.
Carry:

Th…
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Daytrader21 avatar

You're correct on the Risk on/risk off environment, if you run a correlation between risk trends like S&P500 and overlaying AUD/USD it can bee seen that from last year's summer the correlation has broke, as SP500 runs to new all the highs and at the same time aussie breaking lower. But at some extend on short time periods this relationships are still present.

mimuspolyglottos avatar

Becoming Hall of Famer. Very glad to see article about trading style of mine. The risk of prolonged stability with low volatility is in a situation,  when people have to put in trade more and more to meet their profit targets. In carries (almost) all use the same approach and  same techniques making ''pump&dump" conditions. This article is useful for me because I have been trying to build carry baskets (risk-adjusted) since 2007 to fund low vols pairs trading (USD/SGD,CHF/EUR).

mimuspolyglottos avatar

Thank You very much.

Armands avatar
Armands 14 Apr.

I guess that in future all central banks will set their interest rates near to 0% and then there will be no carry trades :)Other two I never knew, so I learnt something new. Good job!

dntrader avatar
dntrader 11 June

I like long term forex strategies.

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2/40
Ranking
Fx Swap and Forward Market
As we all know, our positions in the FX market are liable to either a credit or a debit at the end of each trading day. Known primarily as Carry, swap or rollover the charge made to the trading account is dependent on interest rates. Before we go further, we need to understand what an FX swap is, It is the buying/selling of a spot currency pair, while simultaneously selling/buying a forward contract of the currency pair of the same value.
The FX swap market is the biggest single market in the world, taking up about 40% of the FX markets, which is by far the largest in the world by asset class
To understand the idea here, we need to know about interest rate parity, while there is a pretty basic formula, the idea is as follows. If one country has a higher interest rate than the other country in the trade, then it is feasible to suggest that I could buy the higher yielding currency by selling the lower yield one and park it in risk free deposits and receive a return, this is the entire concept of the carry trade.
However, to prevent arbitrage, buying a currency pair in the future must discount this.
As we can see above, this is the forward curve for the AUDU…
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Daytrader21 avatar

Thanks again for reinforcing some basic concept that I almost forgot. Your article are always very informative. keep up the good work

Airmike avatar
Airmike 21 Mar.

very nice article. best of the bests :)

mimuspolyglottos avatar

Another financial HAIKU from Adrian. Short, deep, impressive. Thank You very much. Why are British so good in teaching high finance but are not good in teaching football? :(    I do not know about today but thirty-twenty years ago some theories  have considered  the forward rate as the best  forecaster of currency's rate in the  future. May I consider my portfolio of currencies with positive swap points and with future rate hike expectations on more than half of them as ALPHA trade ( trying to create some analogue to stocks)? Best Regards.

AdrianWS avatar
AdrianWS 24 Mar.

Hehe Mimus - thanks for the kind words. Interesting you mention that last point... Normally people consider FX markets Zero-sum, and while the transactions are. Every trade (as highlighted above is exposed to interest rates) as such, they are receiving cash flow, so over time FX strategies (such as G10 carry trades) have outperformed a 0% return for all parties, which is an odd thing to think about but its true! However most don't consider generating alpha as an FX tactic, but its perfectly valid imo and works percectly.P.s. Have you not seen Southamptons academy? really good at training.

Maria_r avatar
Maria_r 26 Mar.

large information flow

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