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Getting Paid? With the USD/TRY Carry Trade?The USD/TRY has one of the highest Roll Over Interest out there should you choose to take on this highly volatile pair. It isn't so much that it is volatile, it has to do more with price just moves one direction, and that is up. The way we want to go is down (short) or at least sideways (ranging). Why is this interesting? It is because the Rollover Interest for going short stands at a whopping annualized rate of 28.94%. With 1:4 Margin Requirement for trading a standard lot on the TRY (based off the broker I use), $25,000 could earn me $28,940 yearly, which would be a staggering 115% return at the end of the year. Compounded, I would be a multimillionaire in no time, Buying up yachts, private jets, gourmet food, luxury cars, a pony that shoots lasers, Space X Starship, and countless other items. But hold up, is there a downside or something that makes this too good to be true? Yes, there is price movement as well as changes in interest rates as well as capital in the account. Having only $25,000 in the account, going full throttle and placing one huge position is sure to activate a margin call within seconds (as price can move thousands of pips against you quickly) and/or cause you to lose more than you put in. Now, we don't want that. You would need to have at least double the amount in the account in order to allow for price movement. The return would be halved, but making over 50% yearly isn't too bad either, is it? With price movement, the USD/TRY (I just call it the TRY), price moved higher over 57,000 pips in 2022, and over 100,000 pips in 2023; that is $18,240 and $32,000 respectively. Interest have just reached 45%, so things definitely would not have been good. Now, with funds in your account, not to many of us have $25,000 lying around to utilize in the markets, nor do we want to just tie up $25,000 into something really risky. Yet if used correctly and price does stabilize, then the TRY carry trade could payout (similar to the EUR/HUF). What could be done to reduce the risk? For starters, position sizing. Don't use the full force of your account and go "YOLO." Manage expectations. With a $25,000 account size, only getting into a position at around $3,750 (which is about 15% of the account used and a 15k position), would be around $3,650 return, which would be about a 14.6% return (still not bad. How many people can do this). If things go sour and price does move up at the end the year by 100,000 pips against you ($0.05 move per pip), that would be -$5,000 reduced to $1,350 because of the gained rollover interest (which would be only a 5% hit to your account instead of 20%). Putting some hedges in could also reduce some of the risk. Additionally, research and analysis, this could push you to make a more informative speculation on if getting into the pair is a good idea. Furthermore, to really ensure you don't lose any money, is to not get into the pair at all. For myself, I am utilizing around 41% of my Forex account in this pair, about 14% of my overall accounts. There are hedges in place to reduce the impact of price moving against me as well as my position being small enough to not cause any traumatic moves, even if price moves 100,000 pips against me (of course don't want that to happen). The decision is also made to stay in this pair for the long term or until there is some major changes. There is additional funds in reserves if needed, if things don't go well, in order to put another plan into play to get out of my positions in an orderly fashion. You all have some great trading out there.
Education
by DollarSaenz
2
The Death of Buy-and-Hold reduxAs a follow-up to my previous article, “The Death of Buy-and-Hold” , Bitcoin in these last four months has demonstrated quite vividly to us the error of that outdated methodology, that Buy-and-Hold is truly dead and technical trading is superior to what is called “investing” today. In the two month period from February, 2021 through April, Bitcoin enjoyed a meteoric rise, gaining 100% in value during that 60 day period. However, as they say, “The bigger they are, the harder they fall…“ And fall it did… Bitcoin gave back every penny in the following two months crashing back to its February levels. The most profitable, reliable, and consistent trading systems available to the average investor, as I demonstrated in previous articles , are those systems based on "supply and demand" methodologies. We can’t fight the hedge funds. We can’t fight China. We can’t fight the “whales” of the crypto market. … But we can follow their footprints as traders . I backtested Bitcoin based on my own proprietary supply and demand methodology, but I would assume that any supply and demand system would achieve similar results because we are all chasing the same protagonist (or antagonist, depending on how you look at them). The results: From January 1, 2021 through June 22, buying and and holding Bitcoin would’ve net a zero return for the investor! Following a supply and demand methodology, however, the casual trader who might work on the 4 hour charts, checking in on their account once or twice per day, I identified 11 trading opportunities which resulted in a net profit of 42 percent . Why would the investor make zero and the trader make 42%? Buy-and-hold only works in one direction… When the product gains value. Supply and demand trading lets you profit rain or shine, by the day or by the hour, in good times and bad. I bring this up, not ultimately as an "I told you so" but as an encouragement: Yes, indeed, it is possible to pull a reliable, steady income from the markets, from the cryptos , from the indexes , from the commodities , rain or shine, week after week, once you learn to "see the money flow" and follow the trail as a trader . One does not have to have their livelihoods be subject to the whims of the economy, of policies imposed by public officials, of Tweets from CEOs, from natural disasters, from supply chain disruptions, the whims of totalitarian nations, nor an employer, employees, or customers. Most importantly, Supply and Demand trading protects us from the large financial institutions who regularly engage in Market Manipulation , whose tactics include fear and greed news cycles, whose analysts and "experts" foment 'sentiment' among their viewing audience, whose priority is to broadcast information that will financially benefit themselves, and not their viewers. Trade well!
BITSTAMP:BTCUSDEducation
by ocaptain
20
The Death of Buy and Hold. Stop Investing and Start TradingEver since the invention of the Mutual Fund, then IRAs, or even going back to the ownership of individual stocks, the “common man” has been taught to “Buy and Hold” when it comes to their investments. Even today, investors are taught to put their hard earned dollars in a “lock box” and told to "let it grow"... We are told things like “Let time be on your side”… “Don’t worry about that downturn, the economy always recovers”... “Start when you are young” and most disastrously, “Buy strong companies in an uptrend, those who have demonstrated consistent growth...” This article may be a revelation. This article may make some people angry about the past decisions they have made. And some might also also say “That guy doesn’t know what he’s talking about.” To explain this I’m going to have us look at three things: a Paradigm, a Parable, and a Pair of Powers. =============== The Paradigm of the Financial Markets. =============== This might be the most important of the three concepts I will talk about in this article. When we understand this one concept, this one paradigm, this one way of thinking will transform us from being a “consumer” of financial products to a “trader” of the financial markets. As traders or investors, we are putting our money into an entity known as the “Financial Market.” Whether the vehicle you are using is a company, a commodity, or a currency… a stock, an option, a futures contract, or a ForEx pair, every single “in and out” represents a transaction between a consumer and a producer or supplier. Now, why is this global pile of securities collectively called a "market”? Well, like any other market it’s a place where “products” are bought and sold. Just like the smartphone market, the automobile market, the ice cream market, and the farmer’s market, the financial market is EXACTLY the same… only we deal in virtual products that we buy and sell by clicking buttons and moving our mouse instead of having to warehouse our inventory and provide a storefront. So, IBM, is a *product*; Tesla is a *product*, Oil and Natural Gas are *products*, and the Euro, Yen, and Kiwi are *products*, no different than a Ford Focus, an iPhone, or a pint of Ben & Jerry’s. Now, in any transaction in any market, who is it that makes money, the consumer or the store owner? You guessed it… the store owner! For *decades* now (going on centuries, actually) we have been conditioned to be *consumers* in a market when it’s the *producers* which are the ones who make the money! We have to switch our thinking. We need to think like a store owner or retailer rather than a customer. Now, how is it that any retailer, any store, whether it’s the ice cream man or Amazon.com, makes their money? They find a way to buy products (inventory) at *wholesale* and sell those products to consumers at *retail*. What do retailers like Amazon and WalMart sell? ANYTHING and EVERYTHING that they can get their hands on where they can buy at wholesale, mark it up, and sell it to the consumer at retail. So how can we make money in the financial markets? Just like Ben and Jerry do in the Ice Cream market. Just like Ford does in the automotive market. And just like Apple does in the personal computing market. We need to do as the Amazon do. =============== The Parable of the Retirement Industry (A Totally True Work of Fiction) =============== Once upon a time (1975, actually) there was a meeting of all the FatCat bankers. They all were having a grand time sipping their whiskey, smoking their cigars, bragging about their riches and success but they all agreed that they wanted even MORE. Looking back at the Stock Market they noticed that S&P really hadn’t moved much in the last 20 years. They said to themselves, “You know, all we are doing is trading all this inventory among ourselves and price is just SITTING there… How can we create a DEMAND for our product so we can see it go UP in value?” In comes New Kid on the Block, John Bogle, founder of Vanguard Securities. “Gentlemen,” he said, “I’ve got a great idea… Let’s give every working man in America a bucket… we’ll call it a Mutual Fund. And we’ll tell them that THEY have to fill it with all kinds of stocks: industrial stocks, medical stocks, automotive stocks, power company stocks, telecom stocks, and the more and more people start ‘saving for their retirement’, the more people will be buying our ‘products’, there will be more and more DEMAND every year and BOOM - the price of our products will skyrocket! (Insert sinister ‘Muwahahaha' laugh here…) So the word gets out to the street and into the business world: Your employees now have the opportunity to save for their retirement using their own money! (Which took employers off the hook from providing their own pension programs as the 401k industry began to grow.) So year after year, more and more Americans bought into the program, and as demand surged, so did the market. For the next 25 years the S&P would see a bull run like NEVER before! So what happens for these 25 years is a natural effect of Supply and Demand. As the limited “supply” of available stocks is becoming consumed by the American workforce, demand goes up. And it works great…. For 25 years. BUT… what happens when those 20-30-and 40-somethings who are working and buying, working and buying, working and buying, creating all that DEMAND… What happens when they become 40-50-and 60-somethings who begin to retire? They begin SELLING those stocks (creating monthly retirement income) and now we start seeing a REDUCTION in demand and an INCREASE in supply as the “balance of power” shifts and there are now more Sellers than Buyers - and the tide now turns in the epic cosmic struggle that goes on in the financial markets day after day, year after year, minute by minute. So what happens to these retirees who have lost HALF their savings by the time 2002 rolls along? They have to stop the bleeding! They go back to work so they can (a) have income and (b) put MORE money into The System so they can reclaim the level of retirement income that they need to go back into retirement. So now they are no longer sellers, but they are once again buyers, driving the price of the ‘products’ in their portfolios back up to pre-crash levels as the balance of power shifts back into the hands of the buyers. Five years go by… The people went back to work see that their 401ks are back to pre-crash levels, they quit their jobs, and the cycle starts all over again when there are now more buyers than sellers. Ack!!!! Now come into the present day where the market is at all time highs. Price has been whipsawing for the last 24 months! What in the blue blazes is going on? The same thing that has been going on since the dawn of retail sales in an open market: products are being SOLD to customers at retail, and BOUGHT from them at wholesale. =============== The Pair of Powers =============== So how does this happen? The first power is the power of FEAR and GREED. When we master our fears and temper our greed we can make the RIGHT decisions in the market. What has the average investor been taught for DECADES? To buy strong, healthy, up trending stocks. “Look at that company… they’ve been up trending for 18 months.” “Look at *that* company… they’ve been showing healthy growth month after month for the last year.” “Don’t miss out… you’ve already let the stock go from 25 to 85… you don’t want to miss the boat, do you?” BUY! BUY! BUY! The Fear of Missing Out (FOMO) and the greed of wanting to “make it rich” lets the novice investor be a slave to the emotions of Fear and Greed. So they buy. And what inevitably happens… You guessed it, the stock starts to falter, starts to fumble, has some bad news come out, is affected by CoronaVirus or other event or excuse. So once the stock gets to a new low price, they get scared (FEAR) and sell back to the broker so they can “cut their losses.” Economically, what did the ‘customer’ do in this case? They BOUGHT a product at “retail” and they SOLD the product at “wholesale.” Just like they would if they were buying a car. Go to the local auto dealer, buy a new car for $30,000, and later sell it for $10,000 when you trade it in for the next year’s model. We need to start thinking like the RETAILER, or in this case, like the financial institution SELLING the products at RETAIL and BUYING them at WHOLESALE. Warren Buffett once said that investors need to be “fearful when others are greedy, and greedy when others are fearful.” Trading psychology in a nutshell. The second power is Supply and Demand. Everything on the planet from Beanie Babies to Cabbage Patch dolls to 1970’s-era Star Wars action figures and yes, Financial PRODUCTS in a financial MARKET has its VALUE determined by the simple market forces of Supply and Demand. =============== The Solution: Hiding in Plain Sight =============== So, all that to say is, Buy and Hold is not only dead (which indeed worked great from 1975 till 2000) but it’s pretty much the great American Lie still being told to this very day every time someone enters the workforce and is encouraged to “put a little away every paycheck toward your future”. The Financial Markets are the ONLY markets in which we are conditioned to pay full retail for a product (look at that uptrend, look at the strong growth!) and sell at wholesale (Well lookie there, you’re losing money… let’s get you out of those losers.) There is NO other market - be it the automotive market, the electronics market, or the farmer’s market - where we are happy to pay full price. I want my stuff on SALE, and that includes my investments! Still not a believer? Let the money do the talking. Looking at the Chart at the top of this article, (also posted below), if you started investing in 1997, you would have had a ZERO NET RETURN after 12 years. If you started investing in 2000, you would have quickly lost HALF your investment, and broke even for a ZERO NET RETURN after 13 years. “Hey, I was told that time is on my side… I just let a DECADE of my life go by with a ZERO return!” If you were unfortunate to begin investing in 2018, you would have experienced six vicious whipsaws in just 33 months. Who needs that kind of heartburn?!?! And where is the market going to go? Up? Down? Do *you* or your financial planner have a crystal ball? Remember: Every financial planner and investment firm has that oh-so-handy get-out-of-jail-free card: “Past performance is not an indicator of future results.” Buy and Hold is DEAD, which means that we can’t afford to be INVESTORS, which is as good as throwing your money into a casino. We need to be TRADERS where we can “follow the money” and see where the major financial institutions, the “movers and shakers” of the market, the “market makers” are CREATING those levels of wholesale and retail, of Supply and Demand, and BUY when prices are at wholesale and SELL when prices are at retail - the exact OPPOSITE of what we have been taught in the Financial Market but the very SAME thing that we do in Every. Other. Market. When we learn to be the store *owner*… When we learn to buy at wholesale to sell at retail… when we learn to “follow the money” using a PROVEN system of trading that identifies these levels of wholesale and retail, we will no longer suffer the whims of the market. Just like WalMart, just like your local grocery store, we will be able to see *consistent* monthly profits if we take *consistent* action and we learn to *control* our emotions and trade like a Vulcan. Trade like Spock. “Trade long, and prosper!” Buy and Hold is dead! Long live Supply and Demand!
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SP:SPXEducation
by ocaptain
141