Swap-free accounts and carry trade strategy

Swap-free accounts and carry trade strategy
The currency market gives a fair shot to earn as every trader is free to choose his niche and specialization. However, by mixing completely different strategies, it is possible to get an equally stable income. For instance, while some opt for medium- or long-term trading on swap-free accounts, others prefer a carry trade strategy.
Swap-free accounts ensure working on Forex without swaps (or commissions, in other words) which are either charged or credited by a broker for holding overnight positions. InstaForex, for example, renders this service for free. Swap-free accounts will perfectly suit the needs of long-term traders who choose the most volatile currency pairs with a negative swap.
Consequently, the traders can have their positions open for a long time, and they do not pay for it. But swap-free accounts are not credited with the annual interest on free margin (InstaForex guarantees 13% annual interest to active accounts).
The carry trade strategy implies making profit on the positive carry between the interest rates of the countries whose currencies you trade. The bigger the difference between the rates is, the bigger swap you will get for the position’s prolongation. AUD/JPY, NZD/JPY, and GBP/CHF are the most popular carry trade pairs. Besides, such exotic pairs as AUD/DKK and USD/MXN are also used in carry trading. A trader can calculate the returns of the carry trade pairs individually comparing the interest rates that are publicly available.
Substantial profit can be derived from the position’s prolongation for a week or more. Thus, the carry trade strategy is frequently employed by long-term traders. Commonly, positions are opened on Wednesday and carried over to Thursday – the swap is trebled for such an operation. Higher volatility and interest rate fluctuations are the main risks that can trigger a trend change and have a profound impact on the swap amount.
Therefore, it is up to you whether to enjoy swap-free trading or benefit from carry trade operations. By the way, it is possible to combine both strategies using different instruments.

The currency market gives a fair shot to earn as every trader is free to choose his niche and specialization. However, by mixing completely different strategies, it is possible to get an equally stable income. For instance, while some opt for medium- or long-term trading on swap-free accounts, others prefer a carry trade strategy.

Swap-free accounts ensure working on Forex without swaps (or commissions, in other words) which are either charged or credited by a broker for holding overnight positions. InstaForex, for example, renders this service for free. Swap-free accounts will perfectly suit the needs of long-term traders who choose the most volatile currency pairs with a negative swap.

Consequently, the traders can have their positions open for a long time, and they do not pay for it. But swap-free accounts are not credited with the annual interest on free margin (InstaForex guarantees 13% annual interest to active accounts).

The carry trade strategy implies making profit on the positive carry between the interest rates of the countries whose currencies you trade. The bigger the difference between the rates is, the bigger swap you will get for the position’s prolongation. AUD/JPY, NZD/JPY, and GBP/CHF are the most popular carry trade pairs. Besides, such exotic pairs as AUD/DKK and USD/MXN are also used in carry trading. A trader can calculate the returns of the carry trade pairs individually comparing the interest rates that are publicly available.

Substantial profit can be derived from the position’s prolongation for a week or more. Thus, the carry trade strategy is frequently employed by long-term traders. Commonly, positions are opened on Wednesday and carried over to Thursday – the swap is trebled for such an operation. Higher volatility and interest rate fluctuations are the main risks that can trigger a trend change and have a profound impact on the swap amount.

Therefore, it is up to you whether to enjoy swap-free trading or benefit from carry trade operations. By the way, it is possible to combine both strategies using different instruments.

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