How Retail Broker with the Swap Rate at night to Eliminate or Reduce Customer they Trend Following ~ fapturbo forex trading package review
More recently, I came across an interesting negotiating strategy aimed at trade term, but theoretically applies to Forex trading retail. The authors strategy claims that even with completely objective and simple rules group diverse futures market liquids produced an average annual return of about 20 % Per year over the last two decades, well above the global equity markets and match the type of return generated by the managed futures professionally managed funds follow tren coverage.
Forex like a professional, I took a look closer to see the strategy what kind of board it may be historically reserved for retail traders. result makes interesting reading because they describe exactly why it can be so difficult for retail traders to exploit existing edge in the market.
For the sake of full disclosure, I will reproduce the rules of the strategy :
Hazard: 100 days ATR ( Average True Range) must be equal to 1 unit of risk.
Note: at the end of each day closes above the previous closing high of 50 days.
Input Filters: long entry when the 50 days SMA ( simple moving average) in above the SMA 100 days.
Output: A trailing stop should be used 3 times 100 days of the ATR price higher since open trade (for long), or the lowest price since the opening des transactions (pour short). Stop leak must be constantly recalculated as Phasing : Output only be done when the daily closing is at or beyond the stop loss.
This strategy was tested on forex currency pairs most liquid and place The most popular, EUR / USD in the long term and the recent period ( from September 2001 to end of 2013 ), using publicly available data where the EUR / USD with a opens and closes daily at midnight GMT.
The results show that the strategy to provide the winning edge on the EUR / USD during Test period. More than 366 transactions, a total yield of 33. 85 units of risk achieved, giving a positive expectation by means of transaction 9. 25 %. This means that the average trade has resulted in a return of the bet, plus an additional amount 9. 25 % of the number of. Given the strategy is entirely mechanical, and it is only an instrument in what is traditionally the worst - performing trend - The following class assets ( currency pairs ), it is not a bad result.
However, fees and commissions must be taken into account for determining profit that is really known. Assuming that :
trade is by funds futures with EUR / USD and
fourth trade should commissions, and one 10 million dollars traded each unit equivalent to the risk of permanent 1 % Of the initial size of the resource, then total return will be equal to $ 3. 385. 000 transactions multiplied by 366, less $ 25 each, represents commissions. This means a reduction in the yield of only about 0. 1%, the total yield of 33 donations. 75 %. Presumably if the strategy driven less perfect, there will be additional losses.
Now imagine with a merchant account retail for $ 10. 000 who wants to share The use of strategies Forex retail brokers. Fortunately for these traders, brokers allow access to a kind of quotation futures contracts that can be exchanged with size very small lot and the lot size is very small as the spot Forex trading, it is not no problem with scalability.
The next step is to work on some of the costs can be negotiated for retail traders tried to implement this strategy over the same period en EUR / USD. We can first of all see the cost of using the Forex spot:
Each cause the spread of commerce 2. 5 pips, et All positions that remain open at the end of New York raises costs to swap overnight position of which varies in position, but the average, for example, three quarters of pip per night.
For simplicity, we can make a rough calculation based on pips. 33. 85 % Discount The calculation is based on the profit of 9088 pips. Spread as 2. 5 merchants dikalikan 336 trade, as well as 840 pips. In addition, we need to reduce costs swap overnight. Retailers we have an open position during night 9889, which would explain 7417 pips. So we must reduce the total 8. 257 pips online total profit of 9088 pips, which leaves us 831 pips net profit!
For the sake of this rough calculation, if we assume that the return spread evenly in each pip, it is a very small net income for our retailers as 3. 09 % as against 33. 85% of return generated by the fund $ 10. 000. 000, we seen previously.
Retailers we can have an alternative, which would purchase contracts term synthetic mini is not responsible for swap overnight, but that has spread more large ; . Take another look at the numbers and also the assumption that a quarter of trade should be postponed, our retailers will face cost 458 times more than 14 pips, matching the deduction of 6. 412 pips. It will be a net benefit 2. 676 pips. Assuming again that all re- uniformly distributed over each seed, retail traders we we ended up with a total net return of 9. 97 %. So use synthetic mini- term will be much more favorable, but still represent a yield annual during the trial period of less than 1 % of salary per year! Furthermore, it will return less than a third of the amount that is enjoyed by a large fund.
decomposing
Why things are so bleak for our retailers? There are several reasons, and examine every reason to caution potential retailers can help to understand how the edge can be effective in a particular market is eroded by selecting the broker or the method of execution.
Futures contracts are actually too big to be available for most traders detail, the position and dimensioning can be achieved by not less than the number total of a million dollars in the diversification strategy follows the trend. Mini - à term is a potential solution, but if they are not very liquid, they are not likely to have the same edge as usual future have followed the trend. Exchange Traded Funds is another partial solution, but still, retailers will pay some sort of access to appropriate market spread much more than $ 20 round-trip commissions paid by significant customer contracts.
This brings us to the issue of the spread. Frankly, there is no reason which even the retailers have to pay more than 1 pip for trade trip on the instrument such as vanilla as the EUR / USD. Broker support more than is absolutely not have a valid reason. I must say that the differences in the distribution sector has declined in recent years. While this is good news, even if the retailer as an example, we have to pay 1 point instead of 2. 5 pips, it will rise with profitability an additional 1. 5%, and can not really be pushed all the way to 2001 en tout cas.
This brings us, finally, the real culprit is reduced reversion : trade level at night which is widely misunderstood, and is therefore worthy of detailed examination.
Nuit Swap Costs
When you do a forex trade, you are actually borrowing a currency exchange for others,. Therefore, you should logically pay interest on borrowed money, when receive a refund of the money that you have flowers in return. usually there is an interest the degree of difference between the two currencies, which means that you must accept or pay additional costs represent each night differential, and well sure the exchange rate is a factor less frequently traded currencies in 1-1. the only times there would be nothing to pay or would receive if the exchange rate is exactly even the pitch point, and no difference in the interest rate.
It seems that sometimes, you pay the difference and sometimes you accept it, until that the whole swap was canceled itself out. Unfortunately, it is not as simple than that for several reasons:
Currency of higher interest rates tend to increase with the exchange rate as an lower interest rate, so you re likely to find in the trade longer from time to time you borrow a currency with a higher interest rate, which means you tend to pay more often than receiving.
Forex brokers charge or pay the retail price is very very different from their customers with long or short a particular pair. Many brokers are very opaque about this and did not even show rates apply on their website, although the rate can be found in the power broker on any platform MT4. the convient Note that, to be fair, there is a different legitimate method of calculating the cost of this. But if you look at the table were organized in myfxbook show Beaches quarter yesterday charged by some Forex brokers detail, you get a sense of different markets.
In addition to charge or pay differential interest rates, some dealers also added Incremental Cost rate is positive in your favor! Ironically, this tends to be The same broker who will charge you for your account is not active, and that the administration involved in negotiating the highly questionable real market even ordered uncommon. the result final is to divert additional cost to the customer.
Most traders are leveraged, meaning they borrow more Eye exchange their money. Traders tend to forget that one of the consequences negative effect of leverage is to drive up the cost of the swap night, because they have pay interest on any borrowing money, not just the margins they put concerning certain trade. of course it is a legitimate part of the load.
The practice of charging a fee for each night the client remains in position open not only open to abuse, but it can be an effective way to greatly reduce the possibility that an operator may be seeking to shift their support to the use of smart trade long-term trend, which is usually paid from time to time if executed properly. One could say that some retail brokers using a vast ignorance of these fees as a way to increase their balance sheets, and the legal entity must take steps towards this. On the other hand, one could say that the market maker can not should make a market in a way in which they can systematically turn off pocket by the statistical behavior of long-term market. There can be many level difference between the currency broker reflected by their customers long or short at a given moment. We can see that one of the brokers can offer a better offer others in a currency pair, but not the other, which seems strange.
A systematic study of this area would be very interesting to read. Meanwhile, the retail traders systematically trying to hold a position overnight to ensure they are fully investigate what is offered when they shop for a broker, and realized that the speed of price movements are favorable, they can have a significant impact on the strategies profitability trend and momentum they can use.
More info for How Retail Broker with the Swap Rate at night to Eliminate or Reduce Customer they Trend Following ~ fapturbo forex trading package review:
