New Miss S Watanabe Trade? All Range (Full Term) Swap Trade
Hello everyone, how are you spending your weekend?
How were your results from last week’s trades?
Last weekend, with China’s trade balance turning out surprisingly positive and the Brexit deadline extension to leave the EU decided, Friday ended in a full-on risk-on market.
Since I received questions from people doing AUDJPY swap investments, I’d like to talk about intermediate-to-long-term swap investing again after a long break.
Karaoke phone has lately appeared mainly on live trading broadcasts of US employment statistics trades and the order-book trades, so it’s often seen as a scalper/day trader, but I have also been trading quietly in swing to medium-to-long-term trades.
From last year, in seminars with Hirose Trade online in April, and in Radio Nikkei Trade Party in May, and in other appearances like Smotr, I’ve consistently said that since the beginning of last year in January, I have been gradually closing out positions in emerging market currencies and high-yield currencies (crude new), and shifting to medium-to-long-term swap investing in dollar/yen longs and euro/dollar shorts, i.e., dollar-strength trades.
I squared out of emerging market currencies and high-yield currencies within last year. The idea is that with Kara-oke’s “Summer Olympics medium-term method,” I had intended to hold with swing investments hybridly up until around the Tokyo 2020 Summer Olympics, but during the Golden Week’s 10-day holidays and around May, I anticipate a big crash or risk-off at latest by this summer.
On the other hand, with the US presidential election coming next year, Trump will try to stubbornly defend the current economy, and with the Tokyo Olympics in 2020 next year, I hope there won’t be a large crash or risk-off until then.
The Nikkei peaked last year.
Looking at US history, there is a cycle roughly every ten years of sessions and recessions, so I think mid to late next year could be dangerous.
Therefore, I will introduce a trade that Kara-oke has been quietly earning from, a dynamic all-range (full-term) swap trade centered on dollar-yen long and euro-dollar short, that can profit in both risk-on and risk-off environments: a swing-to-mid/long-term dollarized trade.
When the overall swing-to-mid/long-term swap positions are about 10, I would hold: 3–4 dollar-yen longs, 2–3 euro-dollar shorts, 1–2 USD/CHF longs, 1–2 euro-yen shorts, and 1–2 USD/CHF shorts, in roughly the above ratios, as positions.
On monthly, weekly, and daily charts, I selectively take profits on long dollar-yen and long USD/CHF when there is support or resistance and risk-on, and I re-buy/re-sell euro-dollar shorts, euro-yen shorts, and USD/CHF shorts to re-enter and add more sells.
On monthly, weekly, and daily charts, I selectively take profits on euro-dollar shorts, euro-yen shorts, and USD/CHF shorts during risk-off, and re-buy/re-add dollar-yen longs and USD/CHF longs for new entries.
The above positions are managed in both risk-on and risk-off scenarios, around high- and low-price zones, using swap rollovers that include three days on Wednesdays–Thursdays, Goto days, Mondays, weekends, end-of-month London FIX, and the 45-day Vega fund rule, sometimes operating as a day-trade or swing-or-hybrid, steadily and quietly.
Technically, I monitor the 5 and 21-period moving averages for each pair along with Bollinger Bands and MACD.
With these positions, whether you buy or sell, you receive swap income. Given that the main focus is on dollar-straight pairs and I employ unconventional hedging, I recommend leverage around 5x for temporary day-trade to swing positions, and around 3.5x for core mid-to-long-term positions.
For this “slightly relaxed”, steady-trade style, it’s a drink-and-trade approach like Kara-oke, where you can steadily earn while swap interest trickles in.Golden Week is coming soon—the 10-day holiday period.
Regarding the swap trades, particularly for cross-yen longs, I recommend lightening positions and taking some profits by Wednesday before the Golden Week holidays start, i.e., by Wednesday morning April 24 or 25 before NY close.If you continue swap trading, I recommend either the all-range (full-term) swap trade described above or a portfolio of high-swap-dollar-straight positions—the dollar-yen long, euro-dollar short, USD/CHF long—and, after Golden Week ends and into late May, restructuring positions.
Have a good weekend.
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