Why did USD/HKD (the peg currency, dollar-peg system) lose in the past? How to win from now on? Speaking to the essence!

Even if you’re lucky to keep winning, a single loss could be fatal… One day, surely the day will come when a great counter-move occurs, right?
This is the continuation of that.Hustling with a Tradi-Pip-like method and aiming without a stop loss

…So, the first topic【Try trading with a currency pair that always stays within a range?】

With normal currency pairs, how much the rate rises or falls depends on the market at the time, and there is no upper or lower limit, but due to national policy“For certain countries and their own currencies, upper and lower limits are set and the rate moves only within that range”there are cases where it is configured to do so.

‘This is called a pegged currency (currency peg system)’

A representative example is the USD/HKD (U.S. dollar / Hong Kong dollar) pair, and because it is pegged to the dollar, it is called a dollar peg system.
There were other countries as well, such as Oman rial and several Middle Eastern countries that pegged to the dollar.

Because the market moves only within the range, if you wait long enough, you will eventually reach a rate where you can take profit.
…That said, for currency pairs with negative swaps, while you wait you could go bankrupt due to negative interest rates.
The narrower the rate range, the smaller the currency gains you can get, and sometimes the price stays at the bottom for months or moves only a little for years, so you cannot withstand the pressure of negative swaps.

Therefore, the main rule when entering is: prefer positive swap →With USDHKD, you go long.

Since the downward movement is limited, even if your position becomes slightly showing a loss, at some point it will stop falling and eventually bottom out and move into the plus territory.
Of course, as mentioned earlier, it can take half a year or several years, but those who are swap-focused tend not to cut losses, instead they endure waiting, earning a few tens of pips per 1,000 units each day (or even a couple of yen), and if they wait endlessly they can win eventually… which is attractive. As long as you don’t cut losses and you eventually break even or turn positive, a trader like me could remain undefeated.

【But almost all USD-HKD long positions were forced to retreat】】

You can win someday, and you have the patience… so why were you forced to retreat?
Because the assumed premiss that was believed to be true was overturned easily.

Because holding long with a buy would make the positive swap collapse and turn into a negative swap,

If you wait forever you will eventually be flat; however, continuing to hold with daily negative swaps becomes difficult; even with additional funds, there is no sign of reversal and you hit the bottom, then you cry and retreat; you end up paying enormous negative swaps and substantial currency losses and retreat in defeat.


【Pegged currencies move only on interest rate differentials】

People buy long with positive swaps, expecting the rate to rise. That’s fine.
Then when will the price rollback (fall) happen?
Buying with negative swap causes everyone to run (sell) → selling pushes the rate down

Even if negative swaps occur, if the rate rises above the purchase rate after some time, you can get currency gains, so you might break even?
But in reality, when negative swaps occur, everyone runs, so the rate falls → unrealized losses widen → if swaps become positive again, buyers may reappear, but the interest rate remains negative → persistent holders start selling to cut losses → the rate drops further and unrealized losses widen

Even with a defined range, you cannot win like this.

What can win is a range where,positive swap is assured.

Including myself, many people believed USDHKD would remain negative for only a few days to 1-2 weeks and then turn positive in the short term.
That premise was overturned, and a very long period of negative swaps forced withdrawals; at that time, everyone’s selling pushed the rate to the bottom and the losses were huge.


【Now it looks quite good, but victory is not guaranteed undefeated】

If swaps turn negative, you will lose no matter what, as stated above.
Many were burned and the market declined, but is it still bad now?

The answer is no　

There are few brokers that handle it, but YJFX offers good swaps,
 
with about 20 pips of positive swap for a long time; last week and this week there have been more than 20 pips.


If swaps remain steadily positive, the rate will also be…
USD/HKD on a 4-hour chart
 
While collecting positive swaps, the rate gradually rises every day (currency gains also increase)

This is an ideal situation.

If you were going to do it, the best time was a few months ago: “start fixed positive swaps a few months ago (there would be no days of negative swaps)”
And because swaps are positive, the rate remains steady.

But even from now, there is a fairly high probability of winning.

Selling Hong Kong dollars and buying U.S. dollars is the USD-HKD long

And since the U.S. dollar is going to be raised further this year, a negative swap is unlikely for a while.


Well, 1 pip is about 14 yen, so even if you profit, the capital efficiency is poor, and even if you endure a rate drop,if the negative swap remains fixed, you will need to cut lossesto understand that there is still a significant edge for those with strong swap patience. It might not be bad if you have the endurance of a swap trader.


PS. Damn, it takes this long just to write about a dollar peg… and this is only an outline, with EUR/DKK completely skipped and more than 5 pages worth of manuscript. I wonder when the rest will end…

By the way, swaps are good, but the real is weak and suffering. Also, referral rewards are down to one more person left. If you’re aiming to be a referrer, hurryIf you want a referral, read this article and apply →Here　


PS2. A risk-off rollback suddenly occurred. As expected during Mercury retrograde

 
 
A 170,000 yen gain in Pound-Yen


Over 130,000 yen profit in Nikkei 225 mini, exceeding 300,000 yen in total profit, a little gratifying