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My interpretation

JPY is going madly short

so, a proposal could be hedging like this (But I can not confirm my technics)

LONG SEKJPY

SHORT EURJPY

And make profit on differential, when (LONG SEKJPY is greather than SHORT EURJPY)

after, take position on EURJPY LONG and SEKJPY SHORT 

REmember, I am not sure at 100% what I am understanding

Comments

  • JohnLast 3034 days ago

    Indeed the decline of USD/JPY is huge 0.86%. However as you can see on the chart the pair was going madly parabollic and a movement like that can't be sustained forever. 

    At the first glance this correction was due to come.

    Hower you can ask what is the main inflection point?

    To my opinion the main inflection point is the level 87. If the pair drops below that point we can say that the current up trend may be no longer valid. 

    The level 87.5 offers also a strong resistence.

    My advice is not to enter right now with market orders, you would be better if you are still bullish to enter with buy stop orders above the current levels. The stops should not be much below 87.

    From fundamental perspective things may change for the YEN.

    However even if the trend is not inflected yet, still a drop of 0.86% is significant. Than means that you need to have a look at the fundamental information:

    "The Japanese yen made a rebound from its almost two and a half year low against its US counterpart, the USD, as investors started taking profits on bets against the JPY as a minister warned every one of the possible disadvantages of excessive weakening of the currency."

    "The Japanese Minister for Economic and Fiscal Policy, said an excessive decline in the yen would cause a spike in import prices. It would benefit exports while having harmful effects on people’s livelihoods, he told reporters in Tokyo today."

    "The central bank has been continuously pressurized by the newly elected PM Shinzo Abe to adopt a two percent inflation target in order to deal with deflation for once and for all. The next policy meeting has been scheduled to take place on 21 January."

    source fxempire

    So it looks like we have a fundamental pressure against the current parabolic trend. We have a calendar scheduled and the market is going to watch it and we have a new PM.

     

  • JohnLast 3034 days ago

    Yuo can check also this article. The satisfactory level is 90, if the Yens goes above 100 that would be considered as a threat to the japan economy.

  • albert 3033 days ago

    That's not good to think too much in forex, follow your charts, that's all :)

  • jaguar1637 3033 days ago

    Well, Albert, you may be wrong

     There ware many members from Indonesia, Australia, NZ, Lituania and so one

    The philosophy of John Last is one of the most interesting and powerfull those current days. He found valuable concepts that makes this forum a must for some traders from all part in the world.

    I think John is not alone in thinking mucher and deeper. there are several people thinking a lot and trying to provide good and innovant answers about trading on forex.

    I got this reflexion about forex, because some of the work made on this forum have been stolen, looted, without counter party. Most of members are just watching us, not participating in the debates, threads, blogs...

    You know I wrote some (reliable) indicators (there are still in backtesting before they will be sold on beathespread.net (when I will finish the website)

    BTW, I get this following information : "I am not allowed to sell reliable Expert advisors to the public, but only for a restricted public." And I think this advice regards also John Last. Because he needs to be rewarded by all the work he have done and not give pearls to pigs ;)

    That means, sometimes, you may think John Last is thinking too much, but also, it's due to the fact, he is  very ofthen alone to post and make new proposals about new way how to trade.

    This is one of the result from the current situation, I can see

     

     

  • JohnLast 3033 days ago

    Albert, the successful traders I know always pay attention to what is going on from a fundamental perspective.

    When you see a drop of 0.86 % it is completely irresponsible not to check what provoqued this movement. 

    If you look at the correlation tables actually there is a very strong daily and hourly correlation between the EUR/USD and the USD/JPY. 

    Daily correlation:82

    Hourly correlation:67.4

     

  • albert 3033 days ago

    Yes yes i know guys, but i just wanted to say, sometimes it's good to make a little break and to take it easy and just watch a chart, like an express meditation.

    In this work we are always very speed, and we spend lots of hours in front of our computers, and we must react immediately when all is in line.

  • JohnLast 3033 days ago

    I see, the point is that for USD/JPY it is quite hard to react immediately in Europe.

    So for longer term horizon ... fundamentals matter. Especially if you ride the trend on USD/JPY.

  • Pete M 3033 days ago

    Note that "the ARB is in the swap payments". The idea was to open three trades of the same size at the exact same time as follows:

    Sell EURJPY
    Buy EURSEK
    Buy SEKJPY

    at the time swap on EURSEK and SEKJPY was very positive.  As the pair is perfectly hedged you're not going to lose anything on the trade, and you gain the positive swap as risk free arbitrage.

  • JohnLast 3033 days ago

    Thanks for the explanations Pete.You are welcome.

    But now unfortunately, the overall swap is negative. 

  • JohnLast 3032 days ago

    I think a possible way to detect those kind of arbitrage possibilities is throught genetic programming. You let the algorithm to figure out what those arbitrage possibilities may be. After you select and make a reality check.

    I think we can do it. 

     

  • doragio 3032 days ago

    Previously there was a commercial EA called Trio Interest hedge that attempted to do exactly this, by calculating the swap rates amongst different pairs and try to establish a profitable ring.  This worked pretty well for a while until the swap rates became net loss.  If you can find a combination that has a positive effect, this is one of the best ways to make risk free money provided your margin handles the minor fluctuations.  If anyone's interested in this said EA, I can dig it up and upload it.

     

  • Pete M 3030 days ago

    In my original post I hadn't accounted for the lots sizes. Explanation is here:

    http://www.forexfactory.com/showthread.php?p=2224064#post2224064

    If you're looking for a script to search out swaps in hedged rings there's something here:

    http://forum.vamist.ro/blog/2/entry-10-swap-arbitrage/

  • doragio 3030 days ago

    Thanks Pete. Good thread at the end for the script.  Here's a link to the Trio Interest Hedge EA. http://www.forex.es/trio-interest-hedge-script-t2271.html

    From the looks of it, similar to the script you pointed to. 

    Are you by chance doing this type of trading live?

     

  • Pete M 3027 days ago

    @doragio - no, because I got to the end of the thread that John posted, and the creator said it was impossible to do on a retail platform

  • JohnLast 3027 days ago

    Pete M where you saw that? I think that in mql it is possible to implement you can do it as a script or as EA. Unfortunately I can't do it.

     

  • Pete M 3012 days ago

    @JohnLast see here: http://kreslik.com/forums/viewtopic.php?p=63343#63343

     

    Hi, Ronald,

    the problem is that an arbitrage of this kind is basically impossible to implement on retail brokers' platforms.

    Michal
       


  • JohnLast 3012 days ago

    I agree as soon you start making money they will notice and will check it out.

    However you can ask the question what about the retail brokers that pretend that they are real ECN.

    Normally when you pay their commissions you are free to do what you want.

    The other possibility is as what vgc suggested to use two brokers and make the arbitrage between them.

     

  • jaguar1637 3012 days ago

    yep, I got the same feeling w/ MB Trading

    they said they are ECN , now EXN, but .... I noticed weird things

     

  • zkogan 2997 days ago

    I find in pretty strange the creator of Impeccable Hedge claimed it inefficient in his thread...

    http://pbrd.co/15zWpLS - made a screenie of EUR/SEK/JPY triangle, arbitrage situations occur now and then.. The one on 4th Feb seems to yield some Please correct me if I'm not right.