AI
Wednesday, May 23, 2018 8:32:34 AM
Hi Cap, Re: Currency Trading for the long term..............
Somehow I never realized you were fiddling with currency trading. Around 2006 I put together a bunch of currency ETFs in a single portfolio and attempted trading each with my beloved Automatic Investment Management (AIM) method. The ex-US currencies I paired with Cash per AIM's usual methods. I also had a holding of the USD and cash as 1/10th of the total portfolio. Overall, it worked quite well compared to peers (mutual funds that specifically traded currencies as their M.O.) At one point, out of 48 mutual funds that were trading currencies, my portfolio would have ranked #7 based on their 3 year annualized returns (mine was 2.4% at the time).
However, that doesn't really tell the whole story. I'd trimmed trade resistance to zilch to attempt to get reasonable activity, but failed to get but an occasional trade. It was the realization that the world's major currencies were colluding during the "Quantitative Easing" era that explained the lack of trading. The very slow drift of currencies hampered trading while the effective yield of owning those currency ETFs dropped to zero.
I'd built the strategy originally to help balance the risk of owning ex-US stock ETFs. Example:
It also was part of the plan to capture better yield on "cash" in the non-US markets. When yields went to zero that took away the incentive of using the portfolio as a place to store idle cash. With all the central banks manipulating their currencies because of the world financial crisis, that took away most trading opportunities. This was before the new world of crypto-currencies started to emerge.
It wasn't that my trades were "bad" as most round trips were profitable. It's just that there weren't enough to make it worth my time.
I eventually shut down the portfolio. If I'd been following along here it would have turned out differently. While some components now at least show some yield, it's not yet worthy of rehab of the portfolio for just that possible gain. Looking at the previous 10 years of price history of the components really doesn't encourage me either.
http://stockcharts.com/freecharts/perf.php?fxa,fxb,fxc,fxe,fxf,fxs,fxy,uup
There's really not a great deal of amplitude of price change and not much frequency of meaningful reversals. Trade volumes for these have also been very low in recent years.
Maybe now that the crypto currencies are intruding on more traditional space controlled by central banks there will be some more meaningful movement with which I could play.
Somehow I never realized you were fiddling with currency trading. Around 2006 I put together a bunch of currency ETFs in a single portfolio and attempted trading each with my beloved Automatic Investment Management (AIM) method. The ex-US currencies I paired with Cash per AIM's usual methods. I also had a holding of the USD and cash as 1/10th of the total portfolio. Overall, it worked quite well compared to peers (mutual funds that specifically traded currencies as their M.O.) At one point, out of 48 mutual funds that were trading currencies, my portfolio would have ranked #7 based on their 3 year annualized returns (mine was 2.4% at the time).
However, that doesn't really tell the whole story. I'd trimmed trade resistance to zilch to attempt to get reasonable activity, but failed to get but an occasional trade. It was the realization that the world's major currencies were colluding during the "Quantitative Easing" era that explained the lack of trading. The very slow drift of currencies hampered trading while the effective yield of owning those currency ETFs dropped to zero.
I'd built the strategy originally to help balance the risk of owning ex-US stock ETFs. Example:
It also was part of the plan to capture better yield on "cash" in the non-US markets. When yields went to zero that took away the incentive of using the portfolio as a place to store idle cash. With all the central banks manipulating their currencies because of the world financial crisis, that took away most trading opportunities. This was before the new world of crypto-currencies started to emerge.
It wasn't that my trades were "bad" as most round trips were profitable. It's just that there weren't enough to make it worth my time.
I eventually shut down the portfolio. If I'd been following along here it would have turned out differently. While some components now at least show some yield, it's not yet worthy of rehab of the portfolio for just that possible gain. Looking at the previous 10 years of price history of the components really doesn't encourage me either.
http://stockcharts.com/freecharts/perf.php?fxa,fxb,fxc,fxe,fxf,fxs,fxy,uup
There's really not a great deal of amplitude of price change and not much frequency of meaningful reversals. Trade volumes for these have also been very low in recent years.
Maybe now that the crypto currencies are intruding on more traditional space controlled by central banks there will be some more meaningful movement with which I could play.
Best regards,
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