There's a lot of good info on IH, but unfortunately a lot of it gets buried. The reason is that conversations take place on broad-topic boards which go on for thousands of posts.

In a thread-based architecture like the one on FF, there are many short threads, each of which deals with a specific topic. It's a lot easier to find old discussions about a very specific thing, because those discussions are encapsulated in single individual threads.

It's like the difference between being in a small focused seminar room vs. being in a large crowded auditorium.

tell me more

I hear he's alive and well on Forex Factory. Something to do with the "thread based" architecture over there vs. the "board based" architecture on IH.

What ever happened to this guy?

Yes, I've seen some articles talking about how it's a huge thing with Japanese housewives trading in small retail accounts. They borrow yen locally and invest in overseas securities.

Thanks Cap

A VIX ETF would be perfect. If it only went nuts just when the market went crazy that would be perfect for me. I would be able to sell just when the market gets nervous.

Toofuzzy

Hi Cap

>>>>. Out of all the money I made on the long AUD/JPY position while I had it, only about 10% of my profit was from interest payments. The other 90% was from the price appreciation. <<<<

Wow that's amazing. I wonder if that is more about timing and when you decided to do this. I wonder if you started to do it a few years ago when you could have caught the trend of Japan lowering their interest rates or at least keeping it just above zero if that would have made a difference. You could have just sat on the position for years. I had heard of the carry trade a few years ago but didn't know how mere mortals could have taken advantage of it.

Toofuzzy

As far as I know, futures and options are the only way to trade the VIX right now. However, there are new ETFs coming out all the time that are based on futures, so it shouldn't be too long before there's one based on the VIX. I looked around on Google but haven't found one yet. You may want to keep an eye on the NASDAQ and AMEX sites or on ETF.com.

I got out of the AUD/JPY carry trade that you're talking about about a month ago when the trend started breaking down. I haven't been trading in August because the institutional traders are gone in the summer.

I have found that the money on interest rate trades is really made and lost on the price movements; the interest payments are only a small percentage of the overall P/L. Out of all the money I made on the long AUD/JPY position while I had it, only about 10% of my profit was from interest payments. The other 90% was from the price appreciation.

Hi Cap

I own a diversified portfolio but for the most part everything moves together more than I would like. I am using AIM and it would be nice if EVERYTHING did not scream for cash all at the same time. (I was VERY busy buying yesterday.... glad I didn't wait till the end of the month)

I started thinking about the VIX and how high it is now. Then I started thinking about AIMing it against SPY or RSP but after looking at a chart decided that isn't the way to go. So then I decided it would be good to AIM the VIX against CASH just like everything else.

Is there a way for me to " BUY " the VIX ? I don't want to use futures or Options. I want some permanent vehicle.

Toofuzzy

Hi Cap

I had asked you about forex in previous post and you explained how with 100:1 leverage off of a $100 investment you could make $450 / year with the YEN at 119 at the time.

The YEN is now 114

I think you said you would lose $84 per $.01 increase in the YEN or $84 x 5 = $420

Still making $30 on the initial $100 investment but I guess yo would have to come up with another $400 in equity (or would you need thousands?)

I suppose you could use less leverage for less risk but also less reward.

Anyway my real question is in my next post.

How is the trading going
Toofuzzy

You're right, it's not impossible. Not only that, it's pretty common. At the beginning of February, the dollar was at about 122 yen and by the end of that month it was at about 115. This was about a 5.7% drop in a month.

Traders that max out their leverage say at 100:1 can only stand a 1% drop before they're wiped out. Even someone with a smaller position size who's only using 10:1 leverage would have experienced a 57% drop in their account value.

I figured this would make a great AIM candidate because it's volatile and currencies don't "go to zero" like a stock can. But to make AIM work for FOREX you would have to cut down the leverage a lot. This eliminates the benefit of the interest rate spread on the carry trade.

Hi Cap

Thanks for the really clear example. It helped me understand what people are doing, not that I want to take that risk myself.

>>>>Now what happens if the dollar drops to only 119 yen? I am short 1,200,000 yen, and originally that was balanced by my equivalent $10,000 long position in dollars. But now my dollars are only worth 1,190,000 yen. In order for me to pay back my loan from Japan, I need to come up with 10,000 more yen. At 119 to the dollar, this would cost me 10,000/119 = $84.<<<

I suppose it is a little better than the example above because you are taking in $450 in NET interest / year so it would take a 5 point increase ( to 115) in the value of the YEN to break even and then down to 114 to lose your capital.

A drop to that point doesn't seem imposible either though (only a 5% change).

Toofuzzy

Well let's use the amount of cash that the trader actually deposits with the broker as the starting point since that's what the returns are based on. In your example you used $100.

If my broker allows up to 100:1 leverage (a typical amount) then I am able to enter positions with dollar values equal to my deposit multiplied by my leverage ($100 x 100 = $10,000).

I don't have to take positions that are this large, but let's look at the riskiest scenario, where I use all my available leverage. In that case, I can go long $10,000 worth of the USD/JPY. This means I would be long $10,000 and short 1,200,000 yen (at 120 to the dollar).

Some Japanese bank would have to loan my broker this yen, and I would be liable for the interest on it, so that would amount to 0.50% x 1,200,000 yen or 6000 yen per year. This is equivalent to $50 per year in interest that I would have to pay the Japanese bank.

On the other hand, I've converted those borrowed yen into 10,000 dollars which I have on deposit at a U.S. bank at about 5.0%. So I would be receiving $500 a year on that deposit.

My net interest is $500 - $50 = $450 per year. This is a 450% return on my $100 deposit. The easy way to get this number is just to multiply the interest rate spread by the leverage. The spread between Japan and the U.S. is about 4.5%, so multiplying by my 100:1 leverage = 450%.

Now what happens if the dollar drops to only 119 yen? I am short 1,200,000 yen, and originally that was balanced by my equivalent $10,000 long position in dollars. But now my dollars are only worth 1,190,000 yen. In order for me to pay back my loan from Japan, I need to come up with 10,000 more yen. At 119 to the dollar, this would cost me 10,000/119 = $84.

That doesn't seem like much, but it just about wipes me out. Remember, my account only really has a deposit of $100. I have lost 84% of that. In real life, this would cause a margin call, the broker would liquidate the position, subtract the realized loss of $84 and I would be left with $16 sitting in my account.

This is why AIM doesn't go well with this kind of an account structure. AIM thrives on volatility, but volatility with high leverage is an account killer.

Hi Cap

I understand the carry trade, the leverage available, that you can make the spread between two currencies interest rates and then leverage that for something like 50% interest rates.

I understand that FOREX allows a relatively small investor to get involved with this.

QUESTION:

If you were doing Japan/ Us Dollar , with being long the dollar I guess to capture the higher interest rate, If the Yen was 120 to the dollar, and you put $1000 into one of these contracts, how much would you lose if the Yen went to 119 to the dollar? ( I know I have the scale of this all wrong and you are probably doing $1,000,000 in currancy by investing $1,000 so each one point move in the yen is 1000 yen or $8 + )

If you need to put up $100 for that $1000 investment and there is a 4% interest rate spread then your getting a 40% return if the currencies don't change? What do the real # work out to be?

Have you looked at DBV ? Would that be of any use for you to trade? Probably no way for you to get the leverage you want.

Toofuzzy

Soooooo why not use them?
Who says I don't?

I think you're confused about what it is that I do. Have you read The FOREX Journal or visited The FOREX Statistical Research Center at http://market-geeks.com ?

What you're saying is like someone telling Microsoft that they "can't succeed in finding something reasonably successful" in computer programming because they keep trying to come up with something better.

But just because you personally don't want to do better doesn't mean that the rest of the world has to suddenly stop turning, LOL.

Microsoft will still try to develop better software.
Other Lichellos will come along and try to try to find better investment methods.
I will continue to build The FOREX Statistical Research center and conduct research into price behavior.

It's called progress. Mankind has been doing it for thousands of years. And you're asking everyone to just stop? Why?

Hi Cap

>>>I have found several methods that work well, and they are mainly based on the statistical idea that gaining a small edge on each trade generates a steady expected return over a long period of time<<<

Soooooo why not use them?

Personally I have found that anytime I try to "do better" I end up doing worse, because I am making an emmotional decision at just the wrong time. Such as switching the AIM settings to tighten up the hold zone.

I thought LD-AIM was a good idea but after using it it seems to make more sence to me for "new" accounts than switching existing running AIM acounts to it.

I wasn't trying to be insulting. If you can't succeed in finding something reasonably successful between having worked in the industry and your annilitical skills why should most of us?

On the Motly Fool there is a Mechanical Investing board. People there developed a continuing stream of stock screens that got higher and higher returns........ at least till January of 2000 when the most agressive crashed and burned because they were all based on momentum investing.

AIM works because you are not trying to predict anything. It reacts to what has already happened instead.

Toofuzzy

All I can say is that I'm glad Thomas Edison never had someone like you around giving him advice, LOL. Actually, it occurs to me that if Lichello had your outlook, there would never have been any such thing as AIM because he would have given up.

Here's an excerpt about Edison from this eductational site:

http://www.kidsnewsroom.org/elmer/infoCentral/frameset/inventors/edison/page2.html
---------------------------------------------------------

Edison and his assistants worked without pause through the winter of 1879 using teamwork to try to find the right filament for the light bulb. Copper, steel, metals and their alloys were cut and placed inside a glass bulb. More than 1,500 different materials were tested in all. Each time, Edison had to pump as much air out of the bulb as he could so that the oxygen would not speed up the burning of the filament. But none of the materials he tested worked.

So many failures might have made anyone else give up, but Thomas Edison had two important characteristics, patience and perseverance that made it possible for him to carry on his work. Each failure meant simply that what he was trying to do couldn't be done that particular way, and that he would have find some other way to do it. Thomas Edison finally figured out that carbonized cardboard would work better and last longer as a filament, but to do that he had to learn an important lesson, that to get through life you have to believe in yourself and persevere.
---------------------------------------------------------------

I have found several methods that work well, and they are mainly based on the statistical idea that gaining a small edge on each trade generates a steady expected return over a long period of time. So I'm not sure where you picked up the nonsense about "hitting home runs", "making the quick buck" and "can't seem or don't yet have a system that works for you."

While you may be satisfied with candles and torches, that doesn't mean that the rest of us have to stagnate too. People like me, Lichello and Edison want progress. We want more knowledge. We will never stop looking. We want the light!

Hi Cap

Saw your most recent post over at the AIM board.

What is it they say......A little knowlege is dangerous.

I find it interesting with all the knowlege you have as an insider to the industry that you can't seem or don't yet have a system that works for you.

I wonder if by trying to hit the home run (make the quick buck) you are missing the singles that will let you win the game.

Anyway AIMing has been working for me since 1995 or so. It only broke down from 2000 to 2003 because I got greedy and nervious about all the cash (the money it was making) it was throwing off before 2000. I am resisting a similar feeling now of wanting to start new AIM programs but now I am wiser and know that having cash at this stage of the market is a good thing.

Toofuzzy

Thank you Scott :)

Happy New Year Susan!!

May you have the Very Best of New Years!

The New Year

The New Year lies before you
Like a spotless tract of snow
Be careful how you tread on it
For every mark will show.

~Author Unknown~

December 23...

HAPPY FESTIVUS!!!!

(for the rest of us)


http://en.wikipedia.org/wiki/Festivus

Thank you, Scott

Thanks Susan!

HAPPY HOLIDAYS to everyone!!!

Merry Christmas Scott! Have fun...be good.

I'd go for that! I'll be here until at least this summer though.

Hi Cap

I am sure they have some back room job where you look at cameras checking to see if someone is card counting. Not to mention all sorts of adminitration jobs.

Toofuzzy

If it involves never having to work with, talk to or see any of the customers then that's for me! LOL

Hi Cap

When I rode my bicycle across the US (42 days) I met a few people I kept in touch with a little while. One of them went to Reno and got a job in a casino. Within a short time (3 to 6 months) they wanted to make him a supervisor.

Aparently all you have to do to get a job out west is to tell them you are from someplace like New York or Boston as opposed to somewhere where the first word out of their mouth is doooooooooooood. I think us easterners have a reputation for moving at something faster than a snails pace.

Anyway a casino job might filfull your mathamatical bent.

Toofuzzy

My scheme to take over the world isn't really that hideous. It's just... I mean, ummm, I mean I don't even HAVE a scheme to take over the world!! World? Me? Huh? Scheme? Nope, not me.

My moves are a combination of exploring the country and looking for a place where I'd really like to live.

My last two moves were actually prompted by external factors. I was in New Hampshire by choice when Fidelity offered me a promotion to move down to Rhode Island. I never thought I would miss Rhode Island (there is an old rant of mine about it in the iHub Parking Lot somewhere), until I came to this place.

I ended up here because after my layoff, first try at full-time trading, and urban camping experiment I came to Memphis to learn to drive tractor-trailers. After a couple of months I found that it wasn't for me, but the cost of living is so low down here that I found another job, moved in and started to actually save money.

Nevada looks good to me because it's warm but not incredibly humid like a swamp, and it's somewhat libertarian. I think the high desert would be interesting. Cali seems like it would be more civilized and energetic though, so that's another possibility.

There are a few places I'd like to try out. The key is being able to somehow support myself online, through trading, the website and other such ventures.

Right now I'm in Memphis, TN. You can find many iHub members on the map at this board:

http://www.investorshub.com/boards/board.asp?board_id=4598

Just traveling for the sake of traveling or is there a method? Tell me it's not all part of your hideous scheme to take over the world....

Capitalist, In what state/city do you live?

I'm with you on the south; I'd take the freezing cold back any day. This place is just maddening...

My planned next stop will be in the southwest though and maybe Cali after that, so I might get the best of both worlds at some point.

Be glad you're in the south for now. I nearly froze walking two blocks late this afternoon.

Freezing cold or toothless hillbillies. A tough trade.

And before you or anyone else says anything, I lived in the Black Belt region of Alabama for two years. Ugggghhhhhhh

You point out another good reason for me to start concentrating on fundamental analysis instead of just TA as I mentioned on the FOREX board...FOREX FA is fun!

It's cool to trade in a market where your decisions are affected by things like worldwide oil policy, trade wars, regional tensions, central bank shenanigans, international relations, etc.

The entire FOREX thing really is getting my juices flowing. I can't believe how much of a geek I am from thinking that interest rates and the such are extremely interesting, or more specifically how the market reacts to them.

Thinking about money market and interest rate equillibriums, real exchange rates, expectations, current events, oil, gold, and all that stuff.... OH GOD I hope I can find a job in FX or fixed income markets.

Thanks for the info.
I'll start checking into it.

It can't be manipulated at all (except maybe by central banks for a little while) because it's so huge and liquid. Here's a good site for the basics:

http://www.babypips.com

My site http://market-geeks.com has a FOREX bookstore on it so check that out too, but you should know that you can probably find out just about everything you want to know from searching around the net.

You can also get a feel for it by visiting us over at this iHub board:

http://www.investorshub.com/boards/board.asp?board_id=5125

Oh MAN, I have NO IDEA how that FOREX works, but everybody seems to be going into it.
I have not looked into it.
What would you suggest as a good starter book or two before one would put their toes in the water?

Is it as manipulated as the stocks, or does it tend to run pretty much along the political and economic financial trends?

Yep! Your nic is definitely familiar and I remember creating a spreadsheet to track personal trading performance. I switched over to FOREX trading exclusively since then and spend a lot of time at this board now:

http://www.investorshub.com/boards/board.asp?board_id=5125

Hey Cap,
You probably don't remember me, but I still lurk your board. You helped out a whole bunch of posters a long time ago with your suggestions and spreadsheets.

Well your smiling electrons and animated friends there are welcome anytime!

I heard folks say you did not have many visitors, so I'm visiting some less frequented sites.
:)
David

Hello! Didn't I just see you in the Geek Forum?? Same dancing characters... LOL

hi

http://market-geeks.com/tradingblog/

at work-- need link!!

I just posted the first FOREX trade on the blog.