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Sunday, 24 September 18:26 (GMT -05:00)



Foreign exchange market

Comparing AUD/JPY Swap Hedging with Various FX Brokers


Trading Forex cross-pairs is often way more productive and profitable than trading USD pairs. The reason is simple. First off, such FX pair often tend to be more volatile when the major market starts going flat. Secondly, since cross-pairs are less popular, the trading volume is usually less considerable, which is why the price is more sensitive to big plays and more volatile therefore. Also, it’s easier to predict the market intensions, especially the long-term ones.
 

 

 

 

When it comes to buying or selling long term, there are some peculiarities we should know and take into account to end up profiting from such trades. Some of the most important things related to long-term Forex investments are relate to the fact that you can end up getting completely different results from the same trade if you go with various brokers out there. It’s all about swaps, which vary from broker to broker.
 
For example, with some brokers, you can get, say, $6 a day per each standard lot as a positive swap just for holding your buy trade and extending it overnight. With other brokers you can get zero dollars a day or even lose a dollar or two every day for holding and extending the same trade. While this may seem irrelevant at first sight, the difference can be as serious as losing or winning a few thousand dollars on top of your trade. For instance, NordFX traders can really benefit from positive swaps while, say, Core Spreads traders, or traders going with some other FX brokers charging them with negative spreads, will lose tones of money from their long-term trades. This holds true for a number of straight and cross-pairs, including AUD/JPY. With that being said, in this article, we are going to figure out which brokers are the best to long-term AUD/JPY plays.
 
FX Swaps for Profit
 

 

The chart below, courtesy of Masterforex-V Academy, shows us the results of comparing 80 FX brokers and their swaps for buy AUD/USD trades. The top of the list reflects the brokers with the biggest positive swaps for AUD/USD if you decide to buy the cross-pair.

001110516.jpg

It should be note that the given currency pair is pretty good for long-term buy trades since most of the brokers – 71 brokers to be more exact – offer positive swaps for such buy trades. However, most of the time, those are rather small amounts. With that being said, we think that the first 3 brokers offer the highest swaps and therefore are worth paying attention to. Those 3 brokers give you around 6 dollars a day per each standard lot of you buy AUD/JPY trade:
 
- PrimeBroker - 5,9.
- Fort Financial Services - 5,89
- Nord FX - 5,5,
- Swissquote Europe - 3,60.
- Swissquote Bank - 3,60.
- InstaForex - 3,00.
- AAAFx - 2,72.
- FXDD - 2,28.
- AGEA - 2,23.
PrivateFX - 2,1.
- Tradeview Markets - 1,03.
- AETOS - 0,70.
SFX Markets - 0,47.
- ForexStart - 0,41.
ActivTrades - 0,40.
Alpari - 0,37.
FIBO Group - 0,35.
RoboForex - 0,34.
- Pepperstone - 0,33.
- Tallinex - 0,33.
Admiral Markets - 0,33.
- Circle Markets - 0,32.
- Colmex Pro - 0,32.
Forex4you - 0,32.
Dukascopy - 0,31.
- Hantec Markets - 0,31.
- JustForex - 0,31.
- ORBEX - 0,30.
- ADS Securities London - 0,30.
- FP Markets - 0,29.
- EXNESS - 0,28.
GKFX - 0,28.
- FinproTrading - 0,27.
- HotForex - 0,27.
- Squared Financial - 0,27.
- AxiTrader - 0,26.
- GOMarkets - 0,26.
- Vantage FX - 0,24.
- Windsor Brokers - 0,23.
- Global Prime - 0,22.
- Z.com Trade - 0,22.
- JFD Brokers - 0,21.
- FXFair - 0,19.
- MaxFX - 0,18.
- Tickmill - 0,17.
- EverFX - 0,17.
- Berndale Capital - 0,17.
- ThinkMarkets - 0,17.
- Vipro Markets - 0,17.
- One Trade - 0,16.
- Finotec - 0,16.
- IronFX Global - 0,16.
- Fidelis Capital Markets Belize - 0,14.
- FXCC - 0,13.
- London Capital Group - 0,12.
- Oanda - 0,12.
FXOpen - 0,09.
- Alfa Trade (UK) Ltd - 0,09.
- Alvexo - 0,09.
- FXPIG - 0,09.
- Turbo Forex - 0,09.
- Forex.EE - 0,09.
FBS - 0,08.
- XM - 0,08.
NAS Broker - 0,08.
- LMAX - 0,08.
- SynergyHybrid - 0,08.
ForexTime - 0,07.
- FX Choice - 0,04.
- MARKETS.COM CN - 0,04.
- XGLOBAL Markets - 0,04.
 
The next 5 companies offer zero spreads in this case. This means that you have to profit only by predicting the right direction of the future price change.
 
- FXCM.
- AvaTrade.
- City Credit Capital.
- HYCM.
- IG.
 
And finally, the following brokers charge you with relatively small yet negative swaps. This means that you have to pay a small fee each time you extend the trade overnight.
 
- Key To Markets (-0,03)
- Swiss Markets (-0,07).
- OctaFX (-0,10).
- InterTrader (-0,14).
- Core Spreads (-1,00).
 
However, the losses resulting from those negative swaps may seem insignificant only at first sight. Let’s see what those tiny negative swaps may turn into in a matter of a week, a month, and a year.
 
OK, first we have the most profitable positive swaps for AUD/JPY. If you buy 1 standard lot with Nord FX and PrimeBroker, you will get:
$6 and $5,9 a day respectively.
$42 and $41,30 a week respectively.
$180 and $177 a month respectively.
$2160 and $2124 a year respectively.
 
Now, we have the most unprofitable swaps for AUD/JPY. If you buy 1 standard lot with Core Spreads and InterTrader, you will be charged with:
$1,00 and $0,14 a day respectively.
$7,00 and $0,98 a week respectively.
$30 and $4,20 a month respectively.
$360 and $50,4 a year respectively.
 

 

If we bought 1 standard lot of AUD/JPY at each broker with negative swaps, this is what your losses would look like:

13234027.jpg

Why is the difference so big?
 
If you want the answer to this question, you can find it in the new book by Masterforex-V Academy, namely in the chapter dedicated to unbeatable strategies. The whole point is, some brokers offer zero (or close to zero) spreads to long-term traders and then make up for those “freebies” by charging them with negative swaps.
 
Tight spreads can be called good news for any trader out there, right? However, the news stops being good as soon as you start going for long-term traders that have to be extended overnight each time another trading day ends.  The whole point is, even if you are lucky to pay really tight spreads but still go long-term and have to pay negative swaps, the benefit gets insignificant or vanishes at all. And it holds true for all kinds of trades beyond the scope of a single trading day, i.e. whether you hold your trades for a few days, or weeks, or even months. And the longer you pay those negative swaps the more money you actually lose on those swaps, whether you like it or not.
 
On the other hand, if we are dealing with positive swaps, we can cover any spreads paid for long-term trades since those are paid only when the trade is opened and closed. You can even make extra money from positive swaps if you hold your trade for days, weeks, or months. One standard lot for AUD/JPY gives you around $6 a day. Actually, Nord FX, PrimeBroker, and Fort Financial Services pay you $6,0, $5,9, and $5,89 a day respectively. All of those factors should be taken into account when auto-copying others’ long-term FX investments.
 
There were cases when the master trader made a decent amount of extra money from positive swaps while someone copying his trades had chosen the wrong broker (with negative spreads) and had to put up with tiny or even zero profits, not to mention even losses resulting from big negative swaps. That’s why Masterforex-V Academy experts recommend acquiring professional trading skills and approaching this kind of business carefully and with a complete understanding what’s really going on and who can actually be trusted in the industry, especially when choosing an FX broker.
 
 
The also recommend taking advantage of their professional auto-copying opportunities based on unbeatable strategies applied by professional traders. Also, you can become a professional investor yourself by entering Masterforex-V Investor School, or you can become a member of Masterforex-V Investor Club.
 
Who do swaps impact expected profits?
 
The AUD/JPY chart below, courtesy of Masterforex-V Academy, reflects the price history for the last 22 years.

 

 

screenshot_17.jpg

The chart shows that the currency pair is at the end of the 4th wave of the uptrend. This means that this is the time when the price is about to suspend the retracement and resume the growth. Analyzing the length of the waves, we cannot deny the scenario when the price goes up by at least 5000 points. However, the currency pair may need up to 3 years to do this.
 
 
Scenario 1. We are going to reach our moneymaking goal by using the data form the comparative table. To be more specific, we need to calculate in advance how the swaps will influence our profitability. Once again, we have 3 variants to choose from:
 
1.     We open a long-term trade with a broker offering zero swaps. If we happen to be correct and the currency pair goes 5000 points up in 3 years, we get 5000 points of net profit. Plain and simple.
2.     We open a long-term trade with one of the 6 brokers offering positive swaps. If we happen to be correct and the currency pair goes 5000 points up in 3 years, we get 5000 points, plus the amount gained from those positive swaps over the period. So, the net profit (in points) will vary from broker to broker:
·      - Nord FX - 11 480;
·      - Fort Financial Services – 10 918,4;
·      - Royal Financial Trading – 6 944;
·      - AAAFx – 6 198,8;
·      - Forex4you – 5 648;
·      - OctaFX – 5 626,4.
 
As you can see, with the first 2 brokers, the net profit will be 2,3 times bigger thanks to the positive swaps.
 
3.     As for the negative swaps, unfortunately, they will be deducted from the net profit. If you go with the brokers with the biggest negative swaps, this is what you will end up getting:
 
- Key To Markets – 4 568;
- InstaForex – 4 568;
- AvaTrade - 4 546,4;
- FXDD - 4 125,2;
- AGEA - 4 071,2.
As you can see, your losses may reach almost 20%, which is not something critical but still unpleasant since nobody wants lost profits, especially if you choose between getting 11,5 points of profits and just slightly over 4000 points under the same circumstances. This is the factor that should be decisive for your long-term investments.
 
Scenario 2. We stop halfway. In the previous scenario we reached the desired result, i.e. captured the expected profits. But what if we decide to abandon our idea at some point further down the road? Let’s consider possible results in case of early closure and assuming that the price is moving our way.
 

 

The weekly chart of AUD/JPY clearly indicates that the price has been flat for the last 18 months:

screenshot_18.jpg

The price range is really tight. The support is at 0,7160, the resistance is at 0,7730. The current price we can buy at is 0,7490. There is no reason to expect the price to stay in the range within the next 18 months, right? This is the period we should consider. This is the very halfway to give up on the trade. If the price stays within the range, the profit potential is jut 240 points while the loss potential is 330 points. How can swaps affect the end result in 18 months?
 
Apparently, with zero-swap companies the result won’t change. With positive-swap brokers, we get the following results (price growth/price drop to the borders of the price range):
 
- Nord FX: +3 480/+3 010;
- Fort Financial Services: +3 199,2/+2 629,2;
- Royal Financial Trading: +1 212/+642;
- AAAFx: +839,4/+269,4;
- Forex4you: +564/-6;
- OctaFX: +553,2/-16,8.
 
OK, if we exit at the top of the range, we always take profit but if we exit at the bottom of the range, the worst-case scenario is minor losses.
 
However, if we go with a broker with negative swaps, this is where we get big losses:
 
- Key To Markets: +24/-546;
- InstaForex: +24/-546;
- AvaTrade: +13,5/-556,8;
- FXDD: -197,4/-767,4;
- AGEA: -224,5/-794,4.
 
In this case, the best we can count on is tiny gains against really big potential losses.
 
Financial results. In order to define possible profits or losses according to our scenarios, all we need to do is decide how much money to invest. Specifically, you multiply the cost of one point by the total amount made or lost in the trade to gent the result in absolute figures (dollars in our case). Just for the sake of example, let’s assume that 1 point is roughly equal to $10. Given the cost of 1 point, these are the financial results for zero, negative, and positive swaps:
 
1. Nord FX (the swap is +6,00 a day):
- Profit made in 3 years if 5000 points of profit captured – $114 800.
- Profit made in 1,5 years when exiting at the top of the range – $34 800.
- Profit made in 1,5 years when exiting at the bottom of the range – $30 100.
 
2. Any company with zero spread:
- Profit made in 3 years if 5000 points of profit captured – $50 000.
- Profit made in 1,5 years when exiting at the top of the range – $2 400.
- Loss generated in 1,5 years when exiting at the bottom of the range – $3 300.
 
3. AGEA with a negative swap of -0,86 a day:
- Profit made in 3 years if 5000 points of profit captured – $40 712.
- Loss generated in 1,5 years when exiting at the top of the range – $2 245.
- Loss generated in 1,5 years when exiting at the bottom of the range – $7 994.
 
So, the figures speak for themselves. While positive swaps let you make money even under unfavorable trading conditions and considerably increase the net profit if the goal is reached, negative swaps play against you and create unnecessary risks while making it possible to profit only in the best-case scenario.

 

 

 

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