It’s not a secret that GDP/USD is one of the most popular currency pairs today However, there is one but. While some traders do really succeed in making money while trading the British Pound against the U.S. Dollar, others have to put up with losses over time while trading the same currency pair. Yet, we are talking about the same trades made with different brokers.
Here is a real-world example take from auto-copying service AutoTrade by Pro-rebate.com. To be more specific, a managing trader trading with NordFX opened a 0,1-lot GBPUSD trade at 1,2520 in November 2016. The trade was closed in 6 months, with a profit of $400. Over the period =, the broker paid the manager another $20, to increase the overall net profit up to $420.
The next day a scandal broke in. The thing is, one of the investors who copied the signal with Dukascopy was hoping to enjoy 30 times as much as the master trader did (he invested 30 * 0,1 = 3 standard lots). As a result, he gained just $8840 instead of $12600. After a couple of days, the investor figured out that the difference was taken by the broker since the broker had set negative swaps for the currency pair. It was $5,3 per standard lot. This means that the investor paid $15,9 a day just for extending the trade for another 24 hours.
It’s all about swaps
This is where another logical questions arises – how could such a ridiculous situation tale place? The question is fairly simple – it’s all about swaps. While such brokers as Primebroker and NordFX credit a positive swap for every GBPUSD trade every day, to the amount of $0,9-1 per standard lot, some other brokers do the opposite and charge a certain amount of money for extending such trades overnight.
Moreover, Primebroker and NordFX happen to be the only 2 brokers out there with positive GBPUSD swaps.
As for other big players, they charge their clients with the following swaps per standard lot:
- Alpari -0,32
- Roboforex -0,41
- Fibo Group -0,58
- TurboForex -0,65
- TeleTrade -0,78
- Forex.EE -0,78
- FortFS -1,37
- eToro -1,5
- Royal Financial Trading -1,9
- FXTM -3,5
- Tradeview Markets -3,7
- AAAFx -4,16
- Swissquote Bank -4,25
- Tickmill -4,56
- AGEA -4,86
- FxPro -5,27
- Instaforex -5,3
- Dukascopy -5,3
- XM -5,32
- Alfa Forex -7
- Grand Capital -7
- Freshforex -8
The losses (depending on the negative swap size) may look as follows:
If you open a new book by Masterforex-V and read the chapter named “Masterforex-V Trader’s Unbeatable Strategies”, you will find out a pretty simple explanation of what’s really going on.
Simply put, the chapter reads that swaps are basically hidden spreads for those who prefer longer-term trading to intraday trading. In case you don’t remember, the spread is the difference between the bid and ask prices, i.e. the prices at which you can buy and sell the asset at the moment. The broker usually names the spread for each currency pair on a specific page. Let’s assume that the spread is just 1 to 1,5 pips when you open the trade. However, it’s just for intraday trades. If you want to extend the trade overnight, each time you have to pay a certain fee called the swap (if this is a negative swap).
For example, at Grand Capital, carrying the trade overnight will expand the spread by 7 points each time you do so. At Dukascopy, this is 5,3 points per day. If the trade is maintained for a whole month, the trader ends up paying quite a lot of money. I guess you can agree that it’s rather difficult to count on long-term profits when trading with a broker that takes away roughly $1200 as swaps for each standard lot you trade in 6 months’ time.
Savvy traders with many years of expertise warn rookies that they shouldn’t trust ads. If you want to become a successful investor, you can always catch at the chance given by Masterforex-V Academy. To be more specific, you can be much better off copying professional VIP traders with unbeatable strategies for free.
By the way, if you join in and open an live account and deposit $3000 or more into it, you will be given free 6-month access to Masterforex-V Academy as well as the local school for beginning traders and investors to get yourself up and running with forex trading at no time. You can always join the local Investor Club and start making even more money by investing in time-tested solutions. If you want to become an active trader rather than an investor, you can do so by applying for various courses available at Masterforex-V Academy and learn tons of valuable things, tips and tricks taking you to the next level of profitable trading.
The British Pound is undervalued. How get rich in a single trade?
If you have been sticking to an intraday trading strategy and don’t want to change anything, this article is not for you. The rest of the article will be dedicated to long-term trades, 100% winning though, as well as about swaps which can turn any unbeatable strategy into a loser. Let’s consider GBPUSD as one of the most popular currency pairs. At first, let’s take a look at the Monthly chart:
The most superficial analysis makes it possible to arrive at certain important conclusions:
1. Never before over the last 26 years, has the British Pound been so undervalued! Unfortunately, we cannot upload the earlier history. Still, this is more than enough in this case. We are not going to open a trade and hold it for decades.
2. The trading volume was higher than now only during the last global financial crisis. It’s roughly equal to the one seen over the 1997-1998 crisis.
3. After the two mentioned crises, the British Pound started rallying. Given everything we have just found out, why not assume that in 2017-2018 GBPUSD will skyrocket to new major highs once again?
Let’s zoom in a little bit:
This is where a couple of new useful conclusions comes in:
1. Over the last decade, GBPUSD has crashed only twice. During the 2007-2008 crisis and after the Brexit referendum.
2. Over the period between them, GBPUSD was relatively flat, in a narrow range between 1,45 and 1,67. The currency pair could easily pass 2000 points in 6 months or so back then, while moving up and down.
3. Today’s price is 1,29, which has at least 1600 points of downward potential, if we are entering another flat within the scope of a long-term downtrend, and the previous 8-year level of support turns into resistance.
4. If the downtrend chances for an uptrend (since the price is around all-time lows), the upward potential is going to be even bigger. If the price breaks above 2,0, we are going to get over 7000 of profit. So, the bottom line is that buying looks more promising. However, there is one but…
Don’t trust commercials promising you the moon and the stars
If to avoid going into detail and ignore 200-300 points, it would be safe to say that the British Pound has never been that cheap relative to the U.S. Dollar (or at least it was a long time ago). The American currency is way too strong, it’s overvalued, which is something we can see by looking at other majors. All of that makes us think that the currency pair is going to skyrocket at some point in the near future. The question is when…
The more we zoom in by switching to smaller-scale timeframes, the more of those controversial tech data we are likely to get. At the same time, nobody can safely say what’s going to happen after the UK finally starts the Brexit. With that being said, for us to get a 100% winner, we will probably have to wait for years – 1,2 or maybe even 3 or 4 years. However, when you want to make millions, this is not much of a period!
In technical terms, everything is pretty simple – deposit a million dollars and wait till it doubles or better yet, triples. Or you can invest as much as you can, while sticking to sound money-management rules. In theory, the result would be great. So, what about putting it into practice?
This is where MasterForex-V Academy experts offer you to come down to earth and stop dreaming about the moon and the stars you have been promised all the time. Think about your risks. “What risks? We are almost 100% sure that we are going to make tons of money in a matter of a year or two!”, you may object. While the currency pair may really go 1600 points and more. The thing is, what’s left when you have been constantly extending the trade overnight and paying swaps to the broker? So, everything boils down to choosing the right broker to execute this kind of trade. Are you planning to go with FxPro and XM, or with a less popular broker but the one allowing you to make money the way it should be? Most probably, the former will promise you a lot of loyalties and guarantees, but ant the end of the day, it will be much harder to profit under such circumstances when starting a long-term trade.
Where does the shoe pinch?
We hope that savvy traders and investors will be savvy enough to avoid small-scale brokers and dealing centers for big-scale trades since chances are they will find themselves short of liquidity to execute the trade. Such small-scale brokers won’t be able to cover such big profits when it’s time to withdraw them. Liquidity and other related things along with withdrawal conditions are crucial for anyone who is serious about FX trading.
The thing is that instant execution, tight spreads (not swaps) and market quotes are not something you should care about if you are going to open long-term trades, right? Instead you should care about other things.
So, the bottom line is, when it comes to long-term trading, it’s all about swaps. If you had opened an account with a company with positive swaps for GBPUSD as your favorite currency pair, you could have made an extra 700 points on top of the mentioned 1600 points. And even if the price had stuck in a narrow range without letting you capture big profits, you would still have gained some money from those positive swaps paid to you on a daily basis all the way up until you close the trade.
That’s why you are recommended to read the agreement and trading conditions carefully at all times and go with the brokers with positive spreads for the currency pairs you like to trade. Take your time to calculate your estimated profits and evaluate all the possible scenarios. Even if you are ready to buy and hold, you still want to look for a favorable entry point to enter at a discount. If you want to learn more, go to Masterforex-V Academy. Good trading!
