How do I bet on the yen vs. USD?

[stinkypete]

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1) OP wants to gamble,
2) currency markets are the most inefficient and finding one of those spots is very profitable. (payoff profile of carry-trade investments is win win win ... win LOSE BIG, so betting against that has a payoff profile that is similar to a call option)

therefore, to OP, i have good news: you're pretty much at just the limit of what i think the notional value of a futures contract is, and can definitely take a position here since you don't even need the notional value to take on a position.

i.e. you can go to InteractiveBrokers.com and open an account. you can then execute a long yen futures order (and just roll it before every expiration) and keep the margin necessary in liquid funds there. i think you should obviously have far more than the margin since the bet can move up and down a lot but overall i don't think you actually need more than 3k for this bet (overnight margin=~2k).maybe 4 or 5k for safety...

enjoy,
Barron

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i guess i should have been more specific.

really, what i was saying, is that the participants in currency markets aren't so stupid that you can bet on the yen rising 10% in the next few years and expect a 10x payoff if it does without a huge amount of risk. and when i say huge, i of course mean around a 90% risk of ruin, since you're looking to get 10 to 1. maybe if you know something about the currency markets that's not currently priced in but will be in the next few years, or if you're good at timing the market with technical analysis you might be able to reduce that risk such that you have a significant edge, but i'm not so sure that's the case here.

the leverage the OP wants simply isn't obtainable without ridiculous amounts of risk.

how much gamble are you looking for OP? do you realize how high your risk of ruin is with the numbers you proposed?

[spider]

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If you have to ask, please don't bet on currencies. Even if you didn't have to ask, still don't bet on currencies.

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Seriously.

Alan G also agrees:

"Nonetheless, despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly superior to tossing a coin. I am aware that of the thousands who try, some are quite successful. So are winners of coin-tossing contests. The seeming ability of a number of banking organizations to make consistent profits from foreign exchange trading likely derives not from their insight into future rate changes but from market making."

That's from 2004, read the rest of it here.

[DcifrThs]

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[ QUOTE ]
If you have to ask, please don't bet on currencies. Even if you didn't have to ask, still don't bet on currencies.

[/ QUOTE ]

Seriously.

Alan G also agrees:

"Nonetheless, despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly superior to tossing a coin. I am aware that of the thousands who try, some are quite successful. So are winners of coin-tossing contests. The seeming ability of a number of banking organizations to make consistent profits from foreign exchange trading likely derives not from their insight into future rate changes but from market making."

That's from 2004, read the rest of it here.

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i firmly agree that there is no model that can predict currency movements.

i do believe that there is a ton of money to be made via betting on currencies since finding actors willing to lose a ton of money and taking the opposite side of their actions is clearly a winning strategy.

no systematic "model" can win though as they are likely too simplistic and just wrong.

you can though, build a trading system (like my old employer's) that uses signals etc. to consistently destroy the currency market by writing down your own logic etc.

i guess that could be considered a model in a sense, but i think it isn't at all what AG was referring to. if it is, then i don't agree and instead disagree as if you can make money from losing participants, and can write a model to find those instances and make money off of it, then clearly you can make a model to beat the currency markets.

my old employer did it for over 20 years and offered a fund to do it for 15.

Barron

[stinkypete]

[ QUOTE ]

i firmly agree that there is no model that can predict currency movements.

i do believe that there is a ton of money to be made via betting on currencies since finding actors willing to lose a ton of money and taking the opposite side of their actions is clearly a winning strategy.

no systematic "model" can win though as they are likely too simplistic and just wrong.

you can though, build a trading system (like my old employer's) that uses signals etc. to consistently destroy the currency market by writing down your own logic etc.

i guess that could be considered a model in a sense, but i think it isn't at all what AG was referring to. if it is, then i don't agree and instead disagree as if you can make money from losing participants, and can write a model to find those instances and make money off of it, then clearly you can make a model to beat the currency markets.

my old employer did it for over 20 years and offered a fund to do it for 15.

Barron

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why do you not consider what you described a "model"? what do you define as a model?

basically you stated that you don't think any model can beat the fx markets, and then you went on to explain that a model/trading system can definitely beat the markets. i'm confused.

[DcifrThs]

[ QUOTE ]
[ QUOTE ]

i firmly agree that there is no model that can predict currency movements.

i do believe that there is a ton of money to be made via betting on currencies since finding actors willing to lose a ton of money and taking the opposite side of their actions is clearly a winning strategy.

no systematic "model" can win though as they are likely too simplistic and just wrong.

you can though, build a trading system (like my old employer's) that uses signals etc. to consistently destroy the currency market by writing down your own logic etc.

i guess that could be considered a model in a sense, but i think it isn't at all what AG was referring to. if it is, then i don't agree and instead disagree as if you can make money from losing participants, and can write a model to find those instances and make money off of it, then clearly you can make a model to beat the currency markets.

my old employer did it for over 20 years and offered a fund to do it for 15.

Barron

[/ QUOTE ]

why do you not consider what you described a "model"? what do you define as a model?

basically you stated that you don't think any model can beat the fx markets, and then you went on to explain that a model/trading system can definitely beat the markets. i'm confused.

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yea, that was a bad explanation b/c i basically changed viewpoints in the middle and didn't go back to edit it lol.

anyways, the average model can' tbeat any market (lets call a model a set of trading rules based on whatever).

there are, however, great modelers just as there are great traders. if a great trader takes the time to write out his logic for each trade, he can see a model fall out of those notes. you can construct indicators out of those notes and then signals from the indicators to create a buy/sell decision.

this is what my old employer did and successfully beat (by a ton) the currency market for over 20 years and "officially" (in an audited fund) for 15.

therefore, i must respectfully disagree with AG since i've seen first hand what can be done. further, it makes logical sense that when non-profit maximizing entities are involved in a market in a very big way, their losses can be mopped up and thus the market in general can be beaten.

Barron

[Ryno]

FXCM has been the largest retail platform in FX for a while, but they got dinged in the Refco collapse so I don't know what impact that's had. That said, you need the JPY to appreciate over 10% in the next several years just to break even, because your IR differential costs vs. the USD are about 5% per year (i.e. it costs you 5% per year to carry the position).

[MrMore]

[ QUOTE ]
[ QUOTE ]
If you have to ask, please don't bet on currencies. Even if you didn't have to ask, still don't bet on currencies.

[/ QUOTE ]

Seriously.

Alan G also agrees:

"Nonetheless, despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly superior to tossing a coin. I am aware that of the thousands who try, some are quite successful. So are winners of coin-tossing contests. The seeming ability of a number of banking organizations to make consistent profits from foreign exchange trading likely derives not from their insight into future rate changes but from market making."

That's from 2004, read the rest of it here.

[/ QUOTE ]

I feel the same way about poker tournaments.

And I absolutely believe that no model/system is going to work.

But, nonetheless, as the OP, I can say that, yes, I am doing it well aware of the risks, and simply as yet another instance of me backing my opinion with my money. Maybe I just see it as a 3x payoff for a 2x draw, and thus am comfortable with it. I play poker and bet sports and invest (tho don't trade) in the market. This is just another risk/reward thang. And I won't be trading. I have no interest in trading currencies, which is where the costs add up. I just want to make a one time bet that the yen is the most underrated currency in the world, and will catch it's due value in the coming years. And if I lose, f me, but I've lost before and I'm still here.

[MrMore]

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FXCM has been the largest retail platform in FX for a while, but they got dinged in the Refco collapse so I don't know what impact that's had. That said, you need the JPY to appreciate over 10% in the next several years just to break even, because your IR differential costs vs. the USD are about 5% per year (i.e. it costs you 5% per year to carry the position).

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That's what I wanted to know.

But, then, while I have you, let's take the numbers out of it and phrase it like this:

I believe the yen is significantly undervalued, re the rest of the world, and want to bet that this changes. Or phrase it like this: I think the world is heading toward very tough economic times, and that Japan is best positioned to suffer the least.

Given that as my opinion, how do I bet on it?

[jimmysnow]

Risk of ruin is higher on each trade but you offset it with smaller position size. I assume the OP has a bankroll in with 7 digits to have a 10k position with that risk. If not....then you are correct...too much risk.

[jimmysnow]

They say the same thing about poker, sports betting, horse racing, options........