Has A New Gold Bull Market Begun?, page-127

CCY is a very liquid asset class similar to the Bond market. Very deep and highly liquid where every one indulge in from the retail trader like myself to CD and any in between funds. Hence the TA is very pure and no gaps except Monday morning generally speaking.

In terms of the FA, I think it is more reactive than the building of a picture on a certain CCY. Each piece of economic news will always trigger a reaction on the respective pairs depending on the impact of the news. Then there is the time zone so the Asian pairs tend to have volume in Asian session and you will see usually the EUr or GBP just chop around in these weak session UNTIL of course London Open!!

I use TA because it gives me a reason to get in or out and allows the measurement of risks and associated potential rewards. I am not sure how one does that using FA, suspect COT report is another tool one can use to allow a very long term hold.. If someone ask me why I buy or sell at a certain price and all I can say is gut feel or I have a feeling, then that is just irrational decision.

Carry trade is when you have 2 interest rate differential between the respective country's CCY. For example AUDJPY, if you buy then you are effective putting your position into AUD and shorting JPY. AUD pays for argument sake 2.5% interest rate /365 multiple by the number of days you hold (in theory but in practice your broker takes some off for themselves haha) since JPY pays ZERO. If you short AUDJPY, you are effectively shorting AUD and buying JPY so you have to pay the interest on shorting the AUD with a higher interest rate. We call these + or - ve swaps. Kiwi used to have the best differential until B English started cutting rates to stoke growth and partly due to the diary index collapsing. Years passed when our interest rate was in the 5+%, Jap housewifes would sell the jpy and buy the AUd thereby supporting the AUDJPY and holding to earn interest. I fail to see the advantage unless the spread between the interest rate is large since on the wrong side of the trade, it is negated by a losing position.

You could quite easily use an Fx pair as an investment vehicle since no fx pair becomes ZERO unlike stocks. If you use sensible leverage it behaves just like blue chips since the % movement daily is minute. I use the example of blue chips as a reference to no volatile movement but we know it is not strictly true in 2015!!!

So that is your basic carry trade.