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Ending My EUR/CHF Carry Trade

October 9, 2014 by

In September of 2011, Swiss National Bank has given a nice carry trade opportunity to many FX traders. After 3 years of keeping my EUR/CHF long position open, I have finally decided to close it today. The reason is simple: if a carry trade does not yield a positive overnight swap, it can no longer qualify as a carry trade.

Today, I have noticed that the long-side swap has changed from +0.169 to -0.506 pip per day with my broker (EXNESS). In my opinion, there is not much point in holding such a position anymore. As you can see on the chart, the dynamics of EUR/CHF is clearly non-bullish.

EUR/CHF Floor - Weekly Perspective

Of course, the pair might explode if SNB suddenly decides to lift the floor or, at least, to introduce negative interest rates, but I am not prepared to wait for that event for some indefinite period while paying more than $5 per lot per day. Additional problem, in my opinion, is represented by the public sentiment on the pair. For example, OANDA shows 83.62% longs ratio for EUR/CHF, which is the strongest sentiment for all 16 currency pair they show. It is clearly overbought by the retail traders, which should serve as an alarming sign. To be fair, it should also be mentioned that that sentiment is at such high levels for many months already.

Alas, all good things must come to an end. I have earned a total of 1,675 pips of positive swap profit this from carry trade and lost 427.5 pips as a direct trading loss (some of my longs had been opened above 1.23 rate). Although the resulting 1,247 pips of profit seems like a nice bottom line, it is not something I can be happy about, considering 3 years of holding and 3,368 pips of potential risk (0.37 risk-reward ratio!)

If you have some questions about this EUR/CHF carry trade or if you wish to offer your ideas for carry trading in today’s FX market, please feel free to post them using the commentary form below.

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