Interest Rate Trade

1 pip in EUR is 100$, 1 pip in JPY is 840$ when trading JPY. Let say the avarage true range is somewhere between 0.6 - 1.8, that is 60-180 pips. The largest change was 156 pips in the last one month period.

Interest rate in Japan 0.25% as of today. In USA, 5.25%. So if we borrow JPY for .25% and loan it 5.25%, that is 5% profit. Now counting 1:100 leverage, that is 500% profit per year. Not bad! And you can do this trade with Forex.

Unfortunatly, brokers might, and in fact do, pay interest a bit different than using the interbank rates. Naturally, they don't have own interest in mind.

So a little experiement: In 3 hours, 14 minutes, 6.2838 profit in interest was the result of my experience with 1:30 levarage. So in 1 day, let's say, it is possible to realize about 20 USD profit on 10.000 USD with 1:30.

I can set up this trade and hedge it against price fluctuations for the price of the spread. Sounds like a 0 risk trade with a 20 USD guaranted.

Unfortunatly, 1 pip is over 24 USD with 1:30 levarage. So 2 pip (the usual spread) is 48 USD. Using 1:100, 1:200 levarage would not improve the risk/reward ratio.

Unfortunatly, the cost of setting up the trade exceeds the guaranted profit.

The question remains, however, can you set up this trade so you do not need to close it overnight? If this problem can be sloved, this would be an excellent trade to set up.

The problem really is

1 day: 46.642608.
1 year: 17024,551. On 10.000 USD on 1:30 levarage.

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