Enhancing every multiday strategies with Swap-Based Adjustments

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Giamma
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Hello CPtizens,

Swaps, those often overlooked factors, can play a pivotal role in our trades. They can be both negative and positive, and here's a proposal: What if CP could adapt their behavior based on swap rates?

Imagine this (only ideas) - when swaps are positive, our EA extends the exit or trailing stop, stop loss to capture more profit; or perhaps using only a breakeven for carry trading a little bit and  after x days switch to trailing?!. Conversely, when swaps turn negative, the EA becomes more inclined to reduce trades' duration  to mitigate potential losses.


Why is this advantageous?

  1. Maximize Profits: Positive swaps mean more profit potential. This approach allows us to squeeze out every bit of advantage when swaps are in our favor.
  2. Risk Management: Negative swaps can erode profits quickly. Allowing the EA to act decisively protects our capital, preventing unnecessary losses.
  3. Flexibility: Monetary policies changes, and so should our strategies. Swap-based adjustments make our EAs adaptable to evolving market conditions.
  4. Efficiency: EAs can respond to swap changes much faster and efficiently than humans, maximizing opportunities and minimizing risks.
  5. Competitive Edge: Staying competitive in the trading world is vital. This innovative approach could set you apart in the markets.

So, what do you think about this idea?  If you like it, let's discuss how we can make CP smarter and more adaptable to enhance every multiday strategies. 

Replies 11
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Andrey Khatimlianskyi
  • Under review

Thanks for the idea!

Unfortunately, it is difficult to even test it, the history of swap rates in MT is not available. So all history is tested with the latest available swap rates.

It is probably possible to find swap history somewhere, but I'm not sure it's worth the time and effort to apply it in MT backtesting.

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Sai Pratap

How much will be the swap charges compared to the profit we make? Is it really worth so much?

By the way, I get zero swap charges from OctaFX as well as Exness for my accounts. 

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Giamma
Quote from Andrey Khatimlianskyi

Thanks for the idea!

Unfortunately, it is difficult to even test it, the history of swap rates in MT is not available. So all history is tested with the latest available swap rates.

It is probably possible to find swap history somewhere, but I'm not sure it's worth the time and effort to apply it in MT backtesting.

Thank you for your input; you've raised a valid point about the historical availability of swap rates in MetaTrader (MT).

However, swaps are essentially a daily income or expense tied to interest rates set by central banks. While historical data can offer some insights, it may not provide the full picture due to interest rate overtime fluctuations influenced by geopolitical events and central banks decisions. I do not think it is necessary to test it as it's not not a traditional trading strategy in the sense of technical indicators or chart patterns. What do you think ?

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Giamma
Quote from Sai Pratap

How much will be the swap charges compared to the profit we make? Is it really worth so much?

By the way, I get zero swap charges from OctaFX as well as Exness for my accounts. 

I can not answer to your question, as it depends what currencies you're using and the interest rate of the relative central banks. You can however calculate it by yourself .

Is it really worth so much?
As everything, depends, but yes, it is worth, as much as many functions of CP. Swaps can be a valuable tool when used effectively. Consider the carry trading positions commonly employed by banks and institutions, expecially in this period of super hi interest rate opportunities (Brazil, Mexico, US or UK VS Japan, Switzerland or China)

It can impact your overall trading performance, in positive or negative, especially if, like me, you're used to carry a trade for weeks or months.


PS: IMHO having no swap or "islamic account" is a minus.

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Andrey Khatimlianskyi
Quote from Giamma

Thank you for your input; you've raised a valid point about the historical availability of swap rates in MetaTrader (MT).

However, swaps are essentially a daily income or expense tied to interest rates set by central banks. While historical data can offer some insights, it may not provide the full picture due to interest rate overtime fluctuations influenced by geopolitical events and central banks decisions. I do not think it is necessary to test it as it's not not a traditional trading strategy in the sense of technical indicators or chart patterns. What do you think ?

So how will you know if this feature is helping or not? If you can't compare how the EA performs with and without it, you can just hope that it works good.

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Giamma
Quote from Andrey Khatimlianskyi

So how will you know if this feature is helping or not? If you can't compare how the EA performs with and without it, you can just hope that it works good.

I understand your point. It would certainly be fantastic to be able to conduct backtesting over a decade or more, seeing what happens with the swap variable within the equation. However, it seems that this is not possible, and from what you've mentioned, it may not be worth it.

What I can tell you is that the feature I've suggested isn't a complex signal indicator requiring extensive testing to compare its performance to metrics like RSI. Instead, it's a valuable addition, similar to "time settings" or "hedge properties" that could empower the EA to assess the valence and strength of the swap rates, enabling it to adjust its behavior, meaning parameters, within certain limits (such as activating breakeven or extending the trailing stop).


Could it help? I can't say for sure, but it certainly can't hurt, given that SWAP is a known and calculable data point, and that is the reason why it might be also possible to test it in live market directy. 

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Andrey Khatimlianskyi
Quote from Giamma

I understand your point. It would certainly be fantastic to be able to conduct backtesting over a decade or more, seeing what happens with the swap variable within the equation. However, it seems that this is not possible, and from what you've mentioned, it may not be worth it.

What I can tell you is that the feature I've suggested isn't a complex signal indicator requiring extensive testing to compare its performance to metrics like RSI. Instead, it's a valuable addition, similar to "time settings" or "hedge properties" that could empower the EA to assess the valence and strength of the swap rates, enabling it to adjust its behavior, meaning parameters, within certain limits (such as activating breakeven or extending the trailing stop).


Could it help? I can't say for sure, but it certainly can't hurt, given that SWAP is a known and calculable data point, and that is the reason why it might be also possible to test it in live market directy. 

So how do you want to analyze swaps? What features and parameters you want to add?

Let's be more specific.

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Giamma
Quote from Andrey Khatimlianskyi

So how do you want to analyze swaps? What features and parameters you want to add?

Let's be more specific.

Okay, here some ideas, that could be translated in parameters or whatever you think might fit, in which swap could be used as a "filter" for a main strategy. I have zero knowledge about programming so, take them as mere inputs.

As it is just an "utility tool", if you think it require too much time, efforts or whatever, just cut off this proposal or postpone it for the future, as it's not really urgent. 


Take Profit and Stop Loss Levels
When swaps are positive, the strategy could automatically adjust the take profit and stop loss levels to capture more profit. This means setting a higher take profit level and possibly widening the stop loss to give the trade more room to breathe. ( by points or by coef-to-vol.) 

Trailing Stop Values

For positive swaps, the trailing stop value could be increased, allowing the trade to capture more profit as it moves in the desired direction ( by points or by coef-to-vol.).

Entry Conditions

Swap rates could also influence the entry conditions. For example, when swaps are positive and intense, the strategy could be more aggressive in entering trades, and when swaps are negative, it could become more conservative. (it could be useful for grid trading, by enlarging or reducing the step size)


Position Sizing

Adjusting the position size based on swap rates could be another strategy parameter. Larger positions when swaps are positive, and smaller positions when swaps are negative to manage risk. (useless for short term trades)


Breakeven Levels

The swap filter could use breakeven levels for trades with positive swaps to lock in some profit once a certain threshold is reached. (useful with "position sizing")


Swap Rate Thresholds: a sort of parameter for reading the "intensity" of the swap. For instance, when the positive swap rate is egual of above a certain value, the filter will be activated, otherwise ignored.

Adaptation Frequency: Define how often the strategy reviews and adapts to swap rate conditions. This could be done daily, weekly, or based on market events (via news filter ?!)


A particular idea for a strategy
Swap rates often vary by the day of the week or time of day. Thanks to the "time filter" already present in cp and the above potential parameters,  it could be possible to build up swap-based strategy based on particular day. For instance, usually swaps are charged triple on Wednesday.  So, perhaps, using time filter, plus some swap parameters, might allow an user to build up a strategy that focus merely on the Wednesday's swap. But yeah, i guess this needs to be backtested.

When and if CP will be multicurrency, it will also possible to read different swaps and build up articulated and automated carry strategies with hedging.


Thank you for your time :) 

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Andrey Khatimlianskyi
  • Declined
Quote from Giamma

Okay, here some ideas, that could be translated in parameters or whatever you think might fit, in which swap could be used as a "filter" for a main strategy. I have zero knowledge about programming so, take them as mere inputs.

As it is just an "utility tool", if you think it require too much time, efforts or whatever, just cut off this proposal or postpone it for the future, as it's not really urgent. 


Take Profit and Stop Loss Levels
When swaps are positive, the strategy could automatically adjust the take profit and stop loss levels to capture more profit. This means setting a higher take profit level and possibly widening the stop loss to give the trade more room to breathe. ( by points or by coef-to-vol.) 

Trailing Stop Values

For positive swaps, the trailing stop value could be increased, allowing the trade to capture more profit as it moves in the desired direction ( by points or by coef-to-vol.).

Entry Conditions

Swap rates could also influence the entry conditions. For example, when swaps are positive and intense, the strategy could be more aggressive in entering trades, and when swaps are negative, it could become more conservative. (it could be useful for grid trading, by enlarging or reducing the step size)


Position Sizing

Adjusting the position size based on swap rates could be another strategy parameter. Larger positions when swaps are positive, and smaller positions when swaps are negative to manage risk. (useless for short term trades)


Breakeven Levels

The swap filter could use breakeven levels for trades with positive swaps to lock in some profit once a certain threshold is reached. (useful with "position sizing")


Swap Rate Thresholds: a sort of parameter for reading the "intensity" of the swap. For instance, when the positive swap rate is egual of above a certain value, the filter will be activated, otherwise ignored.

Adaptation Frequency: Define how often the strategy reviews and adapts to swap rate conditions. This could be done daily, weekly, or based on market events (via news filter ?!)


A particular idea for a strategy
Swap rates often vary by the day of the week or time of day. Thanks to the "time filter" already present in cp and the above potential parameters,  it could be possible to build up swap-based strategy based on particular day. For instance, usually swaps are charged triple on Wednesday.  So, perhaps, using time filter, plus some swap parameters, might allow an user to build up a strategy that focus merely on the Wednesday's swap. But yeah, i guess this needs to be backtested.

When and if CP will be multicurrency, it will also possible to read different swaps and build up articulated and automated carry strategies with hedging.


Thank you for your time :) 

I've got you point.

But this is again very general ideas, not specific improvement request.

Swaps are changed very rare. If you think strategy with wider SL/TP/TS works better, just increase them when swaps become positive! You need to do it once a few month.

Regarding the Wednesday --- you're right, it is better to close positions before triple swaps. As well as before weekends. And you already can do it with the Time filter.

Good luck with your experiments!

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Giamma
Quote from Andrey Khatimlianskyi

I've got you point.

But this is again very general ideas, not specific improvement request.

Swaps are changed very rare. If you think strategy with wider SL/TP/TS works better, just increase them when swaps become positive! You need to do it once a few month.

Regarding the Wednesday --- you're right, it is better to close positions before triple swaps. As well as before weekends. And you already can do it with the Time filter.

Good luck with your experiments!

Got it! No problem. I initiated this discussion not to make a specific request but to kickstart a collective conversation about swaps, carry trading (already addressed in scientific literature) and  possible ways for capitalize them with CP.

Manually adjusting parameters becomes inconvenient when implementing a bidirectional strategy on the same asset. For instance, let's consider the current USDJPY scenario with 1 lot size. When I (or a strategy) go long, I'm currently earning a relative good ammount of USD in Swap (circa 10 USD/day), but when I go short, I'm incurring a relatively high cost due to the swap (-18 USD/day). Manually changing these parameters every time a strategy dictates a long or short position can be challenging, especially if one work on different pairs.

As for the Wednesday strategy, my intent was precisely the opposite: to formulate a strategy that opens short trades exclusively on Wednesdays, to capitalize the triple positive swaps.

Thank you anyway for the time you've dedicated. Cheers! ^^