Ecurrency Digot Stategy - Moving Forward
Digot Buying/Selling Strategy.
Todays post is dedicated to my analysis of the impact of Currency Exchange Rates on a Portfolio (as it relates to mine anyway).
First I would like to point out that my Portfolio is based in USD/DXG and I currently have about 27% of the value in USD digots. The balance of the portfolio is made up of 13 non-USD denominated currencies and their related digots. If your portfolio is based in USD/DXG and you hold only USD or DXG based currencies, the currency exchange rates has no effect on your daily gains. Alternately if your portfolio is based on Non-USD/DXG currency OR you have a mix of different currencies then your portfolio will fluctuate with currency exchange rates.
That being said, I believe and the numbers prove that it is tremendously impotant to hold digots that are doing well against the US Dollar. Oh, I know, easier said than done! My point here is that the old stategies of buying the best performing digots at the lowest premium is no longer good enough. Your strategy should also include consideration for how that currency has been doing against the US Dollar and try to anticipate future movement.
This last week the US Dollar rallied against most other major currencies. The impact of this is that exchange rates relative to my Non-USD currencies are dropping. In simple terms...if an exchange rate is dropping, the gains on your non-USD digots will be diminished or possibly negative. My portfolio has gained about $50 this week however, the currency exchange effect was negative by a little more than $14.
Ecurrency Digot Strategy Moving Forward-
Most of the major currencies are at or near what I call major support areas. This coming week should tell if those support areas are broken (which would mean continued strength in the dollar) or will they hold and regain ground against the dollar. If the support areas are broken I will be liquidating my holdings in the following currencies: Australia, British Pound and the Euro as these are the currencies that have been most affected.
If that happens I will replace those digots sold with digots whos currency has been performing well recently given the rally in the US Dollar. The ones I see as good performers are: Canada, India, New Zealand, China, and maybe Mexico. I have digots in all of these currencies except India, so it is just a matter of buying more digots in the currencies I already have.
Caution - One week does not make a Trend!
In your own analysis you are looking for a trend. The currency markets flucuate all the time, don't get swayed by short term moves. Look for breakouts of support/resistance levels. The nice thing about Currencies is that they usually trend for a long time.
So why even mess with Exchange Rates at all? Why not just have a USD/DXG based portfolio and include only USD/DXG based digots? Short Answer: It is all about maximizing the returns in your portfolio. If you are on the right side of the Currency Exchange game, the returns are double or more the average gains not including exchange rates. All of the above currencies have far outperformed USD based digots in my portfolio. My USD based digots are averaging about .08% daily while the best performing non-USD based digots are averaging .15% to .285% daily.
Long Term
With the lower daily gains ecurrency trading can no longer be a Buy and Hold strategy. One must try to capitalize on trends in the currency world. This can be achieved by analysing the strength of a currency versus the US Dollar.
If you have any questions or comments, feel free to post a comment on this blog or send me an email to mailto:info@futures-brokers-review.com
Todays post is dedicated to my analysis of the impact of Currency Exchange Rates on a Portfolio (as it relates to mine anyway).
First I would like to point out that my Portfolio is based in USD/DXG and I currently have about 27% of the value in USD digots. The balance of the portfolio is made up of 13 non-USD denominated currencies and their related digots. If your portfolio is based in USD/DXG and you hold only USD or DXG based currencies, the currency exchange rates has no effect on your daily gains. Alternately if your portfolio is based on Non-USD/DXG currency OR you have a mix of different currencies then your portfolio will fluctuate with currency exchange rates.
That being said, I believe and the numbers prove that it is tremendously impotant to hold digots that are doing well against the US Dollar. Oh, I know, easier said than done! My point here is that the old stategies of buying the best performing digots at the lowest premium is no longer good enough. Your strategy should also include consideration for how that currency has been doing against the US Dollar and try to anticipate future movement.
This last week the US Dollar rallied against most other major currencies. The impact of this is that exchange rates relative to my Non-USD currencies are dropping. In simple terms...if an exchange rate is dropping, the gains on your non-USD digots will be diminished or possibly negative. My portfolio has gained about $50 this week however, the currency exchange effect was negative by a little more than $14.
Ecurrency Digot Strategy Moving Forward-
Most of the major currencies are at or near what I call major support areas. This coming week should tell if those support areas are broken (which would mean continued strength in the dollar) or will they hold and regain ground against the dollar. If the support areas are broken I will be liquidating my holdings in the following currencies: Australia, British Pound and the Euro as these are the currencies that have been most affected.
If that happens I will replace those digots sold with digots whos currency has been performing well recently given the rally in the US Dollar. The ones I see as good performers are: Canada, India, New Zealand, China, and maybe Mexico. I have digots in all of these currencies except India, so it is just a matter of buying more digots in the currencies I already have.
Caution - One week does not make a Trend!
In your own analysis you are looking for a trend. The currency markets flucuate all the time, don't get swayed by short term moves. Look for breakouts of support/resistance levels. The nice thing about Currencies is that they usually trend for a long time.
So why even mess with Exchange Rates at all? Why not just have a USD/DXG based portfolio and include only USD/DXG based digots? Short Answer: It is all about maximizing the returns in your portfolio. If you are on the right side of the Currency Exchange game, the returns are double or more the average gains not including exchange rates. All of the above currencies have far outperformed USD based digots in my portfolio. My USD based digots are averaging about .08% daily while the best performing non-USD based digots are averaging .15% to .285% daily.
Long Term
With the lower daily gains ecurrency trading can no longer be a Buy and Hold strategy. One must try to capitalize on trends in the currency world. This can be achieved by analysing the strength of a currency versus the US Dollar.
If you have any questions or comments, feel free to post a comment on this blog or send me an email to mailto:info@futures-brokers-review.com
posted by Dxjunkie at 7:58 AM
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