I’m looking into the forex (not looking to invest, just researching.) Suppose I am trading in hypothetical scenario where USD/JPY is trading at 10. Let’s say I perform the following actions:
- I deposit $200 into my account and exchange half into JPY. 100 USD, 1000 JPY.
- The rate changes to 20. I rebalance, converting $25 to JPY. 75 USD, 1500 JPY.
- The rate changes back to 10. I bring my USD balance back to the first balance of the $100. Now I have 100 USD again, but now I have 1250 JPY, a gain of $25 from step 1.
Why don’t more investors do this? Or do they? I would assume that it has something to do with fees/taxes making this strategy difficult to make money off of, or that the movement in rates isn’t enough to make a significant difference with this technique, or that the pattern is regulated against.
EDIT: I know the title isn’t very clear but other than saying “why don’t forex traders use this technique?” I wasn’t sure what to call this question.