Hi,
this is a question for forex experts!
I have not a lot of experience with forex. I have understood that it is possible to include the carry effect in the P&L calculation in TB. Another great thing, I must say!
My question is: is it also possible to include the carry in the calculation of the trend indicator (in case of trend following)? The problem that I see is that basing my signal on a comparaison between the current spot rate and an indicator based on the history of the spot rate is inconsistent with what I trade as my P&L comes from the spot rate difference AND the carry. The solution would be to build an index which would mirror the investment in a forex pair and accounting for the carry(always long the same ccy/interest rate, always short the same ccy/interest rate). Then I could base my indicator and signal on this index rather than on the spot rate, which would be consistent with the P&L calculation.
Other said, it is possible that the indicator based on the built index shows a trend in a different direction than the one based on the spot history if the carry goes against the trend of the spot FX.
Does all that make sense? Did somebody already tackle this issue?
Alex
