Recent decade forex market has become the important market for Turkish investors
because of some offers in terms of leverage, high profit, and instant trading advantages.
However, these offers can turn into a nightmare for individual investors.
As it is known, forex market contains lots of financial instruments such as currency,
index, and commodity and so on. These instruments are volatile and include
high risks owing to leverage, unlike stock stocks. For this reason, investors can lose
their all investments. Investors losing their money or hear that forex is dangerous
market as well as it enables investors to make a huge profit are looking for a different
way in order to earn money in forex market. That is why in this study different
ways which investors look for will be emphasized with their risks. There are many
studies about risks in forex market such as volatility risk and leverage risks. On the
other hand, there is no study about the process of swap income, bonus transfer and
their invisible risks. Therefore, this study can be an important observation for finance
Forex which is also known as a foreign exchange is a global market that enables investors
to trade currencies. Provided that it is widely explained, Forex is a market which traders can
buy and sell the variety of commodities, currencies, and indexes. Investors can access their screen in
order to see their open position, trading new commodities or currency in 24 hours. Five days
and 24 hours open market lead investors focus on the price screen and it causes investors to
open overmuch positions. In this way, investors start to feel themselves as a professional trader
and they try to learn technical analysis and basic analysis. After figuring out kind of analysis,
they start to invest more much money and finally they lose their huge amount of investments. It
is obvious that investors will be expert on financial markets by losing and winning. However,
most of the investors try to avoid well-known risks such as volatility and leverage risks and they try
to find a way without risk and uncertainty. That is, investors understanding technical analysis
and other techniques cannot prevent them from risks and uncertainty create some ways to get
fixed and risk-free profit. These ways are swap income and bonus transfer. These two terms and
their risks will be explained instead of well-known risks.
In this study, general information about forex, hedge system, the difference between the swap
and swap income and cost will be emphasized before focusing on how to make the profit by applying
swap income, bonus transfer, and their undesirable results.
2. LITERATURE REVIEW
As it is known, forex market possesses 5,5 billion dollar volume all over the world. For
this reason, it is believed that there is no probability to manipulate this market. However, trends
can be determined by central banks of countries. Especially, announcements and news result in
uncertainty and volatility. At first, this situation is not like manipulation then it can become
manipulation. To illustrate, FED took some measurements for macroeconomic vision after 2008
mortgage crisis and FED started to announce too many news about macroeconomic indicators.
That is, economic movements start to depend on the mouth of FED and it has affected all over the
world. Way of the trend, volatility and investment decision have been formalized by the decision of
FED. Especially in the announcement and news hours, market is volatile and risk becomes double.
While positive effect of FED results in the increase of USD, negative effect of FED lead to
the decrease of USD. For instance, XAU/USD (Gold) is sensitive to Central Bank of America. That
is, XAU/USD (Gold) increases or decreases by being sensitive to announcements of FED. Announcement
hours and sudden shocks are important risks for individual investors. For this reason,
while investors pay attention to technical and basic analysis for forecasting future, hedge
system are the essential role for avoiding risks and loss.
In this part, the literature review will be observed about technical analysis, basic analysis
and hedge system.
2.1 Technical Analysis
Technical analysis contains price, volume and historical movements on graphs and
comments all of these concepts. It is believed that technical analysis is a method which tries to
enable investors to forecast future price and change of price by using statistic ways that show
buying and selling signals (Akman, 2004, p.273).
Technical analysis accepted that price includes everything about factors and effect on
formation of price. In the market, there is a trend and this trend occurs via historical trend
movements. That is, investors can try to estimate future trend via historical trend formation
(Erdinç, 2004, p.183).
Volume, opening price, closing price, lowest and highest price are the important concept
for technical analysis since all of these information constitute process of price. Graphs play
an essential role on technical analysis since technical analyst tries to understand way of the
trend via observing price graphs that consist of demand, supply and demand meeting point.
Moreover, analyst tries to follow the change of trends determines the turning point of price such as
resistance and support point. In this way, technical analysis enables investors to schedule about
buying and selling process. Technical analysis possesses three important approaches (Murphy,
1985, p. 2).
i. Market rebates everything: this assumption which is very important for technical
analysis support that price reflects everything that possesses effects on price such as
the economic situation, psychologic factors, politic situation, news and announcements.
While increase of supply reduces the price, increase of demand rise the price. That
is, technical analysis approach accepted that price reacts due to change of demand
ii. Prices move with trends: technical analysis suggests that buying and selling process
depend on trend direction and it continues constant point and time
iii.The past repeats: similar graph formation and similar price movement enable investors
to determine the trend of the price. That is, price is growing from historical price
movement and graph formations.
2.2 Basic Analysis
The basic analysis differs from market to market. That is, basic analysis for share market is
the function of company’s financial structure that will be operated (sold or bought) in the stock
market. On the other hand, basic analysis for forex market is the function of the economic situation of
countries since currencies and commodities are bought and sold in the forex market. Furthermore,
difference between basic analysis of stock market and forex market is that there is a chance
to make analysis for long run investment at the stock market. However, there is no chance to
make analysis in long run investment at the forex market since there is powerful volatility and
leverage effect. Another reason why long-range investment cannot be made is that forex market
does not have the structure for long-run investments.
Basic Analysis contains huge amount of indicators in terms of company information,
sector information, long run factors (Change of population, urbanization, natural resource and
development of international trade) and macroeconomic information and expectations (Sevinç,
2004). However, only macroeconomic parameters can be used at forex market and this help
investors with having idea for currency and commodities.
2.3 Hedge system
First of all, hedge system is a different concept from the hedge fund. Hedge funds are special
funds which can use different financial instruments without dependent of legal restrictions and
these funds have the possibility for short-selling and borrowing (Fıkırkoca, 2006, p.8). That is,
while hedge fund is related to investment funds, hedge system is a way which enables investors
have fixed profit and avoid losses. This system is the most convenient way to prevent investors
from having losses. This way is used for many goals. The first one is that existing and losing
position can be protected. Secondly, investors can protect existing position in important announcement
hours. The last one is to make the profit without risks and uncertainty via bonus transfer
and swap income. In this study, the last one will be mentioned because this hedge way starts
to be big problem for individual investors. All of these ways are used for avoiding risks. On the
other hand, the last one for profit without risk cannot remove risks. On the contrary, individual investors
take much more risks when hedge system is used for profit without risk. This risk will
be emphasized after bonus transfer and swap income are explained.
3. Bonus Transfer and Swap Income
Individual investors pay attention to find brokerage companies which are reliable and
offers some advantages. That is, they are looking for companies which offer fast withdrawing,
bonus opportunities, high swap income and law spread. However, most of the beginner and experienced
investors do not know which company is reliable. This has become the important problem for
investors. Turkish investors believe and deposit their money to foreign brokerage company owing
to bonus offers, high swap income, the absence of swap costs and lower spread.
These brokerage firms are not audited by Sermaye Piyasası Kurulu (SPK) since they are
located in abroad. There is an agreement and many rules are declared between investor and
Brokerage Company. However, these do not protect the investors. These companies are not
regulated by capital markets board of their countries let alone SPK. When investors live problem
about withdrawing money, screen errors and others, they cannot find an institution in order
to complain. These companies can be reached when investors deposit money. On the other
hand, when investors make the profit or have any problem, company vanish.
The most attractive question is how investors believe these companies and what are the
In this part, these questions will be answered and some ways which are used by brokerage
companies will be explained.
Companies located in abroad call and offer two kinds of ways that enable investors to
make the profit without risk. While the first way is bonus transferring, the second one is swap income.
Bonus Transferring: this way seems simple and logical way to make the profit. Turkish
investor opens two different accounts. While the first account is opened at Turkish company, the second
one is opened at the foreign company. Foreign companies offer %20, %30, %40 and %50 bonus
advantage depending on depositing amount of money. Investor deposits 30.000$ to two
companies and bonus transferring system works Figure 1.
Figure 1. Bonus Transferring System
As it is seen at figure 1, each company are deposited at 30.000$. However, the total account
is 42.000$ at the foreign company because of bonus. That is, the investor will buy and sell same
currencies and commodities at two accounts in order to transfer 12.000$ from foreign company
to Turkish company. However, the loss should be 42.000$ at the foreign company to transfer 12.000$.
In this way, the total account in Turkish Company will be 72.000$.
Figure 2. Profit Circulation of Bonus Transferring
As it is shown at figure 2, bonus and all money was transferred from Foreign Company
to Turkish Company via XAUUSD. However, there is a spread cost at 1.500 $. That’s why
total profit is 10.500$. This way provides investors with the opportunity to take fixed and risk-free
profit thanks to hedging commodities and currencies.
As it is seen, change of gold price does not
affect the investor thanks to hedge. Opposite function between two brokerage companies protects
investor from the volatility of gold. Every pip is 1.000$ loss and profit oppositely. Gold increased
from 1260.50 to 1301.00 and gold position became profit at Turkish Account, opposite position
of gold at foreign account can seem loss. However, it is profit not loss since the gold position was
hedged and loss and bonus transferred from foreign account to Turkish account automatically. In
this way, while bonus was transferred as profit, rest of money was transferred as available
capital. After extracting spread cost, investor gained 10.500 $ profit.
Swap Income: brokerage firms give investors swap interest when they have the short
position with USD (sell USD). On the other hand, swap interest is taken from investors, when
they have a long position (buy USD). To illustrate, when investors sell USDTRY, they will have
swap income. This income differs from company to company. Furthermore, Turkish brokerage
firms have to take swap cost when investors buy USDTRY and swap costs are everytime higher
than swap income. That is, Turkish brokerage firms do not accept the agreement without swap
In this wise, swap income can be prevented by the brokerage. However, it is believed that
there is a way in order to get swap income by investors who look for new ways to find riskless
and fixed income. This way is demonstrated at figure 3.
Figure 3. Illustrate by Swap Income
Turkish investor opens account both Turkish and foreign company. While investor
agrees with the foreign company not to pay swap cost, daily swap income will be taken from Turkish
the company at 60TRY.
The investor sells USDTRY at 3.5235 TRY and buys it also at 3.5239 TRY. In
this way, USDTRY will be hedged and there is no risk on USDTRY. There is only spread cost
(40TRY) and it is 400TRY at 10.00 lot USDTRY.
Provided that investor does not close the both USDTRY positions in twenty days, profit
will be 11.600TRY. The calculation is shown below.
Total Swap Income = (Days * lot * daily swap income) – spread the cost
11.600 TRY = (20 * 10.00 * 60TRY) – 400TRY
Provided that investor waits longer, profit will increase since the spread cost will be paid
Therefore, USDTRY should be bought and sold from the point that does not result in the margin
call. Every margin call leads to new trades and new trade leads to much more spread cost.
Developing financial methods and plans bring with it new perception. In these days,
the perception is better risk-free income than a risky one. Therefore, individual investors do not
desire to take risk even probability of high profit and they try to find the best way in order to
have fixed income. When the huge amount of investors hear bonus transferring and swap income
strategies, are the volunteer to apply these strategies. However, they are not aware of the danger of
these strategies. That is, individual investors, focus on riskless strategy, fixed income and easy
way of money. Brokerage companies offering the bonus, swap income, low spread and none swap
cost trick individual investors. Investors trying to avoid risks and uncertainty face fraud and
they lose their whole investments. Bonus transferring and swap income can seem attractive
strategy, however, the huge amount of investors faced fraud owing to these strategies. Especially,
shopkeepers in the grand bazaar are tricked many companies because of these strategies even these
shopkeepers have knowledge about forex market and this kind of brokerage company.
Akman, C. Bireysel Yatırımcının Rehberi, İletişim Yayınları, İstanbul, 2004.
Erdinç, Y. Yatırımcı ve Teknik Analiz Sorgulanıyor, Siyasal Kitabevi, Ankara, 2004.
Fıkırkoca, E. Alternatif Yatırım Araçları, TSPAKB Araştırma ve İstatistik, Aylık yayınlar, Sayı:
41, Ocak 2006.
Murphy, J. Technical Analysis of the Financial Markets. New York New York Institute of Finance.
Sevinç, E. Temel Analiz Yöntemi Kullanılarak İMKB’de İşlem Gören Hisse Senedi Fiyatının
Belirlenmesi, İstanbul, 2004.