Carry trade, seasonality and earnings - time factors in swing

On a weekly horizon the price does not move only with the chart. It moves with time. Three forces of time decide whether the market pays you for holding or makes you pay: carry (the cost or income of holding), seasonality (repeatable calendar patterns), and earnings (the results season). This lesson teaches you how to measure them and wire them into your swing plan instead of being surprised by them.

Carry trade as a retail swing trader understands it

Carry is the difference in interest rate, dividend, or financing cost between what you hold long and what finances it short.

For you carry has 3 faces:

1. Forex swap: You hold EUR/USD long, and the ECB-Fed rate differential generates a positive or negative swap every day at 22:00 UTC. On weekly positions swap can eat 5-20% of the R gain.
2. Stocks/ETFs - dividend versus the financing cost of a CFD or a loan: If you trade stock CFDs, the broker charges a long financing cost (often SOFR/WIBOR plus a margin). On a short you receive part of the interest, but you pay the dividend if there is an ex-date.
3. Futures - contango/backwardation: Commodity futures in contango lose on rolls. If you hold an oil ETF built on futures, the ETF itself bleeds over time even when spot stands still.

Daily holding cost (CFD):
Cost = (Position value * (Base rate + Broker margin)) / 360

Example: Position 50,000 PLN, rate 5.75% + 2.5% margin = 8.25%
Daily cost = 50000 * 0.0825 / 360 = 11.45 PLN / day
Cost of 10 days = 114.5 PLN

Carry equation for swing:
Real R = R from price - (Sum of swap/financing costs) / Initial risk in PLN

Rule: always check the broker’s “Swaps” or “Overnight costs” tab before opening a swing. If swap is negative at -0.8R over 10 days, your TP has to be 0.8R bigger.

Seasonality - statistics, not magic

Seasonality is the repeatability of returns in specific months, weeks of the month, or days of the week.

You do not trade seasonality as a forecast. You use it as a probability filter.

How to measure simple seasonality:

Step 1: Pull monthly returns for 10-20 years for an index (e.g. S&P 500, WIG20)
Step 2: For each month calculate:
- Average return
- Median
- % of months up (hit rate)
- Z-score vs the annual average

Step 3: Seasonality is strong when the hit rate >65% and the average >1.5x the deviation.

Classic examples (measure them on your own market, do not copy):

• January effect / December on small-cap stocks
• Rising volatility in mid-September to October
• A weaker dollar in December versus a stronger one in January
• WIG20 weaker in May-June, stronger December-April (check current data, because it changes)

How to use it: seasonality is not an entry. Seasonality is 0.2 of a point on your 10-point checklist. If the D1 setup is perfect and seasonality is against it, you cut the position by 30%. You do not reverse the decision.

Earnings - gaps that wipe out a month of R

For stocks and indices the results season is the period when weekly positions can open -10% below the SL.

The mechanics:

Earnings risk = Gap / ATR D1
If a company can gap 8% on its results and your position has a SL 4% from entry,
the SL does not protect you against gaps - you will be closed at the gap price.

Management plan:

1. Calendar: Every swing position in stocks - check the earnings date (e.g. earnings.com, investing, bossa, mBank). If there are <7 days to the results - do not open a new swing.
2. Strategy A - close before: Close 100% of the position the day before the close if the position is more than 1R in profit. You accept that you are not taking the move on the results.
3. Strategy B - shrink and widen: Cut the position to 0.25% risk and widen the mental SL to 2.5 ATR, accepting the gap. Only if the expectancy of your setup after earnings is positive (you have to calculate it).
4. Strategy C - options (for advanced traders): Hedging with a long option, but that is outside the scope of this lesson - the signal being that you should not hold a naked swing.

Combining the three factors into a checklist

Before every weekly swing ask 5 questions and award points:

Time Factors checklist (0-5 pts, min 3 to open):
[ ] Carry: Is the cost of holding for 10 days <15% of the planned R? Yes=1 No=0
[ ] Dividend/ex-date: Is there no ex-div during the holding period that eats R or creates a tax? Yes=1
[ ] Seasonality: Does the month/week have a hit rate >55% in line with the direction? Yes=1 Neutral=0.5 Against=0
[ ] Earnings/Macro: Is there no binary event within 7 days? Yes=1 No=0
[ ] Weekend: Are you planning to hold over the weekend with a SL that accounts for the weekend gap (min 1.8 ATR)? Yes=1

If you have <3 pts - you stand aside. That is a decision too.

When the plan says do not trade

1. When the holding week contains the ex-dividend day of a stock you are short via CFD and the dividend is 3% of the price. You will be charged the dividend. That can be bigger than your risk.
2. When swap is negative and rising (the central bank has just raised rates for the currency you are shorting). Your long swing becomes a loan you pay for.
3. When the earnings calendar shows 40% of the portfolio reporting within 2 days. Close or reduce, do not add.
4. When seasonality is strongly against you (hit rate <35% in that month over 15 years) and the setup is average. Seasonality as a filter rejects, it does not confirm.
5. When a commodity ETF is in deep contango >10% a year and you want to hold it for 3 months. You will be right about the spot price and lose on the roll.

Mistakes that cost the most

A measurable exercise

Title: Time-cost audit

1. Take your last 10 swings (or demo trades). For each one reconstruct: how many days it was held, how much swap/financing cost was paid, and whether there was an ex-div during that time.
2. Calculate: the total time cost in PLN and in R. The average time cost per 10 days of holding in R.
3. For the same instruments, pull the earnings calendar for the next 30 days and mark the risk days.
4. For one index (WIG20 or S&P 500) calculate monthly seasonality over the last 10 years: the hit rate and the average return for each month.

Pass criterion: a cost table for 10 trades + a seasonality table for 12 months + 3 earnings dates that would have forced a close.

Check yourself

1. How do you calculate the real R after accounting for swap/financing cost? Give the formula.
2. Why is the ex-dividend day especially dangerous on short CFD positions?
3. What is contango and how does it affect a commodity ETF held for months?
4. Give 2 strategies for managing a swing position before earnings.
5. How do you use seasonality as a filter rather than as an entry signal?

Frequently asked questions

Does a positive swap mean I should always hold just for the swap? No. Carry is a bonus, not a reason. If the technical trend contradicts carry, carry will not save the position. D1/W1 first, then carry as a bonus.

Where can I find a reliable earnings calendar? Companies’ official investor relations pages, brokerage services from the GPW, the NASDAQ earnings calendar, Investing.com earnings. Always verify against 2 sources, because dates shift.

Do I also pay swap on cash stocks? Not swap, but you have the opportunity cost of capital and dividend tax. On cash stocks holding does not cost a daily financing fee, but the capital is frozen. That is a cost too - measure it as the R you lose on other setups.

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Educational material. This is not investment advice. Carry, dividends and earnings change dynamically - always check your broker’s specification and official company announcements.

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