Has trading correlated pairs damaged my trading? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Hedging correlated pairs using pip difference 16 replies

Buy/Sell Scripts for Correlated pairs 1 reply

who trades Correlated pairs? 0 replies

correlated pairs 2 replies

Pairs least correlated to GBP/JPY? 1 reply

Has trading correlated pairs damaged my trading?

  • #1
  • First Post: Nov 28, 2013 3:52pm Nov 28, 2013 3:52pm
For a long time now i have always traded well over 15 pairs accross large timeframes, but recently i have stepped down and only tried to trade a few pairs to make things more stress free. One thing though which crossed my mind was during my trading off a lot of pairs with little success, i have to question have i been trading them properly? For instance should you really be going short on USDJPY when long on EURUSD? Or should you really be going long on GBPUSD whilst shorting USDCAD? I'm just thinking about my past trading and how this may have affected my outcomes. For instance, winning GBPUSD trades but then losing USDCAD trades in the same session etc;

Hope this is easy to understand.
  • #2
  • Nov 29, 2013 4:41am Nov 29, 2013 4:41am
Hello ReyesWhite,

There is no right answer here. What i think you could aim for is using one side of the trade for lowering your risks while betting that for the opposite side.

For example when USD/CAD is moving sideways and GBP/USD is on an uptrend, you could go long on GBP/USD and short USD/CAD. If uptrend continues you will lock in profits while USD/CAD is likely to go sideways. If GBP/USD should reverse and move lower then USD/CAD is likely to go lower as well. The logic is, if one pair has been on an uptrend and another one sideways then continuation of uptrend should not affect the pair which is moving sideways.
  • #3
  • Nov 29, 2013 6:23am Nov 29, 2013 6:23am
Quoting ReyesWhite
For a long time now i have always traded well over 15 pairs accross large timeframes, but recently i have stepped down and only tried to trade a few pairs to make things more stress free. One thing though which crossed my mind was during my trading off a lot of pairs with little success, i have to question have i been trading them properly? For instance should you really be going short on USDJPY when long on EURUSD? Or should you really be going long on GBPUSD whilst shorting USDCAD? I'm just thinking about my past trading and how this may have...
I think you answered your own question, K.I.S.S

Trade the best setup!
  • #4
  • Dec 2, 2013 11:01pm Dec 2, 2013 11:01pm
Quoting ReyesWhite
For a long time now i have always traded well over 15 pairs accross large timeframes, but recently i have stepped down and only trior instance, winning GBPUSD trades but then losing USDCAD trades in the same session etc; Hope this is easy to understand.
As others suggested, trading the best set up is the only option on the board and frankly, when it comes to currency correlation between pairs, there's just no straight answer..
  • #5
  • Dec 26, 2017 6:17am Dec 26, 2017 6:17am
Yes, I don’t count currency correlation in my live trading! No doubt, sometimes it works (currency correlation) but I have enough confident about my trading strategy! My suggestion is, if you have any doubt about your strategy then practice more in your demo! For me, different trading pair means different environment; that’s way I don’t consider currency correlation in my trading! I always open and close my trades based on my plan & strategy!
  • #6
  • Dec 26, 2017 9:46am Dec 26, 2017 9:46am
The only way to answer that question is to look at the results of your trading before and after the change. When were you more successful, before or after the change? When did you feel better about it, before or after the change?
  • #7
  • Dec 27, 2017 11:57am Dec 27, 2017 11:57am
Quoting mlawson71
The only way to answer that question is to look at the results of your trading before and after the change. When were you more successful, before or after the change? When did you feel better about it, before or after the change?
That’s the actual process! No doubt, testing is a trading strategy or system always takes such a long time! But, there is no alternative reliable way! I have made my strategy that I am using right now by 2 years of demo practice!
  • #8
  • Edited Dec 31, 2017 8:28am Dec 30, 2017 11:51am | Edited Dec 31, 2017 8:28am
Quoting ReyesWhite
For a long time now i have always traded well over 15 pairs accross large timeframes.......
There's no right or wrong answer IMO. It depends on your strategy, and what you're trying to achieve. Obviously the more pairs you're monitoring simultaneously, the more work that's needed to keep track of everything.

If your strategy involves analysis of fundamentals (macro, sentiment etc) then you will probably be looking at currencies rather than pairs, and attempting to pair strong currencies against weak ones. Basket and diversification strategies also require looking at many different currencies/pairs.

However, if your strategy involves basic PA/TA, then you're obviously focusing on individual pairs, and it's possibly more sensible to stay with the majors, as their behaviour is arguably more patterned, and of course your broker costs will be lower. Or your strategy might involve trading pairs like GBPNZD which tend to move a larger number of pips per day.

IMO it's very important to also consider exposure. If you are (for example) long in both EURUSD and GBPUSD, then your exposure in USD is effectively doubled. Of course if you're looking to diversify your risk, then you could trade both pairs, and simply use half your normal position size.

If you are (for example) long in EURUSD and short in GBPUSD, then that is equivalent to being long EURGBP (assuming the position sizes are balanced correctly).
Here is the algebra: EUR/USD / GBP/USD = EUR/USD x USD/GBP = EURGBP.
  • #9
  • Last Post: Dec 30, 2017 8:14pm Dec 30, 2017 8:14pm
Quoting ReyesWhite
For a long time now i have always traded well over 15 pairs accross large timeframes, but recently i have stepped down and only tried to trade a few pairs to make things more stress free. One thing though which crossed my mind was during my trading off a lot of pairs with little success, i have to question have i been trading them properly? For instance should you really be going short on USDJPY when long on EURUSD? Or should you really be going long on GBPUSD whilst shorting USDCAD? I'm just thinking about my past trading and how this may have...
there are EAs available for 3 pairs correlation and whenever i used it ,it always failed me on demo account ,so IMHO take 1 pair at a time,study the trend and do trading cautiously.on bigger picture it seems that pairs are correlated but it is not practical because we are fighting for 10 to 20 pips,so correlation doesnt serve us until and unless you are trading 0.01 and keeping for days and weeks.Live Trading is a serious business.

happy new year and happy pips!
0 traders viewing now