Trading 2 pairs with the same currency

Hello Everyone,

I wanted to know whats people thoughts on trading 2 pairs that have the same currency in them. For example, Long AUDUSD and Short GBPAUD. Or Long EURUSD and Long NZDUSD. Do you guys consider this as doubling down so you dont play both at the same time or do you treat it like 2 different trades?

Thanks

Hi,
Yesterday when AUD started being sold, entering LONG on GBPAUD was a very good idea, yet between AUD and CAD wasn't much difference, i think because CAD was also being sold and that resulted in a choppy chart on AUDCAD, same for AUDJPY.
I would think in what is being sold or bought in terms of 1 currency.

Also AUD , NZD, JPY, CAD being sold. Entering SHORT on whatever combination contains JPY would have been greatly affected by those spikes, caused by a mass JPY sell.

Usually most of the pairs containing the same currency move the same way - so often all 7 AUD pairs move up together or down together. The odd one out is often AUD/NZD but leaving that one aside, it makes no practical benefit to take 6 long AUD trades side by side in order to greatly increase your long-side exposure to AUD: you could simply take out one very big AUD position on AUD/CAD or GBP/AUD or any of the others. But why is taking an over-sized position ever a good idea?

Hello,

So for what I understood, you guys think that taking 2 or more longs or 2 or more shorts on the same currency but different pairs is like doubling down. You are betting on the same thing and in effect risking more than normal on the same bet? Did I understand correctly?

Yes you are correct that your are increasing your exposure and risk by trading two correlated pairs in the same direction. Understanding and keeping an eye on currency pair correlation data is key. Correlation changes over time, a currency pair highly correlated this week may may have a reduced correlation the following week. You can trade two currency pairs with the same currency that are correlated and could be part of a wider strategy but you most always know your exposure and risk.