Multiple Trades? (Hard to explain)

Looking over my daily charts, it seems that the majority of the time, certain pairs will behave and at least move in the same direction as others. AUD/JPY, GBP/JPY, and EUR/JPY are what I'm referring to specifically. The main issue for me here is that the pairs are all xxx/JPY. Is there any additional risk in taking all these trades (ie since they mostly move the same way, I'd be risking 9% instead of 3%). Now, if your system gave you the same signal for each of those, what would you do?

Take all the trades?
OR
Take only the best setups (thus entering some subjectivity in)?

Thanks,
andersenws

The best one for sure. This happens all the time. All those pairs may move in the same direction, but one or two of them will cover your spread and maybe give a good profit, while another will only move enough to frustrate you.

Check the average pip movement per day. Some may give a nice looking pin on the daily, but overall the first target may be smaller in pips than you realise against the other pairs.

I will use a rating system. The best one goes to the one that has the biggest room to move..

basically take all the trades!

Thanks for the responses guys. Bundy, I hope that since I'm trading off of the daily's, I will get enough movement to cover the spread (unless it's EUR/AUD 12 pips!!). Hilmy, with your rating system, do you give more lots to what you feel is the best trade or is your rating system just on which trades to take?

andersenws

I would look further into the correlation of these pairs; more specfically the correlation of these pairs AND your system. Some systems will play well with correlated pairs, and some will not.

I trade one system on two highly correlated pairs. The signals themselves, however, are not as correlated as the pairs themselves. They are correlated, however, so you should look into studying their correlation. What I did, is I took my trade sequence of each pair and interleaved the data from the two pairs. Basically a sequential list (by time) of all trades for BOTH pairs over a given amount of time. Then you can evaluate your risk as though it was one system. From here you can determine if it is beneficial to trade multiple pairs or not based on your overall return to drawdown, or even by glancing at the final equity curve.

Determining the correlation of multiple pairs on one system is hard, but determining the correlation of multiple pairs on multiple systems is even harder.

Well I always risk 2% or lower up to this point. If I have 5 trades ready to go, I'll give the first 2% of my equity to that. I'll then subtract that amount from my balance and keep doing the same thing. Some trades do fit the 1% risk. So you're right, the bigger lots go to the higher probability trade.

But in the future I might implement the 3% risk and I might also limit my exposure to 10%. But really I just look at the available margin. I mean I wouldn't have 10 positions open with only $100 of margin left. There's some objectivity into this. But the rating system should be subjective.