Diversify risk based on each currencies performance

In Position Sizing for each individual currency what are you thoughts on this.

With the trading system I have, I have 4 specific currencies I will use. I also know that in ranking of best performer to the least performer of the 4 currencies, what is the best and what is the least performer.

What are your thoughts on diversifying the risk for each trade based on the performance ranking of each currency, meaning all trades with the best performer currency I will risk the most per trade and the least performer I will risk the least per trade but still stay within my Portfolio Heat for all 4 currencies.

So instead of risking lets say 1% on each trade for all 4 of the currencies, I will risk 1.2% on the best performer and going down the line, 1% - .80% - and finally .75% to the least performer of the 4 currencies.

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I love risk management and position sizing strategies.

The question here would be how do you rate performance? By trend persistency, volatility, range size, adherence to particular indicators, your past performance on the pair, how?

I already implement an approach discussed earlier... adjusting risk size based on expectancy % of the last 10 trades (higher % = higher risk, up to a limit of 3%, lower % = lower risk, down .5%).

If you adjust based on past performance the result would be the same as this, except the expectancy percentage would be per-currency as opposed to per-account. That distinction could be a very nice way to manage risky pairs tho.

Test the concept and see how it works?

Expectancy is a way to compare performance. What I have found is certain currencies have very specific price personalities that can be exploited and capitalized on. This very specific price personality goes way back in the history of certain currencies which can be used to a traders advantage by a trading system built to exploit it. The higher risk would be taken in the currency that most adheres to this specific personality trait and the lowest risk in the one that of the 4 currencies I trade that least adheres to the specific personality trait. Of course the expectancy has to be there for each of the 4 currencies and than throw in Monte Carlo Simulations for the R multiples and than find what the 2 standard deviations on either side of the expectancy are and also find what the maximum losses in a row would be, again using monte carlo simulations and than throw in the position sizing/risk control for each currency to set your objectives for return and drawdown.

I am a very visual person so this type of trading system I developed suits me well. I like the way you think, those options for rating performance are great things.

Steve

So pattern adherence then. You increase your risk % when you're trading a pair with historical patterns that match your system, decrease on the inverse.

Do I understand you correct ?
You toss a coin and get 4 heads in a row. So you say they the expectancy for the next throw to be a another head has increased although the probability for each outcome is always 50:50 no matter what?

The only problem with that analogy is that a coin has fixed odds, the markets don't. Markets get choppy, some patterns misbehave, chaos enters the equation. I bet if you plot out the effectiveness of your system over a few decades worth of data you'll see that failures often cluster.