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Diversifying Currency Pairs!

  • #1
  • First Post: May 25, 2011 10:45am May 25, 2011 10:45am
I'm wondering, if you were to only trade 5-10 currency pairs, which would they be? I find there is way to much overlap and similar movements (ie. usd/jpy and cdn/jpy) by watching 20 or so pairs, and want to narrow down my focus. I am looking for a diverse group of pairs which function as independently as possible.

Also, is comparing a county's currency to the USD always the best way to gauge the direction of a country's currency (ie. USD/JPY, EUR/USD, CDN/USD)?

Thanks CH
  • #2
  • May 25, 2011 11:24am May 25, 2011 11:24am
Quoting bigsteely101
I'm wondering, if you were to only trade 5-10 currency pairs, which would they be? I find there is way to much overlap and similar movements (ie. usd/jpy and cdn/jpy) by watching 20 or so pairs, and want to narrow down my focus. I am looking for a diverse group of pairs which function as independently as possible.
I'd look at the major crosspairs, and evaluate the minors against their most important counterpart. This means most currencies (including CAD) will be evaluated against the US dollar. However, certain currencies (e.g. SEK) are better to be evaluated against the euro.

Quote
Also, is comparing a county's currency to the USD always the best way to gauge the direction of a country's currency (ie. USD/JPY, EUR/USD, CDN/USD)?
Look into currency indices. If you assess the value of a currency based on a basket of currencies it is by definition less biased than when you look at bilateral exchange rates.
The nail that sticks out gets hammered back in
  • #3
  • May 25, 2011 9:33pm May 25, 2011 9:33pm
Quoting bigsteely101
I'm wondering, if you were to only trade 5-10 currency pairs, which would they be? I find there is way to much overlap and similar movements (ie. usd/jpy and cdn/jpy) by watching 20 or so pairs, and want to narrow down my focus. I am looking for a diverse group of pairs which function as independently as possible.
What I'd do is sort which are trending up and trade long on those then the opposite for the downtrenders. Right now there are 6 pairs on my long watchlist and 9 on my short. I hear you on a certain currency printing similar trends against others. When that happens (AUD for me lately) I focus on pairing the weak vs the strong. In the Aud example I wouldn't short it across the board but instead pair it with a recent strong currency like the Nzd. Really helps your odds of the pair moving in your intended direction.
  • #4
  • Last Post: May 30, 2011 5:45pm May 30, 2011 5:45pm
Thanks Noloqy and Emeraldeyes for your responses. I will try to focus and adjust my trading with your ideas in mind. Cheers CH
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