I have a question about Baskets

I know very little about "basket trading". My understanding is that by trading a basket you have the ability to smooth out fluctuations in a single currency's movement.
I have an indicator that is fairly solid on profits but is a little volatile on drawdowns.
The indicator works on EURUSD and GBPUSD.

Does it make any sense to trade a basket of currencies in the same direction? Should I trade both the long and short of that basket and if so what should the lot sizes be?

Say I received a long signal for EURUSD, should I as an example

Buy - EUR/USD
Buy - AUD/JPY
Sell - GBP/JPY
Buy - USD/CAD
Sell - EUR/CHF
Sell - NZD/CAD
Buy - GBP/AUD
Buy - NZD/CHF

Any help would be great!
Thanks

This:

Buy - EUR/USD

Buy - AUD/JPY

Sell - GBP/JPY

Buy - USD/CAD

Sell - EUR/CHF

Sell - NZD/CAD

Buy - GBP/AUD

Buy - NZD/CHF

Equals:

+EUR-USD

+AUD-JPY

-GBP+JPY

+USD-CAD

-EUR+CHF

-NZD+CAD

+GBP-AUD

+NZD-CHF

Equals:

Zero. All the pairs in this basket cancel each other out.

What are you trying to achieve?

Thanks Maxx.

I am trying to find a way to improve my draws by trading a basket of currencies in the same direction as the EURUSD but with less volatility.

I saw this on the internet..

Based on it, we trade our basket.
In case of a bullish USD (USD score above 50) we go:
SHORT: AUDUSD, EURUSD, GBPUSD and NZDUSD
LONG: USDCAD, USDCHF and USDJPY
In case of a bearish USD (USD score below 50) we do the opposite, so we go:
LONG: AUDUSD, EURUSD, GBPUSD and NZDUSD
SHORT: USDCAD, USDCHF and USDJPY

Do you think that trading that basket in the same direction as the EURUSD with uniform lot sizes (scaled to match) would work for me?

Yes it is a good idea because you spread your trades, thus harder to turn your trade into a loss for market manipulators. Basket trading is probably the only way a retailers can be successful long term, yes I said it, but it's probably true. Also you can try your first idea and close when profit goes +ve a small amount, and open over and over, unlike what this Maxx guy says its not a perfect hedge unless you are using specific trade amounts like Oanda lets you. YOu will find that sometimes you float in profit even though by the looks of it you are hedged. The key is to see margin used, if it is non 0 then you are exposed. Usually you will be able to open/close hundreds of times before you notice the basket waundering into the negative territory more than you'd like, you can always wait it out the key is to always use proper MM.... dont leverage more than 2% on any basket in worsed case scenario.

opening/closing 100 trades over say 2 weeks may get you 10-15% while worsed case gets you -2%, it is to be seen based on your strategy if this is viable long term, but atleast it is a strategy without open ended losses.

If you want to be directional I still advise to use basket, but try to download a basket indicator, there are lots of threads on FF that dothat, and then you should be able to play the basket like a currency pair, but use EU as a guide also to tell you when to get in/out.

Thanks sidhujag,

There seems to be many ways to look at the "basket" strategy the description you mentioned of "opening/closing 100 trades over say 2 weeks may get you 10-15% while worsed case gets you -2%, it is to be seen based on your strategy if this is viable long term, but atleast it is a strategy without open ended losses" Is a perfect goal for me.

You mentioned some EAs out there on FF that I should look at that have code to mess around with. Any suggestions that I should start with first?

Thanks!

Does anyone have a good directional EA indicator for baskets that they would like to share Please?

Thanks

Hello,

I was just reading your other thread on scalping EURUSD. I'm really interested in what you're doing and I have a load of questions for you. Could drop me a PM with your email since I can't send you PMs?

Thanks!