Synchronised basket trading

When one currency, GBP for example, is being sold off or bought against a basket of other currencies there is synchronicity in the market. When we are able to identify synchronicity we are being placed in a very advantageous position. It means firstly that the PA is supported by several pairs linked with the base currency and that our trade will be supported across the market. Secondly it means that we can trade all major pairs linked with the base currency instead of just one. The third advantage is that the move need not be very large. It could be a sharp spike or it could be a gentle progression over a couple of hours.

For example, when GBP is weak we would buy EUR/GBP and sell GBP/USD, GBP/JPY, GBP/CAD, GBP/CHF, GBP/AUD and GBP/NZD.

Opportunities to trade synchronised baskets are offered from time to time, and the real trick is to identify them. The most common opportunity is presented in the lead-up towards a high-impact news release when pre-news sentiment is synchronised across all pairs. This happens when traders are positioning themselves in advance of the news. If the global group-mind is confident that a news release is going to be positive or negative then their positioning will be reflected in a synchronised price action.

The method involves the display of all pairs on the trading platform. I am experimenting with a 5m chart with the 20 ma as my indicator which shows the synchronised PA. Here is an example taken during the lead-up to US pending home sales on 28/10/13 with USD as base currency. It can clearly be seen that USD shows strength across all pairs. The outcome of the news release had little impact and was irrelevant. The important factor was the USD positive pre-news sentiment.

Pre-news sentiment leading up to the news release on US core retail sales, PPI and retail sales was USD bullish from 10.30, 11.00 am with the exception of CAD. Entering at about 11.00 am would have realised a good return. PA reversed at 12.00 when trades are closed. The conflicting outcome of three reports created confusion and there was no news spike. The chart shows pre-news sentiment and the result of the news releases.

This exercise shows that following pre-news sentiment has its benefits, but it is wise to exit half an hour prior to the release.

New to Forex Factory.. decided to expand myself a bit.. and have more advanced trading discussion.

I would have to agree with this strategy.... My main strategy is positional in nature and base position decisions on what I see in a particular pair.. However, several pairs will provide good positional entries at the same time suggesting that they are synchronous.. To me this has more to do with Macro Economics. A currency is bullish or bearish from the overall sentiment of the that underling economy compared to that of other economies. Example Australia is fairing better then Japan, Euro Zone, and US economies so there are more bullish opportunities in AUD. As for basket trading, I find my overall position will resemble this not by design but by market opportunity and a willingness to spread risk across currency pairs.

Food for thought.. and thanks for posting.

Cheers.

Interesting topic to discuss but already gone before it really starts.

wish you happy weekend.