multiple systems per pair/multiple pairs per system? 3 replies
Trading 24 hours per day, 5 days per week 14 replies
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Account has been funded. So I am looking for trades now. Fxstat and Myfxbook live links are given at top of the first post.
DislikedI believe trading with public eye effected me here. ... Hopefully I will grow out of this mentality soon that I need to cater for public eye and just do what I do...Ignored
These statements might seem contradictory but they arent.
After given it enough thought and testing multiple methods to manage correlation, I have come to conclusion that correlation is best dealt by limiting VAR (Value at risk) rather than messing with position sizing or SL settings.
At any given point of time, I shall not put more than x% of my account at risk through use of SL. Right now this x% for me range between 3 to 5%.
So I will take all signals that are valid as per my understanding, despite the fact that some of them might appear in the same direction on correlated pairs, UNTIL total VAR exceeds x%. When it does, I will either have to neutralize the risk on existing pairs by moving SL to break even effecting elimination any risk or will not take the new signal.
[1] Generally AUD = NZD and EUR = GBP.
[2] Minor crosses like NZDCHF and the likes are practically just ratios of their majors. Well! all crosses are ratios in practice, but some minor crosses have no weight of their own i.e. NZDCHF and the likes.
[3] It is easy to see here (http://www.myfxbook.com/forex-market/correlation/AUDJPY-EURJPY). First, correlation is different for each time frame. Pairs correlated in 5M are not correlated in 1D. Also, pairs can be correlated to each other due to market sentiment till their correlation goes away. A good example can be of JPY and CHF, which fundamentally become stronger when market is risk averse. But as soon as the risk averse sentiment goes away, this correlation brakes.