Relational Pairs.

[Jimmy]

When I enter some trades I wonder if I am doubling up on the same position within my trades.

Is there any tried and true guide for which pairs move in step and which have inverse relationships?

[rhodytrader]

There's a fairly simple rule of thumb to follow. If you are going long the same currency via two trades you are doubling your exposure to that currency. For example, if you buy EUR/USD and EUR/CHF you are doubly exposed to EUR.

With that in mind, though, you have to recall that any time you hold multiple positions you risk altering your real exposure away from what you had in mind. This is where a lot of traders get messed up when "hedging" one pair against another. A recent example someone brought up on another thread was to hedge a GBP/JPY long with a CHF/JPY short. The problem with that is the combination of those position creates a long GBP/CHF position.

[Jimmy]

Excellent example. Thanks