Trading similar currency pairs
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  1. #1
    SanMiguel's Avatar
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    Default Trading similar currency pairs

    If you trade similar currency pairs, eg GBPUSD, GBPJPY, ie the GBP part.
    Should all your trades be in the same direction?
    More often than not, they move the same way, if GBP gets stronger, then it moves up in all currency pairs.

  2. #2
    jawnlooi Guest
    yes but why?
    you trade the currency gaining value with the currency losing value. if GBPUSD is rising, and GBPJPY is rising, then you put a buy on both, and JPY increases its cash rate by 100 points (yeah right) then you're in trouble no? the concept is to buy GBP and sell whichever currency is getting weaker at that moment.

  3. #3
    justlearning's Avatar
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    Quote Originally Posted by SanMiguel View Post
    If you trade similar currency pairs, eg GBPUSD, GBPJPY, ie the GBP part.
    Should all your trades be in the same direction?
    More often than not, they move the same way, if GBP gets stronger, then it moves up in all currency pairs.
    Check out the usd/chf and the eur/usd negative correlation, it had been valid for a while now......

  4. #4
    SanMiguel's Avatar
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    Quote Originally Posted by jawnlooi View Post
    yes but why?
    you trade the currency gaining value with the currency losing value. if GBPUSD is rising, and GBPJPY is rising, then you put a buy on both, and JPY increases its cash rate by 100 points (yeah right) then you're in trouble no? the concept is to buy GBP and sell whichever currency is getting weaker at that moment.
    Because if GPBUSD has passed a resistance point but GBPJPY is at a resistance point then they could go in opposite directions?

  5. #5
    jawnlooi Guest
    yes and no, GBPUSD is the major, most people trade GBPUSD over GBPJPY so the result is net. people buy the GBPUSD because it's going up and will do so, which gives GBP bull strength, but if alot of people are shorting GBPJPY then the net bull for GBP is decreased and JPY will fall alot?

    (btw, do note that i am just expressing my thoughts here, i do not have alot of experience trading different parallel pairs)

  6. #6
    SanMiguel's Avatar
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    Quote Originally Posted by jawnlooi View Post
    yes and no, GBPUSD is the major, most people trade GBPUSD over GBPJPY so the result is net. people buy the GBPUSD because it's going up and will do so, which gives GBP bull strength, but if alot of people are shorting GBPJPY then the net bull for GBP is decreased and JPY will fall alot?

    (btw, do note that i am just expressing my thoughts here, i do not have alot of experience trading different parallel pairs)
    There just seems to be a lot of correlation between currency pairs where one currency is the same. So much so, that it is pointless trading similar currencies as you increase your risk.
    ?

  7. #7
    jawnlooi Guest
    i'm not sure you phrased that right so ill presume that you're saying that since there is a relationship between how GBPUSD and GBPJPY moves, there is no point placing buy on GBPUSD and buy on GBPJPY because it increases your risk?

    yes and no, if you trade on two currencies and both of them give you a valid signal, then it's only right that you trade them both. it does increase your risk, but its a risk-reward ratio. they can be treated as independent trading pairs. much like how someone who trades EURUSD does not really care much about how GBPUSD is going, as long as his signals work.

    something like that. you get the picture, the roulette player doesnt care about the blackjack table. (the house always wins)

  8. #8
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    I don't pay much attention to the relation but when I analyze my trades i find that most of the time there is a currency in common in them.
    e.g
    today I have
    GBPJPYn short
    EURJPY short
    USDJPY short
    CHFJPY short
    AUDJPY short
    AUDUSD short
    CADJPY pending short
    JPY is strengthening against each pair differently, think about it like arm wrestling each want to go in a certain direction, how far depends on how strong its.
    if jpy is stonger than gbp and jpy is weaker than eur that means
    gbpjpy is going down and eurjpy is going up.
    hope this didn't complicated it for you
    Jado

  9. #9
    rhodytrader's Avatar
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    Quote Originally Posted by jawnlooi View Post
    yes and no, if you trade on two currencies and both of them give you a valid signal, then it's only right that you trade them both. it does increase your risk, but its a risk-reward ratio. they can be treated as independent trading pairs. much like how someone who trades EURUSD does not really care much about how GBPUSD is going, as long as his signals work.

    something like that. you get the picture, the roulette player doesnt care about the blackjack table. (the house always wins)
    Not a good comparisson there. Roulette and blackjack have no direct link with each other. If you're trading GBP/USD and EUR/USD there is the common link of the USD. You cannot treat them as entirely seperate positions since something impacting USD will impact both your positions. They will not trade in an unrelated fashion, though there will certainly be variations in relative performance.

    Expecially in the USD you need to be careful of over-exposing yourself because that is still the one currency which can completely and utterly dominate all others at any given point. Imagine every one of jado911's trades going badly all at the same time. That is the very real risk when you are trading unidirectionally in the same currency.
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  10. #10
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    Quote Originally Posted by rhodytrader View Post
    Not a good comparisson there. Roulette and blackjack have no direct link with each other. If you're trading GBP/USD and EUR/USD there is the common link of the USD. You cannot treat them as entirely seperate positions since something impacting USD will impact both your positions. They will not trade in an unrelated fashion, though there will certainly be variations in relative performance.

    Expecially in the USD you need to be careful of over-exposing yourself because that is still the one currency which can completely and utterly dominate all others at any given point. Imagine every one of jado911's trades going badly all at the same time. That is the very real risk when you are trading unidirectionally in the same currency.
    Luckily for me they didn't go against me, even though i have 4 open positions now all of the trades where valid and made the movement in my direction. +390pip as I write this.

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