Correlation (taking trades or not)

just the other day i was looking at
usd-jpy
usd-cad
on the 4h frame. i jumped into usd -jpy (shorted) and could of gone into usd-cad as well at the same time (long). the thing is , they both have usd in them and the directions are opposite. do u think taking both trades is a bad idea because of correlation (they both have US dollar in them and in one trade i’d be shorting USD, in other trade going long USD), or maybe it’d be okay since they don’t look to be moving the same way visually? of course, if they were moving the same way, i would not take both.
what do the experienced people who make money think about this?

thanks

If you traded the two pairs in opposite directions (one long, one short) the USD exposures would cancel out - assuming equal position sizes. In that case you’d be left with short CAD/JPY, which would make more sense to just trade directly because you wouldn’t pay two spreads.

then u think that generally speaking the 2 have too much correlation to trade at the same time in different directions? that one should generally stay out of launching diff usd pairs same time, unless they want correlation to happen. i’m surprised. had a look at their 4h charts, big candle 14 dec 2016, 16:00. there is a trend preceding it in both charts, , but in different directions, which would have brought in profits with both long and short on the usd same time…

I have sometimes been tempted by over-confidence in entry signals to get both long and short on the same base currency, and it usually has not turned out well for me. As a long-term trader this is folly, I try not to repeat the experiment. So, I never look at a chart less than d1, always consult the weeklies to confirm direction, and entry signal/pattern is the last thing I look at.

Longer-term, its unusual for a base currency to have both a buy and a sell bias. I have been looking at some kind of heat map to help confirm visually I am not going to buy and sell the same currency at the same time - Google forex heat map for various designs.

thx tummor for your advice. i assume you are profitable. the thing is, if you trade weekly and daily, u get hardly any signals (from the standard majors groups). you’d think shares would be much better for slower timeframes - 100s of non correlated shares to choose from i believe.

As you say, I have had few signals from the major currency pairs for several months. Ordinarily, forex has the most impressive trends, lasting months or even years. But I take it geo-political events and resulting uncertainty are behind the loss of so many good trends. Still - its also good to know where NOT to take a trade.

I am now 95% in shares, where there are amazing bull runs in progress, also with the TA benefit of having over-arching indices to help flag the way.

Yes I am profitable - very, if I just follow the main trends.

Frankly, if I get a buy trade on EUR/USD and sell trade on GBP/USD then I will be active on both currency pairs! Because, I believe my personal trading strategy rather than currency correlation; I don’t want to consider EUR/USD context with GBP/USD! But in my early stage of trading, I tried to use correlation strategy but no good result I found!

remember we’re talking about 4h timeframes (D1 is probably correlated more strongly). and whether one would take 2 usd pairs in different directions (long usd, short usd) if they don’t look correlated visually…

and great how tommor is killing it. even if you’re on slower timeframe with shares, you are probably launching many of them same time and getting great results fast. i’m sure my day will come soon.

(i was about to launch a 4h setup recently but didn’t since my D1 trade was in the other direction and correlated…might have to stick to 4h only. so even less opps to choose from. i’ve been a little saddened, well not quite that, that there aren’t many 4h opportunities lately. and when they come, they are correlated. it’s not like what you have with shares with many to choose from. so maybe currency is more of a short term traders thing when one trades it by itself and wants to make more money)

Check myfxbook “pair correlation” for more information. Anyway if there was a possibility it would be already used by some trader to generate profit. Remember that efficient markets work only is there is no opportunity to arbitrage (getting profit risk free)