My trading method recently gave me the following signals at approximately the same time. The timeframes were not all the same, but similar
Short GBP/USD (240)
Short GBP/JPY (180)
Short NZD/JPY (180)
Short CHF/JPY (240)
Short CAD/JPY (180 & 240)
Long USD/CAD (240)
If I would normally risk 1% per trade, what should’ve been my total risk exposure for this set of trades? Is going short GBP/USD necessarily the same as going long USD/CAD? If I’m short GBP/USD is that the inverse of being short GBP/JPY? If I’m short GBP/JPY is that the same as being short NZD/JPY, CHF/JPY and CAD/JPY? My head is spinning, please help me out.
if you want to keep the same risk percentage then you would have to divide your stop loss by the amount of trades you are placing at once (this would also depend on pip value) and then use that figure as your stop loss.
Doing this could mean you getting stopped out on your trades only for them to go back in your favour after you have been stopped out. Id just trade a couple you dont need to be in multiple trades at once.
You should read up on “risk sentiment”, which is basically the degree to which the financial world as a whole is seeking “risky” investments. In the currency world, the higher interest bearing currencies are considered higher risk than the lowest interest bearing currencies. So when the markets want to “de-risk” also called “flight to safety”, they’ll buy up USD and JPY, and sell currencies like AUD, NZD, EUR and to some degree GBP, CAD, CHF.
Now this is just one factor, there are other factors affecting each currency in its own right, but your trades suggest to me that your system is reacting to a “flight to safety” event in the markets.
You will be long 4 x JPY, 2 x USD
and short 2 x GBP, 2 x CAD, 1 x CHF, 1 x NZD
Now there is some diversification safety because of inherent factors in each currency, but you are HEAVILY playing a flight to safety trade, and if the market feels like returning to risk plays, you will likely get simultaneously burned on all your trades. I’d recommend weeding out a few of those signals, by whatever means neccessary. You will then be left with the best of the best and will have a clearer mind to manage the trades that you do have, which is more important anyway.
But even beyond that, I’m worried that you are blindly taking signals without pair by pair discretion.
The 6 pairs were strongly either positively or inversely correlated (all better than 80%) so it was basically all the same trade. I figured as much, I just didn’t know for sure, but now I do.
