What is the benefit of trading a cross pair like EUR/CHF instead of trading one lot of USD/CHF and one lot of EUR/USD? Obviously you could have less exposure if you only wanted to purchase one lot but if you were going to buy more than one lot wouldn’t you be better off buying the two separate pairs because cross pairs tend to have higher spreads. Maybe I’m mistaken and the movements aren’t that closely correlated but if they aren’t why aren’t they?
your right the crosses do have higher spreads however what you just stated you are paying the spread twice since you are buying 2 different pairs. Now witch one has a higher spread?
You know I just had to go back to my trading plattform to look at this. The spread works to about the same either way you go about it. Buying 2 pairs was a pip or 2 more. But your other benefits are less exposure like you stated not having to manage 2 different trades for the same result. And you can watch one chart makes life alot easier. Plus if you trade EUR/CHF you cut out the USA Not completely but when Obama opens his mouth like he just did. 2 different pairs can react in very different ways. Now you dont have to manage that to.
When trading any pair, you have to only concentrate on the two countries that are involved and every pair has it’s own personality. EURCHF is the EURCHF and you have to take into account of the characteristics of those two currencies and how the pair trades. The EURUSD and the USDCHF are two different animals entirely. Just because they have the USD in common, does not make them equivalent to the EURCHF when you trade them together.
My spread on EUR/CHF is only one pip worse than my spread on EUR/USD, and the same as my spread on GBP/USD. I find that the cross pairs tend to trend very nicely, are a little more resilient in the face of news announcements, and can give quite decisive moves within their trends. I trade a number of cross pairs a fair bit, I like their predictable nature (that’s what it’s all about, after all) and so don’t begrudge them the extra pip or two spread at all.
ST