the shortest answer is, “i don’t know,” and if i were smart enough, i’d probably leave it right there, but…
i chose the four because each seemed to have a decent daily range and were not eaten up with dramatic spikes. in retrospect, i might have chosen gbp/usd over usd/jpy and i am doing some more work on that consideration. it may be a good fifth wheel to add.
regarding your other thought, there are any number of trade sizing algorhithms based on various performance indexes. i have a fundamental resistance to anything predictive and harbor a secret suspicion that the quest for this tool may be among the root causes of failure. i am not so bull-headed that i couldn’t be swayed on that with the right evidence. here is something i wrote at another time and place:
Let’s say the Yen and the Aussie are performing best with this method. What would be the point in trading another pair that doesn’t do as well, like the Euro? Only because markets change and past performance is no guarantee of future results. I cut my teeth on futures trading and was always looking into (buying) systems designed by Larry Williams, Bruce Bab****, Bob Buran, etc. Most of them were optimized on a diverse portfolio and it was recommended that you trade the whole portfolio rather than cherry-pick what looked best. You may have made your money last year in silver, but this year the system tanked on it and you managed to get out alive thanks to copper or soybeans.
though I am not proposing that the currencies work like futures, still we can’t know when the Yen might have a long trading range that chews us up and maybe the Euro would be going somewhere and save us.
with my new system, i am usng the gbp/usd and it trots along making fair gains. then, in may, 2011, its takes only -480 losses and racks +1,265 wins. what could have seen that coming? would there have been any predictor for the gbp/jpy on 10-28-08 to range 1,317 pips, of which daybreak captured +813?
one thing we absolutely must do is monitor the equity charts for each pair. this i do believe in. when a pair starts drawing down, determine when to pull it offline until it starts performing again. with daybreak, the equity chart from 1990 for the aud/usd looks like a huge “v”, going down like a jumper from 1990 thru 2003, then, up like we approve from 2003 to now.
opinions are like, you know, everybody has one. i have many, but opinions is all they are. i have observed that you can’t deposit an opinion or make a sandwich out of one.