I got a question regarding the main differences between forex pairs.
What do I mean? I am testing a strategy (5 year period) and got insanely good results on EURUSD, good win rate and something like 8% drawdown.
In the same time, the same strategy on AUDCAD is blowing my account, while in GBPUSD it gets 80% drawdown.
It is based on indicators (oscillators), so basically every indicator is making exactly the same calculations by the same formula, but obviously on some pairs it is insanely good, while in others is blowing the account. I was expecting for example 2-3 time better or more bad results, but the discrepancies are huge.
So, what is the main difference between different currency pairs and how can I make the strategy more effective and to work for other pairs as well? What should I look for and consider further?
This is a phenomenon which not many people have noticed - you can make the exact same trades on two pairs and there will be opposite outcomes.
For good examples which are well researched and back-tested see the transparent trader on YouTube. He is very thorough but he still cannot explain why this happens.
In my personal opinion, this is very hard to just assume that it will work just like this in the future. This is because the sentiment may change in due time. Some currency may get stronger while the others weakening depending on the fundamentals of the market, etc. In this case, if the flow is changing the opposite way, it might ranging first before it can decide the new direction and may cause your strategy giving a lot of false signals. Please be careful on this.
So, my personal solution on this matter is, to identify which currency is strong pairing it with neutral/weak or weak pairing with neutral/strong. With either of these, you will at least giving yourself a chance to encounter a trending market. I hope it does make sense.
Even though some currency pairs may correlate, some get more stronger/weaker than the other and this gap they creates makes the differences between our risk exposure and risk management towards each.
It’s science! Just like testing for purity of a Water gotten from same source, each samples though from same source will give different results due to certain factors.
