When I open a positions with two different pairs
for example like
EUR/USD
GBP/JPY
The result tend to go the opposite way of each other.
If I’m losing on the other one, I’m winning on the other one it really annoys me.
I know this is a very basic question but I hope someone can enlighten me.
I recently back-tested the idea of correlated pairs such as G/J and A/U. I was convinced, like you, that there was a permanent correlation. However, what I found was that it all depended on the market cycle and whether a certain currency was strong or weak in relation to all the others.
Of course, you already know not to trade something like E/U and U/J together. That’s not what we’re are talking about. For our discussion here, far removed pairs can be traded together. Sometimes they will correlate, sometimes they won’t. It’s annoying at times, yes. My advice is to concentrate on the trades within one position on one currency pair at a time. If you must trade more than one pair at a time, try using another account or trading the second pair in a sub-account. Hope this helps.
I look at it the other way round, and I’m pleased I didn’t open only the trade that’s losing.
I think that whether one’s annoyed or pleased in these circumstances depends on whether one’s essential perspective is to “make profits” or to “manage risk”. I’m in the latter group.
Found a very good article here
Will surely gonna be helpful choosing pairs now.
Forex is a very concentrated market where one currency value can decrease or increase with the changes in other currencies values or changes in world or domestic economies. So, in many instances, you can feel correlation between currency pairs but i consider that it happens due to correlation between various currencies and the economic changes of the various nations.
Study at the free school here on BP, it explains this along with a bunch of other stuff you’ll need to understand
Currency pairs are definitely related with one another. That’s why currencies are quoted in forex business as pairs. Because one currency is bought or sold or exchanged against another currency. Many of the trader found relation between currencies perimeter. But the fact for me is the market situation. Market will told you which currency pair should be profitable or not. But you have to understand the market demand. Many trader trade with more than one trading pair at a time. But I am not that much expert for doing this.
Absolutely there’s much correlation. Meaning, some run together, for the most part.
The biggest perspective would be between the Majors vs. Comms (Commodity currencies).
COMMS = AUD, NZD, CAD.
MAJORS = USD, EUR, GBP, CHF, JPY.
And then there’s the risk-on vs. risk-off currencies.
RISK-OFF = JPY, CHF. (Safe Havens)
RISK-ON = All COMMS.
But, there are some specifics to be mentioned also. Like the GBP is known as a risk-on currency within the Majors. Also the EUR.
Then with the specific pair EUR/USD, the EUR will be known as the riskier currency to the more safe haven USD.
Believe me, there’s so much more going on. You have to get a sense of how the money is flowing. Like, for instance, when all of the stock markets are moving up, that’s a risk-on situation. Which will mostly translate into the riskier currencies to move higher also (which could be the Comms, GBP, even the EUR).
So, the answer to your question is “definitely”. But, of course, like many other things in the market, it’s only to some extent, which is difficult to measure.
You know, there is one way to find out for yourself. Construct your charts in a particular way that you can see a grouping. Say all of the Comms. Then you can bring the time frame way down, and see for yourself, how they move together.
Look…nothing is absolutely guaranteed to be predicted in the market. But, their absolutely is some correlations taking place. We just don’t know for how long of a time it lasts.
See, this is one of the things I was amazed with, back when I first started. It is a truth. Big money doesn’t go into just one currency pair. I believe they trade in whole currencies. (Put up in your chart one currency against all the others…you’ll be amazed how they will all go up, or down, at the same time)
So…find out for yourself.
I did.
Mike
Yes a lot of them relate to each other.
It is common thing that pair moves up or down position all pairs move , there can be a relation to their movement or opposite trend . actually international and economical changes effect major currency pairs so they can be related to their current and future market movement.
@matzhee I am attaching a screenshot of my Excel sheet for your review. You may observe that every currency pairs do have different ratios on different time frames. I hope it would help you to understand the positive or negative correlation between major currency pairs.
Currency Data is based on 19th January, 2018 in the Excel sheet.
Positive and Negative Correlated Currency pairs
Yes, currency pairs have a good relation among them. USD is the major currency of the world and any change in its behavior effect other currencies as well. The exchange rates are interlinked with each other. Gold and oil also have a huge influence on many currency pairs. Am I right mates?
Sometimes we take too close and myopic a view of currency pair charts.
Look at 2017.
The monthly closes for February were the low of the year for 5 of the 7 EUR-based pairs.
April was a significant reversal month for 4 of the 6 CAD pairs.
July was the highest monthly close for 3 of the 5 AUD-based pairs plus both NZD-based pairs. It was also the highest monthly close for the USD/NZD, and the lowest monthly close on the GBP/NZD and EUR/AUD to this time.
November was the highest monthly close for 5 of the 7 GBP-based pairs.
Still on the GBP-based pairs, its necessary to look a bit further back, but only as far as October 2016, for a string of reversals.
Yes, some currency and are correlated. That’s a normal thing.By the way, some traders manage to make good money on it.
