So eur/usd and usd/chf have negative correlation.
This is a kind of hedging strategy.
I buy both pairs or sell both ,so one pair is in profit and another is in loss but there will be a few pips different and at one point the total net profit becomes positive.
I did paper trade and bought 1 lot of each and at one point 1 pair is at -30$ loss and another is at above 40$ gain and sell both to get net profit of 1 pip and sometimes 2 to 4 pips.And with leverage we can increase the profit.
Its just that with two perfectly hedging inversely correlated pairs, one moves with your position as fast as the other moves against it. So no advantage occurs until you cut the losing trade and let the winner run. Which means it is then onwards unhedged.
And in which case, why did you need to open positions in both anyway, you could have simply placed bracket orders to buy and sell each of the two pairs, avoiding the spread costs, and then cancel the three untriggered orders as soon as the first one is executed.
You can obviously see the correlation. However, there are many subtle differences when you look closely, these differences are magnified when you’re trading larger position sizes, such as lots.
If you had gone long these pairs 12 hrs ago you would be in profit right now because USDCHF had a bigger move. But, if you were short you’d be in the negative, hoping USDCHF retraces.
It is an interesting idea though, and one I would encourage you to try out for a few weeks on a practice account.
Alternately, what I have done successfully in the past is take 6 pairs, 3 of which strongly correlate positively or negatively with each other (just like your example above), line the charts up one on top of the other, and wait for one to make a strong move. The idea here being if one makes a strong move and the other does not, then you would expect the one that made the move to correct at some point.
This works better at higher timeframes. The problem is you have to always be checking them unless you set up some sort of alert or ea system.
