If you go short euro/usd, go long aud/usd, and go long euro/aud. Would that mean that the euro aud and usd are hedged with one another since your going long and short on the three currencies?
Technically yes, E/A is the cross pair of E/U & A/U, placing those 3 trades would leave you
flat. But you would be down the spread. So you may as well sit on your hands.
Try it though in a demo account place all 3 trades & watch. Leave it a full day then
close out all trades.
You could also do the math but… what’s the point when your platform will do it all
for you & all you really need to know is that it works in principle.
This is what’s called triangular arbitrage. Theoretically you should end up net zero if you were to do those three trades, but in reality you would lose money because of the spreads.
Well, let me get it more clarify for you
Let say you short EU $1/PIP, and the pair rise 100 pips, so you’re in the hole of -$100.
AU, however, rise only 30 pips, so, you’re net $30. Overall, you’re totally -70 Now, you’re long EUR/AUD=-70(EU=-100,AU30)
Actualy, you’re double whamie (-140)
If the markets go other way, you’re up 140 etc, hopefully, it can straight out for you. put them in demo for several days see what happen, good luck!!
happy trading
thanks everyone for your input ive learned alot