Selling a currency in one pair (GBP/NZD) and buying it in another pair (GBP/USD)

Beginner Questions
1

Hi there,

I started forex lately and my short analysis said I should go short on GBP against the NZD and at the same time go long on GBP against the USD. The question is: does it make sense to sell a currency in one pair but buying it in another currency pair? Is it counter productiv or can it function?

I am waiting for all your answers.

Thanks,
ForExchange

2

So going by your analysis: NZD is stronger than GBP & then GBP is stronger than USD.

You’ve named 3 currencies & outlined their strength in comparison to each other so in my opinion, the pair that you should be looking at is NZD/USD. You should pair a strong pair with a weak pair & with the info that you’ve given, you should be looking for a long position on the NZD/USD.

3

Hi baz1982!

Thanks for your answer. With two currencies I ment GBP with two different currencies. In the case what I have done, do you think it is a mistake then to go with the GBP long and short at the same time with different currencies?

4

Yeah I did catch that you meant 2 different pairs (GBP/USD & GDP/NZD) & it could be deemed counter-productive but if you’re system is giving you entry signals then you’ve got to follow your system.

I was just pointing out that if you picked the strongest currency (NZD) & pitted it against the weakest (USD) then you would be minimising your risk as you’d only be exposing yourself to the market with one trade as opposed to the 2 trades that you outlined in your opening post.

Personally I would do the one trade as (using the analogy of actually buying/selling money rather than speculating) you are effectively buying the GBP vs USD & then using those pounds to buy NZD. The GBP is basically a middle-man so like all things, removing the middle-man will save you money (you’ll only be paying one spread). Therefore you should be looking at NZD/USD for an entry.

5

Ok baz1982,

you are fully correct the spread and thanks for your help!