Hi I am a bit of an amateur i.e. I follow the graphs but do not understand how to use candlestick charts etc. I use Alpari to trade currency pairs and do ok at present. I am self taught and trying to learn all the time.

I have a question and I hope this is ok here.

I noticed with some pairs that they reflect each other, i.e. when one pair is travelling up on the graph another pair will be very closely coping this movement in the opposite direction, i.e. like mirror images.

Can anybody tell how you would best trade this to make a gain?

Obviously I would trade long on one and short on the other and if I get it right I would do quite nicely but at the same time if I got it wrong I would do quite badly, so is there a way to trade this a bit more successfully?

It seems to me that you have an advantage when this happens but I don’t know how to take advantage, and 2 straight opposite trades could just as easily go bad or good. Can anybody help me here?

Please go easy on the terminology and explanation, as I say I am amateur, trying to learn.

Any help/info appreciated.

I’ll start off by saying I don’t know how to trade profitably like this. I’ve slowly been looking into this more; here’s a keyword to help you start too. Search for ‘correlation trading’.

That would be hedging. The other way to trade correlations is to look for divergences. After calculating the product moment coefficient ®, you can look for a situation where price on one pair does NOT move as expected when compared to it’s correlated pair.

If for example, two pairs are correlated with a Pearson’s r of 0.61, you can look at it as if it means there is a 61% chance that price will eventually move in the direction predicted. Technically, this is a statistically-incorrect interpretation of the value, but it should suffice for your purpose.

Just a warning: correlations do change and rapidly. You need to stay on the ball and calculate them often.

I would say dont trade them as a pair.
Just picked the better looking chart, and trade that.

your example: long EURUSD, and short USDCHF…they look like mirror most times, correct. the problem what you hold if you have both? 2x USD short technically. It might pay off, but in the same your exposure to USD is 2x the intended, and so is your risk!

you would only hedge when you have long EURUSD, and long USDCHF for example…but then what do you have?
you are long EURCHF…but only by paying double spread to open 2 positions, instead of this single ( note the USD part of the pairs gets ofset by eachother this case).

So, back to the beginning: trade what looks better. As a beginner, i suggest to trade only 1 currency in a time, always the one that looks higher probability. This way if you make a mistake, it wont cost you too dearly.