The more I learn about forex the more confused I get. Once I get a hold on something that works then I discover something that changes. For example, I’ve developed my own strategy that allows me to make safe reliable trades and then if my 1st price target is hit, I keep adding smaller amounts to my position over days until the market reverses or my stop is hit.
The Good: From what I have stated above it works well, semi safe, can turn a decent run into a huge winner with small risk.
The Bad: This is a problem that Im sure most traders face. My strategy works… works very well but should I only trade the major 6-8 pairs or focus on them all for entries?
A few weeks back I tried to focus on the whole and at one point I had an open position of most Australian pairs (CAD, CHF, NZD,USD). Then bad news ( I think unemployment) hit and the AUD reversed. My stop was hit on every one of the AUD pairs.
If I was only long the AUD/USD I would of just lost that one trade…
What are you opinion traders? Focus on them all or just the few major?
That question has also disturbed me for long. I have always wanted to trade at most 4 pairs i.e EU, GU, Gold and Oil for the simple reason that USD pairs seem to all move the same most of the time so i found no need to look at all. I thought it would be easier if i specialized in those 4.
By opening multiple positions on AUD with the same directional bias (long), you’ve exponentially magnified your risk. Especially by keeping the positions open when there is AUD-specific news being released.
The challenge with trading EUR, gold and oil (and commodities, in general) is that they’re all inversely correlated with USD.
If you’re long any of these assets against USD, they tend to all move in the same direction.
With regard to selecting currency pairs, you may like to also investigate the following thread. It is not a trading method/system as such. It is a method for identifying the current strongest/weakest currencies with respect to JPY as a base. It only considers the majors but often the actual S/W pair formed by the two extremes is a cross pair rather than just against USD or JPY. I have not actively traded this myself as I tend to specialise in EU but I do follow the thread and it seems to be achieving some significant success…might be worth a read.
That is the whole reason for remaining with those pairs. I only want to be trading the USD and since all USD pairs more the same, i decided to remain with those 4. It will be easier for me to keep update to date with their fundamentals (EU, GU and Oil). I have found these pairs to be having good PA and hence my choice as a PA trader.
However my challenge is the lack of patience, whenever i take time without spotting a setup in these pairs, i check out other majors and when they start moving i fail to choose with to take or end up taking one with few pips.
You could’ve went short EUR/AUD and short AUD/CAD.
(I ignored AUD/CHF because CHF is highly manipulated by the SNB.)
Synthetically, you’re short EUR/CAD, but if you want to play multiple AUD pairs, you can explore this approach.
Since we know how AUD did last week, here’s another idea (without looking at charts).
Now that we know that EUR/AUD ended up and AUD/CAD ended down, do you think that each pair will end up or down at the end of next week?
If you believe in momentum, and that price will continue in the same direction, you can put on the same trades: short EUR/AUD and short AUD/CAD.
If you believe in mean reversion, and that the moves for each pair are now overextended and will reverse direction, then you can put on the opposite trades: long EUR/AUD and long AUD/CAD.
I’m just giving a simple example to hopefully jumpstart your thinking. You may want to actually look at charts to get a sense of the price action. Maybe there are other AUD pairs that are better candidates. Or even non-AUD pairs.
Sorry, @smagombe, I mistakenly thought you were trying to diverse away from a USD concentration.
My only comment here is that the USD is only one factor in the price movement of oil and the correlation is very loose. These do both chart well but not entirely synchronously…even less so on shorter timescales.
Here is a daily chart for one year with UsOil prices overlaid on EU:
I think i will try to stick to my pairs more religiously from today. They are EU, GU, Gold, Oil, US30 and DXY. DXY is basically for gauging the performance of the USD. But of course I only have one trade open at a time among (EU, GU and Gold) depending on which provided a better setup and more pips.
Oil has some of the best PA Setups i have seen on any pairs.
Just out of interest, what time frames do you usually use and what are the typical durations with your positions? If you are using PA then I guess you are looking at 2-10 day kind of range?
After backtesting I have decided to only trade the 8 major currencies in 4 pairs. That way if there if something drastic that happens ( EUR/CHF example) I am not involved in more than 1 CHF trade. It limits my risk while being constant.
I use to do this, also throw in the USDX and see if the session is displaying USD strength/weakness, add XAU and a Equity Index to determine risk on /risk off. It is a valid way to trade. The problems I encountered was I could not actively monitor all the Instruments, and when USD gave a signal it gave it across the board sometimes, then I would be questioning which setup looked more favourable. Eventually I suffered information overload and missed every signal through not trusting the setup or not catching it in time. If your trading time frame is 4 hour or above it is easier but I became frustrated trying to intra day trade this way. Good luck.
When I started trading on forex I used only one currency pair – eurusd. Some people’d say it’s trite and so on. Nevertheless, it’s a very volatile tool, which gives you a great opportunity to profit.
