Wednesday 14 March 2012

Correlation between currency pairs

Recently I was posting uptodate about a strategy named as Dancing with moving average. For the last couple of weeks... I didn't have any open position for any currency pair for this strategy -- EUR/USD, GBP/USD and EUR/JPY.

During regularly posting about the trade.....on #384 post, the owner included a new rule.... these three pairs are correlated..... means that.... if one pair's price action, other pairs will go same direction.... so if a position is open on any one pair, position at opposite direction on other pairs will not be valid.... so if with a position in one currency pair (any of the mentioned three), if price action of other pairs goes opposite direction of opened pair.....we have to wait for the price to move same direction.... and position should be similar....

Now, a situation raised....there is no position open for me.... I have trade in both direction.... with the rules in first post.... I can have long position in EUR/JPY and short position in EUR/USD and GBP/USD..... as the new rule doesn't allow position in two opposite direction in these three pairs....  which one I should take now... I'm in an indecisive position..... So I asked a question in a post in that forum....Here is the post.

If you have any answer, you can answer it in here or in that forum...

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