Balanced and diversified FX management.

HobbyTrading said:
Oh I see. I wasn't aware that I was asking for "secret sauce". I would be interested in the basics though.
Let me give an example: suppose I use EURUSD, EURJPY and USDJPY. Would this basket be in balance if I go long 1 lot in each of these?
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Hello HobbyTrading. I would say the first is what is your account balance? Because trading lots you have to have a certain amount to be able to balance the values, versus trading an account that uses units or dollar amount. Then comes into play the rate that it is compounding and how you increase the balancing when being limited to 100k, 10k and 1k increases with lots. The second issue is how many units 1.0, 0.1, 0.01 lots in a given currency is and how you weight your positions because of this. Third would be the time frame you are looking at and what variables are likely to come into play News, Data releases ect and your sizing because of that.

Great question!
 
Update to positioning. Have rebalanced and added into position. Current Position value is about 89k

Balance $100,169.06

Et 2020 may 20 new trades b.png
 
DepthTrade said:
Hello HobbyTrading. I would say the first is what is your account balance? Because trading lots you have to have a certain amount to be able to balance the values, versus trading an account that uses units or dollar amount. Then comes into play the rate that it is compounding and how you increase the balancing when being limited to 100k, 10k and 1k increases with lots. The second issue is how many units 1.0, 0.1, 0.01 lots in a given currency is and how you weight your positions because of this. Third would be the time frame you are looking at and what variables are likely to come into play News, Data releases ect and your sizing because of that.

Great question!
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From your remarks first and second I conclude that you manage value at risk by adjusting all position sizes to account size. This is understandable.
From your third remark I think that you base the relative position size of one currency pair compared to the others based on macro-economic parameters? If so, you must have determined a set of relevant macro-economic parameters and determined how sensitive each currency pair is to changes in each of these parameters. Then you adjust/rebalance the position size of each currency pair when new data comes available.
From your comments I get the impression that you don't use price analysis of the actual currency pairs in your basket to rebalance relative position sizes?
 
HobbyTrading said:
*From your remarks first and second I conclude that you manage value at risk by adjusting all position sizes to account size. This is understandable.
**From your third remark I think that you base the relative position size of one currency pair compared to the others based on macro-economic parameters? If so, you must have determined a set of relevant macro-economic parameters and determined how sensitive each currency pair is to changes in each of these parameters. Then you adjust/rebalance the position size of each currency pair when new data comes available.
***From your comments I get the impression that you don't use price analysis of the actual currency pairs in your basket to rebalance relative position sizes?
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Hello HobbyTrading
*Yes, but also the exchange rate.
** That and also cross-referencing the currency with commodities priced in that same currency, then how it correlates with the cross.
*** Ultimately price dictates everything that happens. It's that there is multiple angles to look at it for verification. Even then, there is a margin for error as in any other strategy.
 
DepthTrade said:
I have 20 years in this game, go BS someone else. Come back if you want, I have a simple test to see how much of a quant you really are.
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What's the point of trading sim? Why not simply post your production account?
 
DepthTrade said:
Hello HobbyTrading
*Yes, but also the exchange rate.
** That and also cross-referencing the currency with commodities priced in that same currency, then how it correlates with the cross.
*** Ultimately price dictates everything that happens. It's that there is multiple angles to look at it for verification. Even then, there is a margin for error as in any other strategy.
More...
Thank you for answering my questions.
 
Hello fellow traders! We have ended the first week of trading and it was extremely productive. The exposure has been rebalanced with no new additions to overall Position Value, still at 88k. Have a great weekend and see you in two days.

ET 2020 may 22 new trades.png
 
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