Currency correlation advice needed

T

tinusp

I’m fairly new to currency trading and have made only a few real money trades since opening my account.

I don’t risk more than 2% of my account balance in any trade but have now realized that the correlation between currency pairs can make this risky if I enter more than one position at a time.

A few questions to the successful currency traders:

1. How often would you have more than one position in the currency market? Do you sometimes have 4 or more positions?

2. Which pairs do you suggest I trade if I want the least amount of correlation? I’m focusing on and looking for entries in mainly EUR.USD, EUR.GBP, USD.JPY, USD.CAD.

3. Any other advice/tips with regards to currency correlation will be appreciated.
 
Quote from tinusp:


1. How often would you have more than one position in the currency market? Do you sometimes have 4 or more positions?

2. Which pairs do you suggest I trade if I want the least amount of correlation? I’m focusing on and looking for entries in mainly EUR.USD, EUR.GBP, USD.JPY, USD.CAD.

3. Any other advice/tips with regards to currency correlation will be appreciated.
More...

you would take a correlation with a common base currency. heres some results from a matrix of log returns for
swiss,yen,eur,bp,cad against the usa dollar
<pre>
CORRCOEF:
[[ 1. 0.44847333 0.80633053 0.46336373 0.20516644]
[ 0.44847333 1. 0.04034948 -0.16400523 -0.29937865]
[ 0.80633053 0.04034948 1. 0.64389181 0.45374127]
[ 0.46336373 -0.16400523 0.64389181 1. 0.39423824]
[ 0.20516644 -0.29937865 0.45374127 0.39423824 1. ]]

EIGEN VALUE:
[ 4.63666926e-05+0.j 4.33333082e-05+0.j 1.54370842e-06+0.j
6.93306274e-06+0.j 1.35429311e-05+0.j]

EIGEN VECTOR:
[[ 0.4339741 0.42353394 -0.64186535 0.45325716 -0.12186999]
[-0.1260431 0.86032288 0.17747007 -0.35184203 0.29777381]
[ 0.4888775 0.13804878 0.74139744 0.41392596 -0.14469437]
[ 0.52666785 -0.02367543 -0.05354708 -0.69038911 -0.49249978]
[ 0.52858243 -0.24666891 -0.0630539 -0.15097451 0.79560415]]

</pre>
 
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