Holy grail: Risk diversification?

[doggyfx]

As you might already know, high-risk environment in trading is the only issue that hinders traders success. The idea came into my mind that staying safe in forex means diversify...risks. Let's acknowledge that the probabilities of guessing where EUR/USD will go in next 30 min (up or down) is 50/50. But if we open several bull&bear micro lot orders on 10 or more assets (currency pairs) carrying out simple and quick S&R analysis, what will happen? There is a higher chance that one losses on one pair will be covered with profits on another.. Or vice versa of course

Made two tries of that technique in my Hotforex demo. Strangely enough both are in profit.. Still thinking about moving this crazy thing on real...

 

[loyek590]

that's all I do, everything is always spread. Sometimes all you have done is cancelled yourself out, but that doesn't last long. The idea is to have your largest winners your largest positions.

 

[Sergio77]

As you might already know, high-risk environment in trading is the only issue that hinders traders success.

I wish it was the only issue. I think the main issue is ignorance of the microstructure of markets. In forex the microstructure is by design so it benefits market makers only with odds in favor of speculators less than those of casinos. I always recommend reading this article and rethinking forex trading. There are markets with much higher odds in favor of speculators.

 

[doggyfx]

that's all I do, everything is always spread. Sometimes all you have done is cancelled yourself out, but that doesn't last long. The idea is to have your largest winners your largest positions.

Yeah.. but what about assumption that some currency pairs depend on each other? any suggestion which pairs may have any gaugeable correlation??

 

[loyek590]

Yeah.. but what about assumption that some currency pairs depend on each other? any suggestion which pairs may have any gaugeable correlation??

all the 6 majors (well now ex chf) are correlated

right now I'm short eur.aud and eur.cad
and long eur.jpy and eur.usd

and getting my ass handed to me in a serious way

eur.chf is pegged, so no point in being long eur and being long chf since they will just cancel each other out

when the majors are spread they just create a cross, and when the cross is spread it just creates a major

 

[loyek590]

all the 6 majors (well now ex chf) are correlated

right now I'm short eur.aud and eur.cad
and long eur.jpy and eur.usd

and getting my ass handed to me in a serious way

eur.chf is pegged, so no point in being long eur and being long chf since they will just cancel each other out

when the majors are spread they just create a cross, and when the cross is spread it just creates a major

to clarify, what I meant was, being long eur.usd and also long usd.chf just cancels you out, that is why I no longer trade chf, but you could also just no longer trade eur, same difference unless black swan flies by.

 

[loyek590]

the reason all six majors are correlated is because they all have the same thing in common, namely the USD. Getting on one side or the other of just one currency is very risky. I won't do it. 90% is money management and 10% is guessing right. Money management won't save you if you guess wrong, but it can save you from a complete blow out. Good money management will cost you a little if you guess right, but save your ass if you guess wrong. So yes, I agree, always stay spread. Diversification isn't the Holy Grail, but it beats getting on your knees each night praying they finally buy the one you are long or start trashing the one you are short.