Currency correlation advice needed

Discussion in 'Forex Trading' started by tinusp, Sep 25, 2007.

  1. tinusp

    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.
     
  2. rosy2

    rosy2

    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>
     
  3. hcour

    hcour Guest