Is this hedging?

[ForexDude]

Great thread, thanks for posting your data CTC

[ForexDude]

I bougth last night (around 11:00 GMT) 1 lot of usdchf and 1 lot of eurusd. Also I bought 1 gbpjpy and sold 1 usdjpy.

The first pair is giving me +13 pips the second is at -27 pips.

I'll hold these positions for a while and see what happens.

[cornellj]

Originally Posted by ForexDude

I bougth last night (around 11:00 GMT) 1 lot of usdchf and 1 lot of eurusd. Also I bought 1 gbpjpy and sold 1 usdjpy.

The first pair is giving me +13 pips the second is at -27 pips.

I'll hold these positions for a while and see what happens.

If you did the two trades similtaneously the second one's advantage(27pips- 13pips) means the first one USD/CHF should still extend to 34pips. That is your target to reach what the first pair(EURO/USD) have done already. This is the case 99% of the time and you can trade on it. The negative correlation in the USD/CHF and EURO/USD is 99% correct, i.e. if one moves up the other will move down and vice versa 99% of the time. There is a difference in the number of pips the two will move though. The Euro will move 80% of the pipmovement in the Swiss. From that you can set a target on the Swiss for 34 as shown above. This is not always correct(only 99%) of the time, but that is better probabilities than anything else you do on the financial markets.

Check this phenomenon and devise a strategy around it. It can be profitable.

[ForexDude]

Originally Posted by cornellj

If you did the two trades similtaneously the second one's advantage(27pips- 13pips) means the first one USD/CHF should still extend to 34pips. That is your target to reach what the first pair(EURO/USD) have done already. This is the case 99% of the time and you can trade on it. The negative correlation in the USD/CHF and EURO/USD is 99% correct, i.e. if one moves up the other will move down and vice versa 99% of the time. There is a difference in the number of pips the two will move though. The Euro will move 80% of the pipmovement in the Swiss. From that you can set a target on the Swiss for 34 as shown above. This is not always correct(only 99%) of the time, but that is better probabilities than anything else you do on the financial markets.

Check this phenomenon and devise a strategy around it. It can be profitable.

Why 34pips?

You mean 80% because 1 pip move in the EURUSD is $10 but 1 pip move in the USDCHF is $8.3 right?

[cornellj]

No, the pipmovement for the Swiss will be 100pips for example and the Euro will do only 80. That is why you are paid less per pip on the Swiss contract than the Euro. In the scenario you had, the Euro had moved 27 already and the Swiss only 13. That is why the Swiss had to catch up to 34.

Analyze the movements in the two pairs and you will see this is a pattern. When I started trading 5 years ago the difference was 100-65(Swiss-Euro) and we were paid US$6.50 per pip. The difference became smaller.