EUR/USD USD/CHF correlation.....

So after looking to experiment on my demo account on Friday I decided to to take a position of going short USD/CHF and long USD/EUR which appeared to be good opportunities. They both turned out and to be bad trades and I lost. Boo hoo!

Anyway I then realised that these two have a strong correlation and I had been betting on the same thing with two different bets on the same currency.

This had to led me to think that perhaps I should drop one the pairs from my trading plan since there is such a strong link between the two, maybe USD/CHF. My question is do people trade both these pairs and treat them like individual pairs or since there is such a strong link do they drop one pair and concentrate on the other one in their trading plan??

EUR/USD is far and away the most actively traded pair for retail traders. I'd venture so say most don't trade both pairs.

Some words would be helpful scouse-no-doubt. I have no idea what that picture means.

If you're short USD/CHF and long USD/EUR, you're pretty much sorta short EURCHF. I presume you're aware of that?

No I wasn't actually! Oh well you live and learn, good job I'm doing all this on a demo account, I'm nowhere near ready to even consider using proper money if I keep making schoolboy errors like this, but at least I learnt a lesson from this and taking one step closer.

Your short USD/CHF = Swiss strength
Your long EUR/USD = Euro Strength

The relative lot sizes of the trade (i.e. 100,000CHF & $100,000) leaves you with a net exposure to CHF as they're worth more than dollars - so what Martinghoul said.

But CHF is pegged to Euro ATM hence my post. Seems a bit of a crazy trade (to me, but I'm sh*t) given that fact.

I'd like to be short when they come off the peg for a punt but who knows when that'll happen. Seems to be testing to the upside as of now.

forefit said:

No I wasn't actually! Oh well you live and learn, good job I'm doing all this on a demo account, I'm nowhere near ready to even consider using proper money if I keep making schoolboy errors like this, but at least I learnt a lesson from this and taking one step closer.

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Yes, you are a step further and well done for using only dummy money. Making mistakes with either dummy money or very small amounts of real money is the sharp way to start trading.

Keep at it, keep making those mistakes! BUt learn from them.

You see the problem is you can read all the news and the books you want but you can get information overload which is a problem I have had in the past, so I have pretty much ditched the news and stuck to looking at my charts and learning from my mistakes which is why I look over the "little" detail about the currency being pegged and the correlation between the pairs.

It's part of the learning experience. Best of luck to you!

forefit said:

You see the problem is you can read all the news and the books you want but you can get information overload which is a problem I have had in the past

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mate I can't p*ss without considering the "news" or "fundies" or whatever you want to call it which is why I can't trade for sh*t. Well that and poverty which makes a £1pip relatively hella risk - leading to panic sweats.

I've been told that the solution is a filter of sorts. Suppose you need to just pick a market/s and focus on what directly affects those. Spraying bullets everywhere at any chart is what got me to the point of headaches but I don;t really have the time to bother with it all any more.

Love/hate innit.

G/L