**Portfolio FX**
I plan to place a number of trades tonight according to the following rules: __Pairs to be traded__
The "majors":
USDCHF, GBPUSD, EURUSD, USDJPY, AUDUSD and USDCAD __Trades to be taken__
Limit orders at the edge and at the mean in markets which are "out of balance". __Portfolio Assumptions__
(i) For simplicity, capital is allocated as if a position is taken in each pair.
(ii) Independence is assumed (i.e no covariance).
(iii) Dollar-funded account. ----------
I have calculated the following risk-adjusted weights for use tonight, with Yen normalised to $1000 risk:
USDJPY $1000
AUDUSD $479
USDCHF $433
EURUSD $425
USDCAD $339
GBPUSD $336
In practical terms, this means that if 1 standard lot is traded for USDJPY, then 2 lots are traded for AUDUSD and 3 lots are traded for GBPUSD etc.
The sum of the risks can then be set to x% of account size.
This is very much "experimental", and is still using a demo FX account. |