Trading 10 pairs and weighting them all the same, or weighting them by volatility?

[Adamus]

I'm simulating trading on a set of 10 currency pairs, and I get widely varying results from the different pairs. I'm using 100,000 as my lot size. Part of me says, adjust the lot size per market to make the returns per market equal, part of me says, use drawdown, and another says use average true range over a long period. And my gung-ho alter-ego says, just f. d.it

I'm looking at

AUDUSD
EURCHF
EURJPY
EURUSD
GBPEUR
GBPJPY
GBPUSD
USDCAD
USDCHF
USDJPY

and in particular right now I'm looking at EURCHF and thinking, hell's teeth, that's a market and a half. The same with GBPJPY.

I get 5 times more profits and 2 times more drawdown than other markets - maybe as well as weighting it less, I should add another pip in slippage?

I can't expect the trading simulator to know what the bid-ask spread and the slippage is like, so if it's a wild pair, perhaps I shouldn't even trade it. It's just that gleaming pot of gold at the end of the rainbow looks pretty attractive.

 

[Rhody Trader]

While pair volatility is definitely an important consideration (and weighting based on something like ATR may make sense), what is likely more so is making sure you are not doubling or trebling your risk in one currency in having multiple trades on. For example, a short EUR/USD and long USD/JPY makes you double long USD.

Oh, and GBP/EUR does not trade. EUR/GBP does.

 

[Adamus]

OK, right, just writing them from memory but good point.

re the doubling up on USD positions - that is on my mind and I'm going to feed my trade results into an algorithm to tell me just how many time periods I had with multiple simultaneous positions. My guess is that it's probably more than I want

Not quite sure what I'll do to counteract that - the pairs all run as seperate systems and don't interact so maybe I'll have to set up some kind of alert so that I can bail out of positions manually if needs be.