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What best 3 pairs to trade for volatility/spread/correlation etc
Started:November 9th, 2011 (11:16 AM) by gracepips Views / Replies:1,431 / 9
Last Reply:November 11th, 2011 (09:55 PM) Attachments:0

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What best 3 pairs to trade for volatility/spread/correlation etc

Old November 9th, 2011, 11:16 AM   #1 (permalink)
Trading for Fun
Northern Ireland, UK
 
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What best 3 pairs to trade for volatility/spread/correlation etc

Hi, I trade live the eur/usd, eur/jpy and gbp/usd with MB trading. But often these pairs move in sync.

I would like to keep my eur/usd and probably the gbp/usd but try a different pair in place of the eur/jpy. Any suggestions? So little correlation and good pip movement is a must.

I had a look at the usd/cad and it does move in the opposite of these usually so its a maybe.

Thanks for taking the time to read this...............

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Old November 9th, 2011, 11:16 AM   #2 (permalink)
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Old November 9th, 2011, 11:19 AM   #3 (permalink)
Market Wizard
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right...


on usd/cad maybe swissy. Look at oil or gold as well then you can trade the risk on risk off trade. Spu is always fun as well...I only trade euro as that seems enough to focus on but the risk trade is always something to view. DB


Last edited by wldman; November 9th, 2011 at 11:20 AM. Reason: add info
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Old November 9th, 2011, 12:26 PM   #4 (permalink)
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I think what you will find when considering the top pairs traded that they all are correlated to some degree, some more than others. Some move together, some move opposite then you will see that reverse at times as well.

For example, per heavy fundamental reasons the CHF will move like EUR, but then they will diverge greatly as we have seen lately.

What I have found is the following:

JPY - Big influence on pairs
USD - Big influence on pairs
AUD/CAD/NZD - Commodity pairs (when market does well, they do well)
EUR/GBP - Tend to move in Unison most times, but obviously go through their spats.

If I were trading EURUSD and GBPUSD and I wanted something that has low spread and moves differently then I would look at USDJPY. I know the pair doesn't move much (especially lately), or even that much lately, but I believe that is the lowest spread pair with the highest volume/lowest spread that you will find appealing.

Good luck!

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Old November 10th, 2011, 08:43 PM   #5 (permalink)
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bluemele View Post
I think what you will find when considering the top pairs traded that they all are correlated to some degree, some more than others. Some move together, some move opposite then you will see that reverse at times as well.

For example, per heavy fundamental reasons the CHF will move like EUR, but then they will diverge greatly as we have seen lately.

What I have found is the following:

JPY - Big influence on pairs
USD - Big influence on pairs
AUD/CAD/NZD - Commodity pairs (when market does well, they do well)
EUR/GBP - Tend to move in Unison most times, but obviously go through their spats.

If I were trading EURUSD and GBPUSD and I wanted something that has low spread and moves differently then I would look at USDJPY. I know the pair doesn't move much (especially lately), or even that much lately, but I believe that is the lowest spread pair with the highest volume/lowest spread that you will find appealing.

Good luck!

Hi Bluemele thanks for the info. I looked at the USD/JPY and yes the spread on MBT is 1pip but over this past week it has moved between 60ish pips a day (acording to mataf) this is a 1/3 of most other jpy pairs. I think I'll try GBP/JPY for a week even with the 2-3 pip spread in comparison with USD/JPY the GBP/JPY has moved an average of 160pips per day. Then I may try USD/CAD.


Last edited by gracepips; November 10th, 2011 at 08:45 PM. Reason: typo
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Old November 11th, 2011, 02:07 AM   #6 (permalink)
Trading Apprentice
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I think a better way to look at which pairs to trade is to look at what system you are using and try to find a pair/pairs that you think you could make money with. For myself I simply could not make money trading the USD/JPY consistently.

I do not know what sort of system you are using, but perusing a chart of the USD/JPY the stuff that I am most suited to would not work. Fractals or break outs wouldnt work for me, pin bars look a bit iffy, moving average based systems - forget it. I am not familiar with fib based trading, or straight trend lines for that matter so cant comment on how they would perform.The point I am trying to make is that if you know what your system can or cannot do then you are alot closer to choosing which markets to trade.

Dont think that by trading more markets you will make more money, it can happen but it need not be so. Knowing one market well is better than being haphazard in three. My own experiences have taught me that everytime I wanted to expand into other market was when I came a cropper.

Trading the EUR/USD seems fine to me, as does the GBP.

For me I trade the USD/CHF, Silver, NDX and on occasion the GBP or AUD.

Good luck

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Old November 11th, 2011, 03:24 AM   #7 (permalink)
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I'm not sure what your spread is like on XAU but it is by far the best spot market in terms of risk reward and volatility. Average daily range is the equivalent of 300-500 pips. It does not have a strong correlation to any of the major pairs either.


Last edited by peglegtrading; November 11th, 2011 at 03:25 AM. Reason: *your*
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Old November 11th, 2011, 05:55 AM   #8 (permalink)
Trading Apprentice
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Pip range is all very well and good but a larger pip range will generally also mean a larger stop loss is needed. Kind of defeats the point. However your dead right in saying that gold seem to be less correlated than most other risk assets and is definetly worth looking at (provided your not in ths US where FX gold trading is supposed to now be banned).

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Old November 11th, 2011, 08:39 AM   #9 (permalink)
Trading for Fun
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I just started trading with MB Trading UK and have a live forex account but although I can see XAU in the instrument lists when I try to trade it it says market no available 0r something similar. I have asked MBT about this via email so I'll know soon.

As for style well is all simple. In a nutshell its..."always fading and never trusting the first price"

By that I mean I work with a 30-50 pip SL (hence forex and not futures for money management) I use 3% max risk on every trade and I scale in that 3% risk over 4 entries per trade. So a small probe first and then if |I think I was too early but the trade still looks appealing I will scale in bring my average down. Note this is NOT averaging down I only use my 3% max risk so if price continues against me I'm stopped out, take my loss and move on. It is scaling in. Its simply were most people put all there trade risk on in one go I scale into my position/risk.

But then and this is important if price moves in my favour I add to my positions and then scale out to take profits. You could say I.

1. Scale in incrementally to my trades to get a better price
2. Add to winners
3. Scale out to take profit

My main guides are supply and demand imbalances on the chart (helped by Sam Sieden). So I look for extended moves into either supply/demand to fade. I'm looking at "zones" not precise points.

90% of the time I am shorting a bull run into a higher timeframe resistance or buying a falling knife into a higher timeframe support. But always having my max risk in place and taking my losses when they come. Trapped trders is also a big part of my thinking. I see charts as a visual picture of fear, greed and areas where trades are or will be in pain if "this or "that" happens. No indicators other that price action and loads of chart time. So far things are going well...................but time will tell:-)

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Old November 11th, 2011, 09:55 PM   #10 (permalink)
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From what your saying about SL I presume you want to trade intra day? Personally I find that real hard going and trading more than one market would be a nightmare (for me). But whenever I have traded intra day I have noticed that end of day correlations with other markets are high, however intra day correlations can often be low.

That is, I have seen parts of the day when the stock markets are up, the GBP is down, the USD/CHF is doing its own thing BUT come the close they have all moved in sympathy with each other.

I have often wanted to capitalise on this but my inability to follow my own rules intra day means I failed thus far to do it.

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