FX:AUDJPY   Australian Dollar / Japanese Yen
146 11 1
Wide-range bars, the down fork, the weak Aussie - all speak for the downward scenario.
Looks like it's working out nicely :)
ForceFollower cryptoyoda
Yeah, looks that Aussie's just got hit. That's good, as I'm short AUD against USD, EUR and CHF (i.e. long EUR/AUD and short AUD/CHF, AUD/USD). Aussie and Kiwi are the weakest currencies at the moment.
cryptoyoda ForceFollower
Do you adjust your position sizing to reflect that?
ForceFollower cryptoyoda
A good question. Actually no, I don't, but I think about it. I risk 1R (1R=1%) in each of those markets, looking to make at least 1R, up to 3R. I may risk cumulatively up to 4% on a given currency. But perhaps it's too much, I consider lowering this limit down to 3%. There's cumulative risk and it should be addressed, just as much as 1) the risk on a single position and 2) the accumulated risk of a drawdown.

When I see that a weak currency gets too strong, I abort all the positions in that currency. It usually happens before my stops are hit, so I rarely lose 1R in each of them, it's usually a fraction of that. Unless it happens, when I'm asleep - then I get smashed. :( It happened to me with NZD on Oct 23rd, as there was an unfavorable news announcement at 3 am. Today I aborted all my postitions in GBP (I was long) and then in CHF and EUR (I was short) and it also cost me a good chunk of my capital, so I guess some limit here might be a good idea. However, I find aborting the losing positions (and taking the losses) an element of a sound trading strategy.

Anyway, thanks for turning my attention to this question.
cryptoyoda ForceFollower
I was an auditor in financials for a bit; this is the kind of thing we were supposed to look for. (Supposed = until audit became a pure loss-leader for consultancy, and a complete joke...)

But this a tricky issue; not just for positions with a common currency in the pair, but also because some ccys may be correlated. (I don't like to say 'are correlated' because the correlations change...) I think there's a case for avoiding multiple positions with a common currency; why not just trade the pair where the 2nd ccy looks weakest/strongest?
ForceFollower cryptoyoda
That's what I do, but it's not that simple. There's always more than one currency that looks very strong and more than one that looks very weak. Strong currencies also weaken and weak ones strengthen. So, to account for a sudden weakening of a strong one, I like to have a postion in a second strong one, sometimes even in a third one.
You're right about correlations. Most of the time EUR is correlated with CHF, AUD with NZD, USD with CAD. GBP and JPY tend go their own way. But there are times when they go uncoupled. However, you're right that, if you can see them go in lockstep, it's enough to stick with just one of them, so your overall risk is smaller in case of a sudden shift of sentiment.
(As for my background, just so I'm not a grey face to you, I wrote my master's thesis in 1998 on forecasting the currencies' exchange rates, then I worked in HQ of a small bank, in charge of managing the currency position of our business. So I see your point and risk management is at the heart of my small trading business. :))
cryptoyoda ForceFollower
Trying to get you in the chat!
Perhaps I spoke to strictly. I share your opinion but would wait for the confirmation by a breakthrough.
ForceFollower motleifaul
Sure, it's OK. :) Extra caution is always of value.
I wouldn't say anything before we don't fall below 92.50.
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