Nice Correlation Trade Between GBPJPY & USDJPY Is Setting Up
A nice correlation trade between GBPJPY and USDJPY is forming. The two pairs are currently trading with a spread of 550 Pips, the widest spread since the end of January. Our algorithm is giving a 79% chance of GBPJPY coming in and a 74% chance of USDJPY rising. With that said we will be going Short GBPJPY at market and Long USDJPY at market. NO STOP will be set, with correlation trades you need to set a mental stop based on your risk profile to your overall equity.
These two pairs are +90% correlated BUT the volatility levels vary with GBPJPY being approximately twice as volatile as USDJPY. With that said you GBPJPY position size should be smaller than your USDJPY position size.
Some traders may believe that Shorting GBPUSD is the same as taking the correlation position which we are recommending. Nothing can be further from the truth! Several reasons:
1) The correlation trade includes JPY and it's economy. How the U.S. economy reacts to the Japanese economy at times will differ from how the U.K. economy reacts to the Japanese economy.
2) The correlation trade greatly reduces directional risk. Either of our positions could work out for us to make money. We could be dead wrong on one pair while the other gives us a profit of more than the pair we are wrong with.
3) The GBPUSD position is all about directional risk, just like any time you place a trade in one single pair. Barring any strategy, indicator, algorithm, etc....a trader has 50/50 odds with a directional trade. NOT in a correlation trade!
Here at Unique Forex we pride ourselves in being the World’s first “Virtual Forex Trading Floor” where we will turn ANYONE that trades with us into a profitable trader fir FREE! That’s right…for FREE! All you need to do is to fund your own trading account.
Unique Forex has a team with 40+ years combined trading experience and with our proprietary algorithm we significantly enhance the trading experience. Utilizing the two, we are able to offer some of the most powerful research on an array of currency pairs. Here you will get all of our research on some of the more popular majors like the EURUSD, but if you would like to get access to the rest of our research head over to www.unique4xpro.com/research.html
If you want to join our Virtual Trading Desk check out www.unique4xpro.com
Also follow us on all of our social media:
Twitter @unique4x
Snapchat @uniqueforex
Instagram @uniqueforex
Tune in to our daily live market insight @ 4:30 p.m. EST on Periscope @unique4x
These two pairs are +90% correlated BUT the volatility levels vary with GBPJPY being approximately twice as volatile as USDJPY. With that said you GBPJPY position size should be smaller than your USDJPY position size.
Some traders may believe that Shorting GBPUSD is the same as taking the correlation position which we are recommending. Nothing can be further from the truth! Several reasons:
1) The correlation trade includes JPY and it's economy. How the U.S. economy reacts to the Japanese economy at times will differ from how the U.K. economy reacts to the Japanese economy.
2) The correlation trade greatly reduces directional risk. Either of our positions could work out for us to make money. We could be dead wrong on one pair while the other gives us a profit of more than the pair we are wrong with.
3) The GBPUSD position is all about directional risk, just like any time you place a trade in one single pair. Barring any strategy, indicator, algorithm, etc....a trader has 50/50 odds with a directional trade. NOT in a correlation trade!
Here at Unique Forex we pride ourselves in being the World’s first “Virtual Forex Trading Floor” where we will turn ANYONE that trades with us into a profitable trader fir FREE! That’s right…for FREE! All you need to do is to fund your own trading account.
Unique Forex has a team with 40+ years combined trading experience and with our proprietary algorithm we significantly enhance the trading experience. Utilizing the two, we are able to offer some of the most powerful research on an array of currency pairs. Here you will get all of our research on some of the more popular majors like the EURUSD, but if you would like to get access to the rest of our research head over to www.unique4xpro.com/research.html
If you want to join our Virtual Trading Desk check out www.unique4xpro.com
Also follow us on all of our social media:
Twitter @unique4x
Snapchat @uniqueforex
Instagram @uniqueforex
Tune in to our daily live market insight @ 4:30 p.m. EST on Periscope @unique4x
Comment:
The correlation hasn't changed much overnight as we are basically flat. We will be monitoring the position throughout the day and may be holding over the weekend.
Trade closed manually:
We closed both positions in the correlation trade between GBPJPY & USDJPY picking up approximately 78 Pips on USDJPY and 14 Pips on GBPJPY. Not bad for a trade which greatly reduces our directional risk. Hope you did well with it.