SwingAndPip

Negative Correlation, EURUSD/USDCHF

FX:USDCHF   U.S. Dollar / Swiss Franc
163 0 1
Alright, let me explain my rationale behind this absurd looking chart.

If EURUSD             and USDCHF             are negatively correlated, if USDCHF             falls, then EURUSD             should rise. If EURUSD             rises, USDCHF             should fall. BUT, let's assume I have no bias and I don't know whether or not either one will fall or rise. No technicals, no fundamentals, nothing! If I buy both pairs lets run through several scenarios.

BUY USDCHF/EURUSD
Scenario one, USDCHF             goes up, EURUSD             goes down. I lose one position, gain another. But my rewards are larger than my risks so POSITIVE GAIN.
Scenario two, EURUSD             goes up, USDCHF             goes down. Again same situation.
Scenario three (VERY UNLIKELY since there is a near perfect -1 relationship) Both trades go sideways USDCHF             goes down stops me out EURUSD             goes up then down and stops me out. Vice versa, EURUSD             goes down stops me out and USDCHF             goes up then down and stops me out.

Let's see how this works in practice.
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