Logging your Forex Trades is essential

 When someone asks me what I ate for breakfast last Tuesday I can not answer. I mean, I am not dumb but I can’t remember. I have 7 breakfasts every week; although that is not a big number, I can not recall them one by one. How could I remember my trades and their results when I have more than 20 weekly?

 Logging my trades allows me to see clearly what I am doing on the market. Which time frame is the best suit to me? When do my trading strategies make the most money? Which pattern is the most reliable? Which currency pair (Forex Market) brings me the most profit?  How do all those change during the time? How do they work in daytime (Asian session) and how in nigh time (London session)? How sensitive are they to the changes (liquidity and/or volatility)?

 Those answers are very important to know to be able to choose the best performing strategy and to develop and to filter them in order to reach lower risk and higher reliability. Also, systematic records indicate changes – in time. If something – anything – changes on the market and that effects on the result you will be able to notice that in time without losing money and you can fine tune your strategy (modify -follow the changed if needed).

 There are many different way to keep your Forex Trades logged.

You can simple write them on a paper – that is the simpliest way but doesn’t provide you any statistic – you have to calculate everything manually. On the top of that it is difficult to store, search and backup those records.

You can use an excel sheet which requests a little bit advanced computer knowledge to create (that is why I created that for you) but the usage is very simple and gives you automatically generated basic statistics. Also, you won’t miss any information because there are certain fields to be filled. Easy to backup and store for ages.

Another alternative can be a dedicated computer application, like FX TraderLog (http://www.fxtraderlog.com/) . Easy to fill up and create statistics, charts about your trading performance and give you an opportunity to import your existing trades from your trading platform (direct data import from Oanda and MetaTrader4), so you don’t have to miss your trades from the past or save you time to log them one by one.

 There is a little bit more sophisticated way to record your Forex Trades, if you choose to record each trading strategy separately. I want to know their performance separately so I record them separately. This way gives me clear picture and allows me to monitor their performance in detail. You probably don’t need that; but it can be useful if you work with a good couple of trading strategies – they can be totally different in time, time frame, currency pair, method, risk, subaccount or account, etc.

Your FREE copy of  FX Trade log Book

 Anyway, I created and I share my‘easy to use’, excel sheet based Trading Log Book with you. You can actually use that or use that as a template to create you own or just simple gives you an idea about the data you have to record.

It is ready to go; just download and save on your computer and start filling your data; it doesn’t cost you a cent. It gives you detailed statistic about the trades, winning-losing ratio, account balance, profit, pips, time frames, short-long proportion and many more. One more thing: this stuff works for you if you actually do it. Keep logging your trades, all of them, otherwise your statistic will cheat you with false data.

Find your FREE copy of FX Trade Log Book here:  http://www.profitscenario.com.au/Free-FX-Trade-Log-Book.html

Posted under Technical Analysis

If you spent enough time in front of your chart (experience) you’ll certainly notice some repetitions (glitch in the Matrix, huh?) after awhile. They can be time related (monthly, weekly, daily or even hourly), price related (acting around support-resistant levels), pattern related (candlestick, or price pattern), news related or some kind of correlation (US Market, USD, etc). After seeing that thing happening again and again I always ask questions: How often does that form? How regular are they? How can I make money from this? What is the risk?

 That is how the story starts. A Trading Idea.

A Trading Idea is basically  not else but a noticeable pattern, a repetitive action in certain circumstances.

 At this stage the Trading Idea is just an idea; it doesn’t provide enough information to trade. To be able to work with that idea confidently we need to know the conditions it’s evolving. Let’s do some statistic. You can back test but after that I always test them on live chart for a couple of weeks or even months (depending on the number of trades that provides).

• Which time frame does that occur on? Sometime they are totally independent from the time frames; sometime they occur on a certain time frame only. I do not work below hourly chart (with patterns) because of market noise.
• How often does that form? Only one or two times a month? Or couple of times every single trading day? Clearly: how many signals say trading opportunities does that provide? The more is better, of course.
• How regular they are? Can I always recognize them as they form the same ‘easy to recognize pattern’, signal, or am I going to miss some?
• Is that ‘signal’ stable? Do they change time by time or remain the same (or very close to that)?
• How can I make money from this ‘event’? What is the way I can make profit over and over again.
• How big is the risk I have to take? What is the worth scenario? How much am I going to lose when it turns against me? And how many times can it happen (percentage)?
• What is the biggest drawdown I have to suffer from? How many losing trades can I experience in a row? (statistic)
• Am I able to trade them in time? Does it fit to my daily routine? I don’t need signals that I can not trade because they are always coming when I sleep.
• Can I describe them with simple, ‘easy to follow’ rules crystal clearly? Can I cover all the market situation can happen?
• Am I able to execute them with my system available? Does my broker let me that kind of trades (some of them doesn’t allow you to scalp or news trade for example)? Does it have reasonable fee (spread)? Does my trading platform suitable for that kind of setup?

 At this stage I saw hundreds of signals; I have my statistic ready, I can see the result. I continue working on it with the following questions:

• Can I increase the reliability? Can I filter out the unfavourable conditions by rules?
• Can I increase the efficiency (without increasing the risk)? Is there any way to better the Risk Reward Ratio?
• Can I decrease the risk? Can I make the same money with lower risk level?
• Can I trade them within a shorter time? Can I make the same money within a shorter time?
• Can I do that any better focusing on the series of trades? (law of large numbers, probability theory, set theory)

 Once I’ve got my ‘optimized’ results I modify the Trading Rules according to them and retest them. Am I happy with that? Can I ACCEPT that result? Is that worth to devote my time and effort?

That is my way to develop a Trading Strategy from a simple Trading Idea. I create my Trading Rules based on the experiences I’ve got during testing. I put them into a framework, a system and I keep an eye on changing: I continuously monitoring the market conditions, the result and their connection; if anything changes I am ready to modify the rules.

Posted under Market Psychology, Money Management, Technical Analysis

Building your Trading Strategy             

Most of us trade in a certain way and we tend to call our way Trading Strategy. Unfortunately most of those ‘ways’ fail on long term – because those ‘methods’ are not really Trading Strategies. When a trader sees its failure he/she throws that away and looks for another method and the story starts again. 

Most of the time they are on the right track but they miss the last couple of steps to build a real working Trading Strategy. 

What makes a trading idea or trading method a real working Trading Strategy? What are the steps needed?

 We can agree the fact any Trading Strategy works only if you work with that. Every single Trading Strategy has to determine the rules to be followed. If you don’t follow them or just partially, it’s not going to work. Moreover, you will lose money with that. Everything, I mean everything which doesn’t make money – costs money (broker fee, spread, time, working hours, electricity, computer usage, internet usage, etc).

 Trading Strategy is your Business Plan

 The main questions to be considered during planning your trades (business) are: What? When? Why? How?

When you have a trading idea you should develop a trading system from it. Determine the market, trading hours, trading time frame to work on and specify (test) the sector or security for that. If you see that working well, create the rules and write them down. The rules are not written down, don’t even exist. If you can not determine, formulate and write your trading rules down that is not a Trading Strategy.

Once you have your rules test them in different market conditions. Try to cover all the market situation can happen and find the exceptions which indicate when not to trade (make a new rule for that) to filter out the unfavourable conditions. (e.g. bank holiday). Those are going to be and just they are, when you miss a trading signal – no other exception. If you didn’t cover all the market situations by rules you would get confused during real money trading because you don’t have your rule to be followed in that certain situation. So you start trading based on your emotions – which leads to failure.

Step1: Create the detailed description of your trade (trading idea, market conditions)

Step2: Set your rules and write them down (entry point, exit point –SL, PT- criteria)

Step3: Determine the risk level (Money Management)

Step4: Test them in different market conditions; modify your rules if needed (filter)

Step5: Calculate your future result and ACCEPT THAT. If you are not happy with the result it’s going to give you do not work with that trading strategy because you will be disappointed and you won’t follow that. (emotions come -> fail)

Step6: Every single trading day before start trading READ YOUR RULES out LOUDLY and then SIMPLE FOLLOW them. Whether or no - without any exceptions.

Step7: monitor the result and make corrective action (modify the rules) if needed

The rules

 Your rules should be as simple as they can. The key is simplicity and reproducibility. No one need rules that can not be executed, right? Create clear, simple rules which determine unambiguous steps to make, one by one. The rules must cover all the situation can happen – when to trade, when not to trade, how to trade, what to trade, which are the exceptions.

 You have your goals already set (destination). You want to get there within a predefined time frame. Your tool (vehicle) is your Trading Strategy.

If you crossed the red light (‘no trade’ signal or no signal at all) you could be lucky one or two times but for long term you would be crashed (failed). If you didn’t move (no trade) at green light (proper trading signal) you wouldn’t get there at all or you would be late. In order to get to your optimal results you must follow your trading rules.  That simple.

 If you developed a proven profitable, reliable system say Trading Strategy and you defined its rules correctly even your wife could make money with that (without any Technical Analysis knowledge).

However, it’s not certainly suitable for everyone (stranger) because they need to trust in you and in your Trading Strategy to be able to follow the rules under any circumstances (if they couldn’t trust in it and couldn’t execute it they would fail). 

So, that is the time now. Start developing your first Trading Strategy which really works. Start now, start writing down your rules.

Posted under Market Psychology, Technical Analysis

Trading on Mobile Device (IPhone)

As I didn’t have Internet Connection for a couple of weeks and I didn’t want to stop trading I tried to use my IPhone for Forex intraday trading.  The information carried out by the basic candlestick charts without any drawing tools on a 3.5 inch screen limited my trading opportunities. Here is how I managed that:

http://www.profitscenario.com.au/newsletter/trades-of-the-week3010.html (this post containes couple of pictures so that was easier to post as a html page)

P.S.: feel free to share this link with your friends: http://www.profitscenario.com.au/newsletter/trades-of-the-week3010.html

Posted under Technical Analysis

Higher reliability or better Risk Reward Ratio?

 When you play Heads n’ Tails you can win 8 times in a row or lose 8 times in a row. However, if you played 1000 times you would be in balance or very close to that, that’s for sure.

 That’s because the reliability (say chance) is fifty-fifty and the Risk Reward Ratio is 1:1; clearly you could win the same amount that you risked.

 If you wanted to make that ‘strategy’ proven lucrative you had two basic ways to do that:

• Increase the reliability (you’ll win more times than you lose)
• Decrease the Risk Reward Ratio (you’ll lose less amount when you lose than you win when you win)

 If we considered the market random (as I pointed out earlier it could be on shorter time frames) we would have the same situation. One can create profitable trading strategies with either increasing the reliability (eg. 75% winning – 25% losing) or decreasing the Risk Reward Ratio (eg. 1:3, say losing 1 unit and winning 3 units), or both at the same time (which is extremely hard mathematically).

 Which way is better? Which way is easier?

 Mathematically it is the same to work with the strategies with 66% winning (33% losing) reliability or working with 1:2 Risk Reward Ratio; the results are going to be the same.

 But there are a couple of things we should consider in advance.

 First: if the Stop Loss and Profit Target distances are the same (say Risk Reward Ratio = 1:1) we have 50-50% chance mathematically to reach either of them on random market.

 If we set our Profit Target as double as the Stop Loss (say Risk Reward Ratio = 1:2) we would got less reliability, say 33% chance of winning and 66% chance of losing, so we would have higher chance to lose. That’s a trap (purely mathematically).

 Even if we managed that well (we certainly could) getting higher Profit Targets than Stop Losses with acceptable reliability we would suffer from relatively high numbers of losing trades. Most traders have serious problem with that; they can not tolerate the losing trades, especially when they have a good couple of them in a row.

 Example: 100 trades, Risk reward Ratio = 1:3, Reliability: 50%
 Trades = 100
 Winning = 50 trades
 Losing = 50 trades
 Winning pips = 50 * 30 pips =1500 pips
 Losing pips = 50 * 10 pips = 500 pips
 Results = 1000 pips

 Mathematically it certainly is a proven profitable trading system with Risk Reward Ratio = 1:3 and 50% reliability. It means that half of our trades are losing and the other half of them are winning but when we win, we win 3 times more.

The pain is that we could easily have 8 losing trades in a row (just like in coin toss, right) anytime and it can be hard to handle psychologically and open the 9^th one without any doubt.

 Risk Reward Ratio can be decreased to 1:8 or even more (reasonable) in certain cases.

 Second: if we left the Stop Loss and Profit Target distances at the same level (Risk Reward Ratio = 1:1 we could make money with reaching higher reliability, say for example 66% winning (33% losing) ratio.

 In this case we could trade with confidence because the majority of our trades turn to winning which is certainly a good feeling.

 Example:  99 trades, Risk Reward Ratio = 1:1, Reliability = 66%
 Trades = 99 trades
 Winning = 66 trades
 Losing = 33 trades
 Winning pips = 66 * 30 pips = 1980 pips
 Losing trades = 33 * 30 pips = 990 pips
 Results = 990 pips

 Unfortunately the reliability could not be increased too much; putting it above 75-80% is very hard (and 80% results would still be equal to Risk Reward = 1: 4)

 Summarization:
Traders with less experience or less trades should certainly look for higher reliability trades/strategies as they help build confidence in the market.

 However, it is a statistical fact that one could make more money with lowering the Risk Reward Ratio (realistically and reasonable) – sometimes it can be hard to execute the trades properly and handle the relatively high number of losing ones. This type of strategies only recommended for experienced traders with good confidence (and/or many trades experience) and with strong psychology (self-confidence, stable personality, sound knowledge, relaxed environment, stress less life style, etc).

Posted under Market Psychology, Money Management, Technical Analysis

Implications of the Forex Market – Free E-book

Hi there,

According to your request I created an E-Book (pdf) from those thoughts below gathering all the information together; so you can read it on your PC, on your laptop or even  on your IPhone or IPad.

All you have to do is to follow the link to the download page (no registration required): http://www.profitscenario.com.au/implications-of-the-forex-market.html

Please feel free to share this link with your friends as this e-book is really FREE.

Posted under Technical Analysis

Hi again,

I had to miss a week or two because I was very busy with trading. Such an exiting time we have had recently on the markets, huh.
Anyway, let’s continue with the next thesis.

Thesis #7: What if Technical Analysis is not the problem?

Everyone is capable to learn the science of Technical Analysis. I mean at least to a certain level.
Market participants have the same or very similar trading and preparing conditions. Free/or very cheap trading tools, trading platforms, news, data feeds, etc. widely available on the Internet.

Although, 90% of traders are still losing money.

Tons of educational/instructional materials available for free or for charge. They copy the materials and share them. They copy well developed trading strategies and share them; and still: 90% of traders are losing money. During trading they can use everything that can help: tutorials, books, videos, examples, trading rooms, skype, phone, cheat sheet, everything; and still: 90% of traders are losing money.

In contrast, if I close my eyes, don’t even turn on my computer, don’t even watch any chart for a week and I make a decision to buy or sell something I have 50% chance to be right and win (in case of having Risk Reward Ratio = 1:1).
Like playing Heads and Tails, right? Probably, I’ll have 5 losing in a row or even 5 winning in a row. But out of 1000 ‘blind’ trades I must I have to win around 500 and I have to lose around 500, that’s for sure. (I will be in a slightly negative balance anyway because of the brokerage -spread, commission- as I have to pay for that both at winning and losing trades). It is mathematical fact.

The only question remains that – and I am very serious now: if one could be in ‘slightly’ negative balance, say in balance with ‘blind’ trading, then how come that the big mass of traders, who are supposedly ‘educated’ traders, who attended many seminars, webinars, who read a lot about trading, are in massive losing balance, moreover most of them are losing their assets in a couple of weeks or months.

We all know the answer; just hard to accept that, huh?

To become a winning trader you have to be better that the 90% on the market. Unfortunately, there is no ‘mark’ on your head which indicates that you are or have been a winner: you have to perform that again and again in every single trade, and it is hard. One or two winning trades can be pure luck; with your closed eyes you have 50% chance for that. The problem is, if you open your eyes and you can watch the chart your thoughts are coming. Your thoughts arouse your feelings, your feelings lead to action and you are in a trade. Based on your feelings.

It is a proven fact that, investors’ mindset works totally different way than emotions. It is a human characteristic. All of us.

The first problem is in the education.
In the profitable trading there are no levels such as beginner level, intermediate level and advanced level. There is only a knowledge level which makes you able to lose and a knowledge level which makes you able to win. Between these two levels there is nothing but hard work, learning, practice, testing and developing.

On the market one needs the knowledge which makes one able to trade in a well organized and confident manner. When the knowledge of the Technical Analysis, as the ‘final product’ of a logical investor mindset, ‘overwrites’ the thoughts based on feelings and emotions, and as a result make an investor decision, which consistently meets the known, tested and proven trading rules.

It is an interesting paradox that traders lose serious thousands and millions in months because they only rely on free downloadable materials, gossips, tips and uncontrollable, copied, ‘stolen’, information from here and there. But in contrast of that huge loss they are not willing to pay for a good, proven recorded, well organized curriculum, education, mentoring program, etc.

The other problem is the personal discipline or I should say the lack of, therein.
It is worthless to have proper knowledge and make reasonable decisions if the execution was failed. The reasons behind that can be found in motivation, responsibility, commitment, discipline, sense of purpose, persistence, the system of goal settings and many more.

Although this is my favourite topic and I developed many methods, systems and rules to create, apply and monitor this process successfully I don’t want to write about it in details here because it took another 100 pages and it is not my original topic now. Briefly: all of them, separately and one by one, as well, can be developed and applied without any limitations.

Anyway, fact is fact that more traders fail to execute their trading plan than develop a system. It is hard to work within certain rules and frames and it is hard to face the fact that it doesn’t matter how good you are or you will be you will certainly, and always have losing trades. Some people just can not handle that. As I mentioned above, the good news is that those skills (as well) can be developed without limitations.

Summarization

Those thesises are my thesises, my experiences. Based on my experience alone you can not trade successfully, you will need your own.

Do not accept them. Do not even argue with them. Just think about them.

Think them over, look for logical, rational explanations. Could you confirm them? Could you prove them?

Could you test them to confirm their existence or even the opposite?

You can only build your conviction and your confidence to trade based on your own experience. You can only trust and rely on your knowledge; all the other aspects are continuously changing on the markets.

Posted under Market Psychology

Dear Friend,

Let’s move on the next thesis.

Thesis #6: What if the trend changing patterns don’t change the trend most of time?

The reliability of the trend changing patterns evolving on a shorter time frame (M1, M5, M15) is middling and untrustworthy. The reason behind that is to be found in the scale of their movement which still should be considered as market noise (we were already talking about it earlier).

The observation of a previous trend is essential in trend changing patterns; and many traders are satisfied with this: there is nice trend changing pattern with a  full-screen filling  previous trend, let’s jump into the trade.

The question still remains that if it was a 15 minutes time frame trend or a much longer, even a daily trend. A trend changing pattern –even if it reaches its Profit Target – is only going to be a counter trend, or dip in the main – daily – trend but can not reverse that.

Unfortunately, they don’t reach their Profit Target most of the time, or they just hit the 161.8% of the distance and we can even feel lucky.
A questions arise in beginner traders that what it depends on, when it reaches the 161.8%, when the 200% and when it exceed far above that (yes, we are greedy, it would be awesome if the trend changing pattern – according to its name -  reversed the trend and we could ‘travel’ with the newly formed trend, reaching multiple Risk Reward Ratio).

A trend changing pattern to fulfill its purpose should reverse the whole valid trend.

A trend formed on daily chart is most likely to be reversed by a signal observed on the daily chart (as well). Trend changing patterns evolved on a shorter time frame don’t reverse the long term trend; they only cause a corrective movement in it. Obviously, they fail most of the time because it is just a small correction compared to the main direction.

So what does the effectiveness of a short term trend changing pattern depend on?

It is clear now: on the proportion of the distance of Profit Target of the actual pattern and the long term trend length.

If the Profit Target determines relatively low distance it can be reached, because it is still covered by the movement in market noise or just fit in the corrective movement of the main trend (maximum 19.1-25.00% of the last impulsive movement of the long term trend)

The reliability of those patterns which directions match with the long term trends are much higher. Those positions actually formed in the dip of the main trends in directions of the main trends (buy in the dip).

If one goes against the direction of the long term trend (eg. LONG) most likely gets in the market in direction of SHORT at the very bottom of the dip. Right after that the corrective movement ends and the main trend continues activating the Stop Loss order (I don’t even want to think about if one has no Stop Loss order and the main trend goes AGAINST him/her).

I saw a ‘trader’ who lost his total assets in less than 10 days on less than 10 trades in cases like this.

Posted under Technical Analysis

Hi Trader,

I have heard that many times -mostly from beginner traders- he/she prefers cable (GBPUSD – instead of EURUSD) because cable is more volatile so he/she could make even 70-80 pip while only 40 on EURUSD with the same pattern. Unfortunately it is an unreal approach.

Thesis #5: What if the more volatile is not really more volatile?

 Obviously, if on the currency pair, which looks more volatile, a Profit Target of that certain pattern is 80 pips, then its Stop Loss order (example: Risk Reward = 1:1) will be at the same distance, say 80 pips. If we had a same pattern evolved on EURUSD and its Profit Target was only 40 pips away than its Stop Loss would be the same again, 40 pips. Keeping the same Money Management rules the profit is going to be exactly the same in both cases because on EURUSD we could double size the position having the same risk (lower Stop Loss distance allows bigger position size with the same risk). Measuring the ‘efficiency’ of the given currency pair is very difficult because it depends on many other factors (personality), but if we had to do it anyway (apart from reliability!) then it should be the proportion of its volatility (ex. ATR) and its spread.
Clearly: how big the expectable movement is and how much it costs.

If the expectable movement was high with relatively low cost, it could be a favourable currency pair (if the other factors, like the number of trading signals and their reliability is roughly the same). By the way it is not a big surprise that some brokers (example: Oanda) ‘price’ the spread based on the actual liquidity of the currency pair so it should not influence our decision to choose a currency pair to trade (a couple of ‘Genius’ sits at every broker who knows that and can complete a simple division even during news time ).

Briefly: choosing a currency pair to trade, we only need to watch for the parameters of strategy (numbers of signals, Risk Reward Ratio, reliability and biggest drawdown); the apparent volatility of that currency pair would not be relevant.

Posted under Money Management, Technical Analysis, Uncategorized

Hi again,

today I’d like to write about the correlation on Forex Market. During planning and executing your trades you should watch for correlation (and opposite correlation, as well) because they have very big effect on your trading results.
In ideal case you should share your risk between 8-12 different and independent investments which have no or low correlation; that’s what we call diversification – it’s a very important part of Risk Management.
Unfortunately, in real life it is almost impossible on Forex Market as we have limited numbers of currency pairs to choose from and they are far from independent.

Thesis #4: What if the correlation is too strong?

Currency pairs on Forex Market could have strong correlation – it is easy to see at the first sight: it is so obvious when we are talking about EURUSD and AUDUSD which are correlated on ‘USD leg’. For this very reason both of their movement strongly depend on USD’s strength (or even its weakness). Their correlation, of course, especially on different time frames -hourly or daily- depends on many other factor, as well: their actual supply-demand, their high time zone, their news time, etc.)

Statistical fact: nowadays, the most commonly and with the highest momentum traded currency pair, the ‘boss’, the ‘market indicator’ IS the EURUSD.

While EURUSD is in its narrowing phase (for example its in ‘Asian range’, when London, the World’s Financial Centre sleeps) and didn’t ‘provide’ direction, the other pairs are usually not able to break out or reach new highs or lows; they are just mainly sideways or their weak attempts are forced back.

In contrast, when EURUSD gets moving -even if its just temporarily or a false break out- it ‘sweeps along’ the other pairs. The movements of main pairs (the other 3 main -besides EURUSD: USDJPY, USDCHF and GBPUSD) strongly depend on EURUSD and the exotic pairs’, as well, even if there is no logic relation at the first blink.

The actual direction of the whole currency market is strongly influenced by EURUSD and its’ attraction and its’ repulsion. (each currency pairs’ have their own ‘personality’ of course, but they correlate with EURUSD to a certain extend most of time.)

Because of this reason similar trading signals could be find at the same time on different (currency pairs’) charts.
It could be very risky if -misinterpreting the Money Management rules- ones traded many of those signals (or even all) at the same time (could form on 4-5 different currency pairs at the same time, mostly in shorter time frames – on M5 or on M15). If they came out with winning they would give a heavenly feeling; but if they turned out with losing, which also could happen, they would cause a massive loss.

Unfortunately, we have the same issue with opposite correlation.
Obviously, the opposite correlating pairs move in opposite way so when the trading signals are coming, they are forming in opposite way.
At the first sight they look good as its seems to be a proper diversification: for example EURUSD long and USDCHF short. In real, if USD strengthened for some reason (news) EURUSD long would fall back causing loss; and USDCHF would break out up, causing another loss. (opposite correlation on USD legs)

The opposite correlation comprehends the same risk as the straight correlation does.

One of the best solutions could be if, with a well-thought and properly applied Money Management, you shared the risk between the correlating or even between the opposite correlating currency pairs and you opened partial positions on each. Most of time it doesn’t happen because of greed, does it?
The ‘perfect’ solution could be if we could trade on non correlating currency pairs – but they only would be rare exotics with low liquidity, which wouldn’t be suitable for regular trading.

Whether you like it or not, trading on Forex market is definitely not diversified trading; it is concentrated trading. One can reach diversified trading on Forex market with applying different (time frame) strategies (diversification in time: scalp, intraday, semi-swing, swing, carry, etc.).

Posted under Money Management, Technical Analysis