Forex Trading Pips Live Update, Thursday 9th August

by Joe Oliver, Forex Trading-Pips

The Australian dollar traded close to 4 month highs against the US dollar on Thursday following news out from China indicating that Chinese inflation data may offer room for further easing.

We are currently short the Australian dollar in our Forex Signals Daily Intermarket Component and taking some heat on our position having recently set new all time combined equity highs just last month. Note below the small dip in our Intermarket Component equity over the past few weeks following recent gains in AUD.USD.

Intermarket Signals Equity Curve All Majors

Intermarket Signals Equity Curve All Majors (please click to enlarge)

We trade all 6 majors in our Daily Intermarket Component: EUR, GBP, CHF, JPY, AUD and CAD. Trading multiple currencies (and multi-time frames) helps to smooth out our equity and reduce the impact any one position has on our overall performance. (For combined Signals performance, please see our recently updated Forex Signals Performance)

TheĀ  biggest problem most Forex traders face in trading a portfolio of currencies is ‘correlation risk’. Currencies tend to be very highly correlated, meaning losses in one market can produce correlated losses in other positions.

We work around these issues in our Signals Program by implementing Intermarket correlation filters. By referencing 2 or more markets in each currency input model we break away from traditional correlation risks and the associated draw-downs that this can entail.