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Thursday, May 26, 2011

Correlation / liquidity / Stretch

Correlation / liquidity / Stretch:

Correlation currencies tend to go in the same direction at the same time. Putting two separate trades correlated pairs is actually like putting a 1 position, which increases risk. As a currency trader you more likely to replace the pairs with the highest and most stringent liquidity spreads, these go hand and hand. EUR / USD, GBP / USD, USD / CHF and USD / JPY represent 80% of the total volume traded in the Forex market.

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