Correlated pairs
Pairs move in families
Pairs that share a currency often move together. EUR/USD and GBP/USD usually rise and fall together (positive correlation) because both are mostly a bet on the dollar. EUR/USD and USD/CHF usually move in opposite directions (negative correlation) because the dollar is on opposite sides.
Hidden double risk
Buying EUR/USD and GBP/USD at the same time is close to making the same bet twice: if the dollar strengthens, both lose. Check what currencies your open trades share before adding another.
Test yourself
EUR/USD and GBP/USD usually…
Move in the same directionBoth have USD as the quote, so dollar moves hit both.
EUR/USD and USD/CHF usually…
Move in opposite directionsUSD is the quote in one and the base in the other.
You buy EUR/USD and GBP/USD together. The real risk is…
Close to doubled, both lose if the dollar strengthensTwo trades, one underlying bet against the dollar.
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