Currency Ring Forex Trend Following Strategy

August 19, 2016

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Currency Ring Forex Trend Following Strategy

This system is reported to be a profitable one. The main property of a currency ring is that altogether, they share the same number of currencies. Let us try this methods using 3 pairs at the same time.
The most popular rings are as follows:
AUDJPY, AUDUSD, USDJPY, CHFJPY, USDCHF, USDJPY, EURJPY, EURAUD

To illustrate this method, let us look at 3 these 3 pairs:

GBP/JPY
GBP/CHF
CHF/JPY

We can see that we have 3 currencies present in this ring namely GBP, CHF and JPY. Now when we are buying the GBP/CHF and the GBP/JPY, we are in fact also buying the cross pair CHF/JPY as well. So, we have to actually also open a buy position on the CHF/JPY pair as well to stabilize the account.

For example:

You buy 1 lot GBP/JPY
You buy 1 lot GBP/CHF
You also have to buy 0.8 lots of CHF/JPY in order to stabilise the accounts

Wait for the currencies to move.

Close all orders if you decide to take profit.

Make an overall profit from all 3 trades, that’s the goal.

To determine how much the pair has moved before entering the trade, use ADR or Average daily range.

Do not trade currency ring when all 3 pairs has already move beyond their 75% daily range . Open position when the currencies moves 25% of daily range and wait for the currencies to reach 50%-75% daily range before closing the trades.

Trail the individual orders separately.

GU, UJ, GJ are the currency pairs that has the most activity. These are the big movers of the market.
It is advised that you trade only 1 currency ring per account as this will decrease undue drawdown that your balance can suffer with these type of strategies. Study the behavior of each ring separately and may assess the performance. Start with a very small lot.