12: Lack of Understanding Currency Correlation
If you buy EURUSD and USDCHF just about the same time, you are in for a shock!
One trade will make you profit and other other trade will make you a loss. You see, these two currency pairs are negatively correlated.
If the other pair is going up, the other pair is going down…that’s what negative correlation means.
When I was trading forex in the beginning, I didn’t know anything about currency correlation so I’d be trading negatively correlated pairs at the same time and end up with the ZERO profit because the profit off the other pair will cover for the loss of the other pair.