How to correlate?

Hopefully, I will make sense when I ask this but if not I apologize.

Let's say I'm in the US/JPY short for 10 contracts and it's gone against me a good bit. Is there equation to know what else to go long on and short on so that I can correlate it and not get any deeper.

IE- Short US/JPY 10 contracts and down a good bit so I want to make sure I don't lose anymore. so I want to Buy so many lots of Eur/US and short so many contract of the USD/CHF. How do I know how many Eur and Chf to trade?

I'm not sure how to answer your last question about amounts in EUR or CHF but the following site will give you information about what pairs are correlating and how much they are correlating.

http://www.mataf.net/en/analysis-correlation.htm

Hope this helps.

yezbick

I think what you are seeking is trade value? For instance, if you want to be somewhat hedged through correlation, the value of each position needs to be equal.

For instance, 1 mini EUR/JPY does not equal to one mini USD/JPY or GBP/JPY. Thus if you have 1 mini in G/J, it will vastly exceed the change to your account in contrast with a position in U/J. So depending on your base currency, $ in this equation ... the position would need to be as such.

10,000 / $1.00 = 10,000 of USD/JPY
10,000 / E1.33 = 7,500 of EUR/JPY
10,000 / P1.96 = 5,100 of GBP/JPY

Of course this equation doesn't stop the chance of you getting any "deeper" in negative value, however, if JPY is the dominant currency and is dragging all the others with it, using this formula could help you ... even though you would end up just being exposed to a long or short EUR/USD position etc.

In the scenario you presented, you would buy $10,000 worth of USD/CHF or 1 mini lot. Then you would have to buy .75 of a mini lot of EUR/CHF. Oanda works well with this form of trading because they allow you to trade to single units rather than lots.

If this isn't what you are speaking of, I think the first poster answered your question.