I am curious to find out how do you guys handle correlations, if you have one EA that is trading multiple currency pairs and the currency pairs are correlated.
Lets say that you have an EA that is trading on the H1 timeframe the EURUSD and you add another currency pair like the NZDUSD and /or the XAUUSD.
if you look at the H1 correlations in myfxbook:
NZDUSD has a correlation with EURUSD of 89% and XAUUSD of 85%, for example
if you are running just the EURUSD and risking 100 EUR per trade when you decide to add the NZDUSD to the portfolio, what do you do?
the high correlations means that many times the EA will trigger open order signals that will be close to each other and that trades for both pairs will be open at the same times, many times, but not always
I can think of several possibilities:
option a)reduce the risk size so that the EA risks 50 EUR per trade, this is effective only if most of the times the trades for both pairs are overlapping
option b) start managing the EAs open orders at a portfolio level,so if there is an open order for EURUSD, that is risking 100 EUR, and you get an entry signal on the NZDUSD:
- b.1) you close 50% of the EURUSD position so that the risk goes down to 50 EUR and open the NZDUSD order with a risk of 50 EUR as well
- b.2) or if you have a risk of 100 EUR on the EURUSD you ignore the signals for NZDUSD? and vice-versa
I think maybe people are probably doing option a?
option b is feasible with MT5, I don't think you can do that with MT4
option b is also feasible by using for example Python or R to manage the portfolio and just let MT4/MT5 manage the orders
or maybe there are some other options? I am not aware that could be more effective?