Request for Guidance on Suitable Currency Pairs and Optimal Trading Times

[Saleh]

I have been developing a trading strategy that involves opening two opposing positions (one buy and one sell) on the same currency pair simultaneously, with very tight profit targets of about 10 pips and no stop loss. This strategy aims to capitalize on minor fluctuations in short-term price movements.

I have tested this strategy on a demo account using the EUR/USD pair and executed 37 successful trades over three days, achieving a profit of $750 from an initial capital of $3000. However, there was one instance where a trade moved unexpectedly, resulting in a potential loss of $2500, but I waited two days until it returned to its original price and it closed automatically with a profit of $22.

Could you please suggest which currency pairs might be most suitable for this type of strategy, considering pairs that generally exhibit lower volatility? Additionally, are there specific times during the day when the market tends to have limited movements, which would be ideal for this strategy?

Thank you for your assistance.
 

[TheGuru12]

Your trading strategy uses a hedging approach, where you simultaneously open a buy and a sell position on the same currency pair. This method focuses on leveraging small, short-term price movements and aims to minimize exposure to significant risks. However, as your experience has shown, it's crucial to carefully select the right currency pairs and trading times to optimize performance and minimize risks.

For a strategy that relies on low volatility, picking the right pairs is essential. Here are a few suggestions: EUR/USD, which you've already been trading, is well-known for its stability and low volatility due to its high liquidity. USD/JPY is another major pair that typically shows less price fluctuation and provides a steady trading environment. EUR/GBP is relatively stable, making it a safer choice for strategies like yours that aim to profit from minor price changes. USD/CHF typically shows less volatility and can be a good option during economic uncertainties. AUD/USD and NZD/USD, though slightly more volatile than the others mentioned, still present lower volatility compared to more exotic pairs.

Timing your trades can also help reduce risk. The market tends to be quieter after the New York session closes, with fewer economic reports and lower trading volumes. The period before the Tokyo open is typically calm as the major economic news from Asia has not yet begun to affect the markets. During the Tokyo and Sydney session overlap, this is usually the least volatile period, ideal for strategies focusing on small price movements.

To effectively manage your trades and reduce slippage, using a low-latency API is key. Select a broker that offers robust API support for high-speed trading. Use a Virtual Private Server (VPS) close to your broker’s servers to improve the speed of your trades. Ensure your code is efficient to make decisions and execute trades swiftly.

Considering adding some form of stop-loss might be wise, even if your strategy primarily focuses on tight profit margins without traditional stop losses. This could help you avoid significant losses like the one you encountered.

By carefully selecting your trading pairs, timing your trades to coincide with less volatile periods, and enhancing your technology setup for speed, you can improve the safety and effectiveness of your trading strategy.

 

Edited May 7 by TheGuru12