Trading currency rings can be very good especially if you do not have the proper skills for doing technical analyses of determining the proper direction the market might be heading and tkaing position accordingly. Currency Ring is a good way to trade the forex market easily and hassle free. Firstly, we need to know what is a Currency Ring actually.
A currency ring is a set of of 3 pairs which contain 3 currencies and share the same number of currencies when traded altogether. Each currency ring will consist of 3 related pairs and there can be many of them. Here are the most popular currency rings which you can trade with the majority of the brokers as all these pairs are normally available to trade on all of them.
AUD/JPY AUD/USD USD/JPY | CHF/JPY CHF/USD USD/JPY | EUR/JPY EUR/AUD AUD/JPY | EUR/USD EUR/AUD AUD/USD | GBP/JPY GBP/USD USD/JPY | EUR/CAD EUR/USD USD/CAD | EUR/CHF EUR/GBP GBP/CHF |
EUR/CHF EUR/USD USD/CHF | NZD/JPY NZD/USD USD/JPY | EUR/JPY EUR/GBP GBP/JPY | EUR/USD EUR/GBP GBP/USD | EUR/JPY EUR/USD USD/JPY | GBP/CHF GBP/USD USD/CHF | GBP/JPY GBP/CHF CHF/JPY |
As you can see above, we have 14 currency rings which we can trade all the time. However, it is advised to trade only 1 currency ring per account as it give you more control on what you are doing and also give you a good glimpse on the currency ring you are currently trading. You can log the statistics and performance of each of these currency rings on different accounts. Trading one currency ring per account also protect you from undue drawdown that you might experience with these type of strategies.
Firstly, we are going to place an Average Daily Range indicator on the pairs that form part of the currency ring we are going to trade. If the pair has moved over 25% of the daily range, then we buy the currency ring and close the trades when the pairs has reached 50%-75% of the Average Daily Range (ADR). Here is an example:
1. We buy 1 lot GBP/JPY
2. We buy 1 lot GBP/CHF
3. We also have to buy 0.8 lots of CHF/JPY in order to stabilise the accounts
2. We buy 1 lot GBP/CHF
3. We also have to buy 0.8 lots of CHF/JPY in order to stabilise the accounts
When we bought the GBP/JPY and the GBP/CHF, we have also actually bought the CHF/JPY as the cross pair and we have to open a real by order as well in this pair to stabilise the currency ring. After we are done, we wait for the pairs to move and we take profit from the overall combined profit of all the orders together. This is a very interesting forex trading strategy and if you have some time to experiment with it, can bring you lots of good. You can read more about this trading method from the link here. Good luck
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Forex currency ring, at the first sight I thought you are talking about the triangular forex arbitrage method.
When I read further, it is interesting that I found this currency ring contains an interlocking currency pair.