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  • Opinions - Not Facts

    This blog consists of contributions from FXCM staff, executives and people that have a relationship with FXCM. In spirit of a blog, the posts are conversational and opinionated. However, they are not official FXCM policy and not double-checked for facts. The authors are providing information that they believe to be true or opinions they hold. To verify information or check official FXCM policy, please contact FXCM through the firm's official website, www.fxcm.com.

    • The Worst Offenders: Pairs for Trading

    By Tim Shea | September 14, 2007

    I’ve been doing some data analysis for FXCM mini accounts over the past year, and have broken down client profitability by currency pair. 

    The very best pair in terms of client profitability was the AUD/CHF.  Unfortunately, it is traded by only a few clients. 

    The top 5 pairs (of those with significant volume) with the best results for clients are: 

    1. GBP/AUD
    2. EUR/USD
    3. EUR/CHF
    4. EUR/JPY
    5. EUR/GBP

     

    So, what do they have in common?  4 out of 5 pairs are Euro pairs.  Number 6 is USD/CHF, which is often the mirror image of the EUR/USD.  With the exception of the GBP/AUD, these pairs are low-volatility and low-spread pairs.   

    It appears that range trading tends to be more consistent than other approaches.  All of these pairs, with the exception of EUR/JPY, spent most of the survey time range-bound.  They all feature strong support and resistance lines, giving range bound traders excellent and consistent opportunities over the past year.  Strong support and resistance lines also let you trade with tight stops, giving good opportunities to use good money management techniques. 

    Now, the 5 biggest losers, starting with the worst: 

    1. NZD/JPY
    2. EUR/CAD
    3. AUD/JPY
    4. CAD/JPY
    5. GBP/JPY

     

    What’s in common here?  The JPY.  JPY pairs tend to have very high volatility, and can be brutal for many accounts.  Most of these currencies are popular carry trade currencies, with often violent sell-offs.  When they drop, they drop a

    LOT, and can drag your account with them.  The high-volatility GBP/CHF is number 6 as well. 

    To compare the extreme losses of the worst pairs, you can compare AUD/CHF to NZD/JPY.  For every dollar of average net profit on AUD/CHF, there were over $6.20 of losses in NZD/JPY. 

    Results are based on closed trades on FXCM mini accounts from 6/30/06 to 7/31/07 (13 months); rollover interest is not factored in.


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