The Importance of Currency Diversification in EA Operations and Effective Methods

In EA (expert advisor) trading operations, currency diversification is a very important element for risk diversification.

Here, taking into account the status of popular currency pairs and the number of EAs in Japan and overseas, we consider effective currency diversification methods.

1. Status of popular currency pairs and number of EAs in Japan and overseas

Japan:

• Popular currency pairs: USD/JPY, GBP/JPY, EUR/JPY, EUR/USD
• Number of EAs: USD/JPY, GBP/JPY, EUR/JPY, EUR/USD

Overseas:

• Popular currency pairs: EUR/USD, USD/JPY, GBP/USD
• Number of EAs: EUR/USD, USD/JPY, GBP/USD

As mentioned above, there are differences in the trends of popular currency pairs and the number of EAs between Japan and overseas.

This is thought to be because Japanese traders mainly focus on cross-yen currencies.

2. Currency pair combinations in Martingale-type EAs

Martingale-type EAs typically combine currency pairs that move similarly to diversify price fluctuation risk.

The following currency pair combinations are commonly seen.

• EUR/GBP
• AUD/CAD
• AUD/NZD

These currency pairs tend to move in a similar manner, making them prone to ranging markets and compatible with mean-reversion logic.

3. Risk hedging concept

Traditional risk hedging has shown more effectiveness by diversifying EAs rather than diversifying currency pairs.

Even if you diversify currency pairs, if the logics are the same, winning and losing times will occur at the same moments.

Benefits of EA diversification:

• By combining EAs with different logics, stable profits can be targeted in any market.
• Less influenced by individual EA performance, enabling stable operation.

On the other hand, currency pair diversification has the following benefits:

• Reduces risk during events such as U.S. economic indicators
• Running the same EA across many currency pairs averages out each pair’s price movements

4. Summary

Currency diversification in EA operations is important for risk management and profitability improvement.

However, since most EAs are limited to a few currency pairs, using a single EA to auto-trade across various currency pairs can deteriorate performance.

For EAs that support multiple currency pairs, there is value in currency diversification.

I believe that combining EAs with various logics such as “Martingale-type EAs, single-position, and multi-position EAs” leads to risk diversification.

Key points of currency diversification

• If the EA supports multiple currencies, currency diversification is effective
• Constructing an EA portfolio with dollar-straight and cross-yen pairs helps diversify risk during sudden events (e.g., US economic indicators or BoJ currency interventions)
• Building a portfolio with Martingale and Tralipi-type EAs along with single-position and multi-position EAs contributes to risk diversification

It is important to understand the pros and cons of EA diversification and consider a currency diversification method that suits you.