Can you get through with only a single currency pair?
Gekō here.
Last time I explained my own thinking about the St. Cup EA.
To put it simply, I believe that relying on a single EA is not ideal; combining multiple EAs helps spread risk.
With this idea as the premise, I will explain what to be mindful of when combining them (that is, when creating a portfolio).
- Diversification of automated trading and discretionary trading
- Diversification of trading accounts (brokers)
- Diversification of currency pairs
- Diversification of trading timeframes
- Diversification of trading times
- Diversification of trade types
This time, I will consider the third item: “Diversification of currency pairs.”
First, please look at this image.
This is the USD/JPY daily chart (from late 2023 to September 2024).
The dollar rose from around 140 yen to about 162 yen, then quickly strengthened back to the 140s.
If you could have predicted this price movement, you might have gained substantial profits, but the real world is not so forgiving.
The same goes for the world of EAs.
No matter how the market moves, an EA trades quietly according to its program.
If an EA matches well with the market, it can yield large profits; if it does not, it may incur losses.
I think this is less about the performance of the EA itself and more about the compatibility between the EA and the market environment, so there is nothing we can do about it.
So, how about other currency pairs?
This is the daily chart of EUR/USD (from late 2023 to September 2024).
Of course there is volatility, but there don’t seem to be as drastic moves as USD/JPY.
In such cases, an EA that matches a relatively calm market appears to be more stable in producing profits.
As you can see, EAs have strong patterns they excel at and patterns they are weak against.
Many EAs are programmed to profit from specific chart patterns and specific currency pairs.
Therefore, when a currency pair experiences market movements that deviate greatly from past patterns, some EAs will underperform.
In a world where “the market is alive,” this is inevitable.
Thus, a measure that EA users can take is to diversify by currency pairs to spread risk.
Diversifying currency pairs is considered an important perspective when creating a portfolio.
