DAY 17: EA and Currency Pair Selection — Operating Strategies Based on Features

In the last time (DAY 16), we examined which time frame to use as the main one when operating EA, looking at the pros and cons of both short-term and long-term time frames.
This time,focus on currency pair selection.
Even with the same logic, profitability and risk can vary greatly depending on the currency pair being traded, which is not uncommon.
Here, from major to minor currency pairs, we will整理 how to discern and establish an EA operating strategy.

Volatility of currency pairs and compatibility with EA

Each currency pair has different price movement characteristics.
In particular, volatility (the range of price movement) and high liquidity are important factors that influence how many entry and exit opportunities an EA can obtain.

• Major currency pairs (EUR/USD, USD/JPY, GBP/USD, etc.)

  • Tend to have high liquidity and tight spreads.

  • Volatility is moderate to high, creating steady trading opportunities.

  • Low spread costs, so they are often well suited for scalping-type EAs.

• Minor currency pairs (AUD/JPY, NZD/USD, CAD/JPY, etc.)

  • Spreads tend to be wider than major pairs.

  • There are times when unique price movements occur, and correlations with major currencies may be low. They can be attractive for diversification in a portfolio.

• Exotic pairs (TRY/JPY, ZAR/JPY, etc.)

  • Some people are attracted by high swaps, but price movements are volatile and liquidity is relatively low, with a tendency for short-term rapid fluctuations.

  • Spreads can be quite wide, making scalping EAs struggle. If risk management is not thorough, there is a risk of large losses.

Spread costs and trading frequency

When trading frequency is high, such as with scalping or day-trading EAs,spread costs cannot be ignored.
The wider the spread, the higher the risk of decreasing win rate and profitability.

• Be careful during illiquid hours
  Even for major pairs like EUR/USD, spreads can temporarily widen during early Asian hours or just after weekends. It may be worth considering limiting EA operation times.

• Balance with volatility
  If your logic can win a reasonable range, slightly wider spreads can sometimes be offset.
  Conversely, EAs that target small pips of profit may struggle with currency pairs that have large spreads.

Correlation and portfolio

When combining multiple currency pairs in an EA,consider the correlations between currency pairs to improve diversification effects.
Since the same dollar pairs tend to move together, depending on the market, there are cases where drawdowns expand simultaneously.

• Do not overly bias toward dollar pairs
  If you mainly operate USD/JPY, EUR/USD, and GBP/USD, you may see similar movements due to dollar-related news and indicators.

• Volatility of cross JPY pairs
  Cross JPY pairs (EUR/JPY, GBP/JPY, etc.) can be highly volatile, with profits and losses swinging dramatically. While good alignment can yield large profits, weak risk management brings danger.

• Commodity currencies (AUD, NZD, CAD) characteristics
  Often influenced by resource prices and China’s economy, they can move due to different factors, which makes them an interesting addition to a portfolio, but trends can change quickly, so caution is required.

Testing compatibility with EA logic

Which currency pair to choose ultimately depends onthe characteristics of the EA logic.
Through backtesting and forward testing, it is important to capture tendencies like “this EA excels at GBP/JPY sudden breakouts” or “it doesn’t gain as much profit with USD/CHF as expected.”

• Center around an EA that performs stably with major currencies
  An EA that operates well on high-liquidity, tight-spread currency pairs can become a cornerstone of operations.

• Verification of multi-currency EAs
  If running the same logic on multiple currencies, regularly check drawdowns and win rates for each pair, and optimize by adjusting lot allocations.

Today’s summary and next preview

• Spreads, volatility, and liquidity vary by currency pair, leading to clear strengths and weaknesses of EA performance.So the strengths and weaknesses of the EA become evident

Next time (DAY 18), we will cover the theme of “Discretion + EA Hybrid Operation—Management Methods and Benefits,” explaining how to use EA while keeping some discretionary judgment by traders and how to combine them to aim for more stable results. Even when using EA, it might not be necessary to rely on “completely automatic.”

Introduction to the EAs I sell

If you are unsure about currency pair selection, please consider the EAs I sell as参考.
https://www.gogojungle.co.jp/users/147322/products

By checking the currency-pair suitability and backtest results of each EA, your operating image may become more concrete.

Now, move on to the next article and consider the “Discretion + EA Hybrid Operation.”
Pleaseclick “Read more” and learn together in depth.