Basket Trading Strategy The trading strategy we would like to present today is effective and rather simple in use. Basket Trading is a strategy that combines trading with different currency pairs at one time. One of the main benefits of the strategy is that it allows the trader to place several positions in just one order and to be more efficient in managing his securities. Basket strategy also allows the investors to tailor their investment portfolios to their specific needs and goals.
There are numerous types of basket strategies. Some strategies are a combination of long and short positions, while others are based on all long or all short approach. The key to success of a basket strategy is in the way it is set up and managed. Thus we will focus on a mixed basket strategy and take into account how many short and long positions we open for each currency pair.
Strategy Set-up:
Currency pair: EUR/USD, AUD/JPY, GBP/JPY, USD/CAD, EUR/CHF, NZD/CAD, GBP/AUD, NZD/CHF
Time frame: Any
Indicator: No
Entry/Exit conditions:
The following trades have to be opened:
Buy - EUR/USD
Buy - AUD/JPY
Buy - USD/CAD
Buy - GBP/AUD
Buy - NZD/CHF
Sell - GBP/JPY
Sell - EUR/CHF
Sell - NZD/CAD
If you would like to trade with less pairs then go ahead with the following combinations:
Sell - EUR/JPY
Buy - USD/JPY
Buy - EUR/AUD
Buy - GBP/USD
Sell - GBP/AUD
Open all the transaction at the beginning of the week - on Monday. All of them should have equal lot size at the moment of opening. The next day - on Tuesday at approximately the same time (24 hours after you opened first trades), reduce the negative positions only by a percentage which is equal to the number of negative pips. So for example, if a 1 lot EUR/CHF trade is -10 pips, reduce your position by 10%. Thus you will be left with a remaining opened trade of 0.9 lots. If by some reason you can’t reduce your trade by the exact amount of the calculated percentage, then round it to the nearest size possible. In case the position is negative by 100 pips or more, close the whole position. You should repeat the same process every day of the week. Similarly if the same EUR/CHF is - 40 pips on Wednesday, reduce the 0.9 lots by 40%, thus you will be left with 0.5 lots remaining open. Close all orders on Friday before the closure of the market. You may repeat the same process the next Monday.
Facultative: You may add more size to positive positions using the same formula. Do not exceed the double of your starting orders size from Monday.
Advantages:
The strategy does not require technical analysis tools thus it’s often considered to be the lazy man's strategy.
It allows the trader to to place several positions in just one order and to be more efficient in managing his securities.
It allows the investors to tailor their investment portfolios to their specific needs and goals.
Disadvantages:
As far as the strategy requires opening multiple trades at one time, the trader has to pay the spread (commission) to the broker multiple times.
Risk Disclaimer: Forexcamping.com will not be held liable for any losses incurred while trading. All traders are fully responsible for their actions and their results of trading any systems posted on this website. You understand that there is a high degree of risk involved in trading on the markets. Do not trade with funds you cannot afford to lose. Trading may not be suitable for everyone. The charts and all articles published on www. are provided for informational and educational purposes only!
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