Correctly Evaluating Mutual Funds and Mutual Fund Managers Cost Cutting Programs

Correlations in Forex

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In forex trading, no currency pair can act independently of another currency. For example, if USD/GBP is trading in one direction, you can bet that there will be an effect on USD/EUR and GBP/EUR as well. Knowing that there is a correlation between currencies is important because it allows the trader to diversify risk, prevent canceling out profits, and double up on a position when given a certain situation. Correlations can change so a trader should revise correlations between values every so often.