How can I be sure that the strategy will work in the rather volatile Forex market?
The FOREX market is known for its volatile nature and large swings, but it is also known for the fact that currency pairs tend to be reciprocals of one another. The strategy takes advantage of this knowledge by using the pairs’ correlation to decrease your risk and the swings effects and allows you to benefit from various interest rates and the ability to buy low and sell high. The key to the system is the correlations between the traded currencies pairs the obligation to trade combinations of pairs which, historically speaking, move in opposite directions to allow the gains on one to offset (at least to an extent) the losses on the other. For example the EUR/USD pair has a perfect correlation of 1 and the USD/CHF pair has an extremely high negative correlation of -0.93. Again, historically speaking, these pairs are extremely likely to move in opposite directions. In the short run, though, anything is possible. If an unusual series of events take place, the pairs may move together for
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