FORWARD TESTING FOREX EXPERT ADVISORS - TRIANGULAR ARBITRAGE // DARK VENUS + IKARUS

Want to manage drawdowns in Forex trading?

Try the Triangular Arbitrage Strategy with forex pairs like: USD/JPY, EUR/USD, and GBP/USD.

Here’s how it works: These pairs are all tied to the USD. When USD/JPY moves up, EUR/USD and GBP/USD often move down—and vice versa.

If one pair causes losses, the others can balance it out by generating profits.

The key is to manage lot sizes carefully and monitor correlations.

This strategy works best in volatile markets, keeping your equity stable and protecting your account.

Triangular Arbitrage involves taking advantage of discrepancies in currency exchange rates between three currency pairs to achieve a profit or, in in this case, to hedge against drawdown (DD).

UJ (USD/JPY - US Dollar vs. Japanese Yen)
EU (EUR/USD - Euro vs. US Dollar)
GU (GBP/USD - British Pound vs. US Dollar)

In your scenario:

When USD/JPY (UJ) experiences a drawdown, meaning the USD is weakening against the JPY, the USD would naturally strengthen against both EUR and GBP in EUR/USD (EU) and GBP/USD (GU) respectively.
This would lead to gains in those pairs, potentially offsetting or "hedging" the losses from USD/JPY.

Key Points:

1. Currency Pair Dynamics:
USD/JPY (UJ) - If USD weakens, JPY strengthens.
EUR/USD (EU) - If USD weakens, EUR strengthens.
GBP/USD (GU) - If USD weakens, GBP strengthens.
2. Hedging Strategy:
By holding positions in all three pairs, you're essentially creating a hedge where losses in one direction (USD weakening) could be offset by gains in the other pairs where USD is the quote currency.
3. Concept Understanding:
This strategy is based on the understanding that currencies are traded in pairs, and the strength or weakness of the USD against one currency will have an inverse effect on pairs where the USD is the quote currency.

If you see USD/JPY going down (USD weakening), you might expect EUR/USD and GBP/USD to go up.

By holding positions in all three, your overall portfolio might not suffer as much from the drawdown in one pair because the other two pairs could be moving in your favor while also protecting margin with positive positions.
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The content presented in this video by DAAVILE is solely for educational purposes and should not be construed as financial advice. Trading inherently involves risks, and past performance is not a guarantee of future outcomes. Any strategies discussed are based on historical data and may not be suitable for all individuals. Always conduct your own thorough research and consult with a qualified financial professional, taking into account your unique circumstances, before making any investment decisions. DAAVILE and its affiliates assume no responsibility for any incurred losses. Viewer discretion is highly recommended.
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