Alright, let me explain my rationale behind this absurd looking chart.
If EURUSD and USDCHF are negatively correlated, if USDCHF falls, then EURUSD should rise. If EURUSD rises, USDCHF should fall. BUT, let's assume I have no bias and I don't know whether or not either one will fall or rise. No technicals, no fundamentals, nothing! If I buy both pairs lets run through several scenarios.
BUY USDCHF/EURUSD
Scenario one, USDCHF goes up, EURUSD goes down. I lose one position, gain another. But my rewards are larger than my risks so POSITIVE GAIN.
Scenario two, EURUSD goes up, USDCHF goes down. Again same situation.
Scenario three (VERY UNLIKELY since there is a near perfect -1 relationship) Both trades go sideways USDCHF goes down stops me out EURUSD goes up then down and stops me out. Vice versa, EURUSD goes down stops me out and USDCHF goes up then down and stops me out.
Let's see how this works in practice.
If EURUSD and USDCHF are negatively correlated, if USDCHF falls, then EURUSD should rise. If EURUSD rises, USDCHF should fall. BUT, let's assume I have no bias and I don't know whether or not either one will fall or rise. No technicals, no fundamentals, nothing! If I buy both pairs lets run through several scenarios.
BUY USDCHF/EURUSD
Scenario one, USDCHF goes up, EURUSD goes down. I lose one position, gain another. But my rewards are larger than my risks so POSITIVE GAIN.
Scenario two, EURUSD goes up, USDCHF goes down. Again same situation.
Scenario three (VERY UNLIKELY since there is a near perfect -1 relationship) Both trades go sideways USDCHF goes down stops me out EURUSD goes up then down and stops me out. Vice versa, EURUSD goes down stops me out and USDCHF goes up then down and stops me out.
Let's see how this works in practice.