There’s no specific answer to that. It depends on you how you are able to crack what’s the trend going to be
It is not right to say that all correlations of Currency/Commodity are worth trading. A trader’s priority is to take into account matters like:
- ‘Service charge’ or ‘commission’, which varies from brokerage to brokerage.
- A ‘Spread’ is defined as the difference between the bid and ask price of any security or asset.
- ‘Liquidity’- is what describes the degree at which an asset or security can be quickly purchased or sold without change to the asset price.
- ‘Access to information’- it would be much easier to gain information about those currencies and commodities that are traded heavily which have smaller spreads and likely to be adequate liquidity.
- Additional fees
Considering the above factors and the strong relationships between the commodity and currency the decision could be made as to which currency pair need be traded. Correlated trading may also have positive and negative swirls looking at the volatility of the commodity.
You need to be critically alert and it is necessary to keep a tab on the stability and shifting of the correlation when venturing into correlation trading. Correlation can now be easily monitored with new platform trading trends; real-time indicators show a periodical correlation between the pair of currency and commodity.
It is advisable to take decisions looking at the divergence of the correlation in the changing market.
For the fluctuating currency and commodity correlations, the navigating tools of timing and strategy are basically required. While entry and exit of both the currency and commodity or either one of them are to be decided by the trader, awareness of the below points while trading is necessary.
- Current correlation of the currency and commodity.
- Does an asset seem to lead to the other?
- Divergence in price.