The **best three hedged Forex pairs**

in Account Booster 👍18 hours ago

The best three hedged Forex pairs typically involve combinations that are:

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  1. Highly correlated (positively or negatively)
  2. Liquid (low spreads, fast execution)
  3. Involve major currencies (stable and predictable)

Here are three of the best hedged Forex pairs:


1. EUR/USD vs. USD/CHF (Negative Correlation Hedge)

  • Why it works: These pairs are strongly negatively correlated, often moving in opposite directions because both are heavily influenced by the USD and share inverse safe-haven flows.

  • How to hedge:

    • If you buy EUR/USD, hedge by selling USD/CHF.
    • If EUR/USD goes up, USD/CHF often goes down and vice versa.
  • Advantage: High liquidity, strong historical inverse movement.


2. GBP/USD vs. EUR/USD (Positive Correlation Hedge)

  • Why it works: These are positively correlated due to shared economic zones (Europe & UK) and both involving the USD as a counter currency.

  • How to hedge:

    • Long one, short the other (e.g., long GBP/USD, short EUR/USD).
    • Profit from divergence or relative strength differences.
  • Advantage: Both pairs are highly liquid and react to similar news, but not identically.


3. AUD/USD vs. NZD/USD (Regional Positive Correlation Hedge)

  • Why it works: These pairs often move together due to similar export economies, commodity exposure, and proximity (Australia and New Zealand).

  • How to hedge:

    • Use when expecting volatility in one while the other remains stable.
    • Long AUD/USD, short NZD/USD or vice versa.
  • Advantage: Smaller divergences allow for short-term hedge or arbitrage strategies.


Bonus Tip:

Use correlation matrices (available on many trading platforms) to check the current correlation strength between pairs before executing a hedge. Correlations change over time.

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