AUDUSD and EURUSD are heavily correlated pairs. Correlation between AUDUSD and EURUSD pairs is more than 80% most of the time. What this means is that if you are trading EURUSD and EURUSD is going up, you will invariably find AUDUSD also going up. And if you find EURUSD going down, you will also find AUDUSD going down. Now just like EURUSD, AUDUSD moves slow. This is good for swing trading. When you open a trade, you don’t have to worry that the market will reverse suddenly. Let’s discuss AUDUSD swing trade that made 1000 pips in 12 days. Take a look at the following screenshot!
Do you see the red arrow on the above screenshot and the inverted hammer candlestick pattern. This is the signal for the start of the downtrend. We enter into a short trade. Our entry is 0.81238 just when the candle closes and the stop loss is 0.81655. So our risk is 42 pips. We make another entry at 0.80395 and the move the stop loss to breakeven at 0.81238. The first position is now risk free while the second position has a huge cushion of around 100 pips.
We again open a new position at 0.80215 and move the stop loss to breakeven at 0.80395. Now we have first 2 positions risk free and the third position has a small risk of 18 pips. Now take a look at the following AUDUSD daily chart.
What do you see? A strong bearish divergence pattern. Do you see long bearish candles being formed on the daily chart? It is an indication that AUDUSD is going fall heavily. So we let the swing trade continue. On the 12th day, we closed all the 3 trades at 0.76431. Our first position made 500 pips. On the second position we made 400 pips and on the 3rd position we made 380 pips. So in total we made 500+400+380=1280 pips in 12 days.
What you would have observed is that we always try to keep our risk low. We make a position risk free first before we open a new position. AUDUSD downtrend started on 14th May and on 15th May you can spot a very strong bearish divergence pattern on EURUSD.
EURUSD has fallen more than 400 pips. So you see how both AUDUSD and EURUSD are heavily correlated and how you can trade both of them together at the same time. When a bullish divergence pattern appears on anyone of the 2 pairs, you should close the short trade and start looking for a long entry. Just keep in mind both the pair have their own entry signals but broadly you will find them trending in the same direction.