hard · Volume Profile Analysis
A trader is long on EUR/USD and then identifies a high-confluence long setup on AUD/USD.
If the correlation (ρ) between the two pairs is 0.75, what risk management rule should be applied?
- The Correlation Fade; short the AUD/USD trade to hedge the EUR/USD risk.
- The Half-Position Rule; size the AUD/USD trade at 50% of the normal risk budget.
- Full size; correlation is not causation and setups should be judged independently.
- The Three-Strike Rule; only one correlated trade is allowed per session.
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