There are various methods to filter out the most volatile currency pairs. Here is the simplest one I’m using:
1. Perform a search on the web to get tools to measure the strength of currency correlation. Like the followings:
2. Suppose you are trading on the 5-minute time frame, pick the currency pairs with low readings on the 5-minute correlation table but with high readings on the longer time frame table, say hourly correlation table. In other words, pick the currency pairs whose 5-minute readings differ the most to the hourly readings and the 5-minute readings are less than the daily readings. My theory behind this is simple: the more correlated between the currency pair, the less volatile for the pair’s movement.
At the momentum of wring this post, the pairs I picked for 5-minute trading is EUR/GBP and EUR/CHF. Check out the chart snapshots belows.
3. Wait until there are available entry points and then pull the trigger.