Buying EUR/USD and USD/JPY at the same time may look like two trades, but the USD risk could cancel out exactly.
In the spot FX example in the image, once the USD amounts on both sides are matched, what remains is exposure to buying euros and selling yen. If the amounts don't match, some USD exposure remains.
So opening another position doesn't necessarily mean greater diversification. You need to break down the amount of each currency, rather than simply count the trades. The amounts and exchange rates shown in the image are hypothetical.
In the spot FX example in the image, once the USD amounts on both sides are matched, what remains is exposure to buying euros and selling yen. If the amounts don't match, some USD exposure remains.
So opening another position doesn't necessarily mean greater diversification. You need to break down the amount of each currency, rather than simply count the trades. The amounts and exchange rates shown in the image are hypothetical.
