Did you know Eur/Usd, Usd/Jpy, and Eur/Jpy are all connected??

shakespeare515

shakespeare515

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Yep, it's the Triad Correlation.. Not sure if many traders recognize this, but if you do not, then you are basically trading blind..



...good trades,

Sam
 
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shakespeare515 said:
Yep, it's the Triad Correlation.. Not sure if many traders recognize this, but if you do not, then you are basically trading blind..
Click to expand...

Sam, I'm really struggling here. As it was only a couple of minutes long I decided to check out the video and see what esoteric stuff I’d missed, but you pretty much just reiterated the text that was in your post.

What is it about this that you find so stunningly amazing? You came across as almost having discovered (or some Fib trader of your acquaintance) the fact that there is a mathematical relationship – between related pairs. Uh?

I am fairly sure one of the first things a trader learns is this type of relationship purely to (a) put on an exotic/synthetic pair that isn’t directly offered by their broker (b) avoid unwittingly betting against themselves and (c) avoid loading up above their limits for any given currency.

I seem to recall you’re more of a scalper so perhaps you’re going to expand on the arb potential when these relationships go out of whack. If so, that’ll be great for demonstrating a theoretical trading strategy, but in reality, nobody on the retail FX side is EVER going to get in anywhere near that sort of opportunity.

If I missed your point then I’d appreciate an expansion beyond your video commentary.
 
Hi Bramble,
Thanks for your reply, understanding this correlation is very important to my style of trading.. this video is just an excerpt of an hour and a half webinar on this subject.

understanding this correlation helps in many ways, the first is debunking a commonly h held myth among forex traders that gbp/usd and Eur/Usd are somehow correlated and base eur/usd trades on the direction of the gbp/usd pair. of course these two pairs ARE correlated when also monitoring eur/gbp to complete the "triad," but without looking at Eur/Gbp you are not seeing all the info to make a solid trade decision..

The main advantage to understanding triads, is it is easier to identify "perfect storm" type trades.. In other words if you can identify a situation, for example, where Eur/Usd and Usd/Jpy are BOTH oversold and are Both due for an upward bounce, then you KNOW your trade is EUR/JPY LONG and to leave the other two alone.. and your entry for Eur/Jpy is when the two "sidecars" (Eur/Usd and Usd/Jpy) are both at support.

You will get a much more accelerated move on Eur/Jpy when Eur/Usd and Usd/Jpy are moving in the same direction. This is only understood by understanding the mathematical relationships in the Triad correlation.

That being said, I never claimed this to be "stunningly amazing" as you said, but just a simple fact on the way the market works. By itself it is not "the answer" to successful trading, just one peice of the puzzle.

also, these correlations never go "out of whack" as you say.. they are purely mathematical and whenever there is a slight imbalance, the market quickly rebalances (within seconds).

Also, once you learn the basics of trading a "Triad" group. You never need to venture outside of that group. There are many trading opportunities within a triad, and it simplifies your analysis process.

Hope this helps..

I appreciate the discussion..

...good trades,

Sam
 
shakespeare515 said:
Hi Bramble,
Thanks for your reply, understanding this correlation is very important to my style of trading.. this video is just an excerpt of an hour and a half webinar on this subject.

understanding this correlation helps in many ways, the first is debunking a commonly h held myth among forex traders that gbp/usd and Eur/Usd are somehow correlated and base eur/usd trades on the direction of the gbp/usd pair. of course these two pairs ARE correlated when also monitoring eur/gbp to complete the "triad," but without looking at Eur/Gbp you are not seeing all the info to make a solid trade decision..

The main advantage to understanding triads, is it is easier to identify "perfect storm" type trades.. In other words if you can identify a situation, for example, where Eur/Usd and Usd/Jpy are BOTH oversold and are Both due for an upward bounce, then you KNOW your trade is EUR/JPY LONG and to leave the other two alone.. and your entry for Eur/Jpy is when the two "sidecars" (Eur/Usd and Usd/Jpy) are both at support.

You will get a much more accelerated move on Eur/Jpy when Eur/Usd and Usd/Jpy are moving in the same direction. This is only understood by understanding the mathematical relationships in the Triad correlation.

That being said, I never claimed this to be "stunningly amazing" as you said, but just a simple fact on the way the market works. By itself it is not "the answer" to successful trading, just one peice of the puzzle.

also, these correlations never go "out of whack" as you say.. they are purely mathematical and whenever there is a slight imbalance, the market quickly rebalances (within seconds).

Also, once you learn the basics of trading a "Triad" group. You never need to venture outside of that group. There are many trading opportunities within a triad, and it simplifies your analysis process.

Hope this helps..

I appreciate the discussion..

...good trades,

Sam
Click to expand...

So, instead of buying eurusd and usdjpy, you buy eurjpy instead. No s**t sherlock! Where do people come up with this crap? Some guy discovered the gap trade the other day as well. I guess you get paid to teach people this? You know what i find funny? When EURUSD and USDJPY go down, EURJPY goes down even faster in number of ticks. Strange huh?
 
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brettus said:
So, instead of buying eurusd and usdjpy, you buy eurjpy instead. No s**t sherlock! Where do people come up with this crap? Some guy discovered the gap trade the other day as well. I guess you pay to teach people this? You know what i find funny? When EURUSD and USDJPY go down, EURJPY goes down even faster in number of ticks. Strange huh?
Click to expand...

Why so aggressive Brettus? the part you say about eur/usd and usd/jpy going down together causes eur/jpy to go down even faster is not strange at all... it's the point. and no, no one paid, it's free right here on the board..
 
The relationships you suggest exist in this example, don't hold in reality.

Eur/Usd and Eur/Jpy are more tightly correlated over time than are Eur/Usd and Usd/Jpy. If anything, the latter two pairs have a negative to no correlation. Eur/Usd and Usd/Jpy are unlikely ever to both be overbought or oversold in any given timeframe.

I do agree of the three pairs you give in the example, Eur/Jpy will often tend to give you more pips per unit time than the other two, but it’s marginal and even with that being the case, if absolute pips were your primary purpose, you’d simply trade Eur/Jpy – and not the other two.

I’m failing to spot where you get any edge discussing mathematical relationships of ‘triads’. Do you have an example that you have documented?
 
TheBramble said:
The relationships you suggest exist in this example, don't hold in reality.

Eur/Usd and Eur/Jpy are more tightly correlated over time than are Eur/Usd and Usd/Jpy. If anything, the latter two pairs have a negative to no correlation. Eur/Usd and Usd/Jpy are unlikely ever to both be overbought or oversold in any given timeframe.

I do agree of the three pairs you give in the example, Eur/Jpy will often tend to give you more pips per unit time than the other two, but it’s marginal and even with that being the case, if absolute pips were your primary purpose, you’d simply trade Eur/Jpy – and not the other two.

I’m failing to spot where you get any edge discussing mathematical relationships of ‘triads’. Do you have an example that you have documented?
Click to expand...

Bramble, What I am sharing with you is fact and mathematical, this correlation ALWAYS holds true. You can do the mathematical calculation at ANY TIME and it will always work.

The part you are saying about "Eur/Usd and Usd/Jpy are unlikely ever to both be overbought or oversold in any given timeframe" is your opinion. there are many situations where these two pairs do exactly that..

You ask why I dont always trade Eur/Jpy? What if its a USD driven move? the example i gave in the previous post referencing Eur/Jpy was in no way saying that Eur/Jpy is always the trade, it depends on what the triad is doing, sometimes the right trade is Eur/Usd (if Usd/Jpy and Eur/Jpy are moving opposite each other.)

And yes I have plenty of documented examples.. thanks for asking, I will post one here soon.. I got to pick up my daughters from school. give me a few hours to get back.
 
shakespeare515 said:
Bramble, What I am sharing with you is fact and mathematical, this correlation ALWAYS holds true. You can do the mathematical calculation at ANY TIME and it will always work.
Click to expand...
Of course it will always work. I can’t not! But what’s the angle? What’s the benefit in understanding the fairly obvious relationship between any related sets of FX pairs?

shakespeare515 said:
The part you are saying about "Eur/Usd and Usd/Jpy are unlikely ever to both be overbought or oversold in any given timeframe" is your opinion. there are many situations where these two pairs do exactly that..
Click to expand...
Opinion? It’s empirical fact. Of the ‘many situations’ where these two pairs do exactly that – give me the data. Post a chart, whatever. Because if I post charts showing just how uncorrelated they are you’ll suggest I’m being selective.

shakespeare515 said:
You ask why I dont always trade Eur/Jpy? What if its a USD driven move? the example i gave in the previous post referencing Eur/Jpy was in no way saying that Eur/Jpy is always the trade, it depends on what the triad is doing, sometimes the right trade is Eur/Usd (if Usd/Jpy and Eur/Jpy are moving opposite each other.)
Click to expand...
Then maybe best if you develop that line because the snippets you’ve shared with us thus far make not much sense and suggest no edge or purpose whatsoever.

shakespeare515 said:
And yes I have plenty of documented examples.. thanks for asking, I will post one here soon.. I got to pick up my daughters from school. give me a few hours to get back.
Click to expand...
Excellent.







edit: ...a few hours....? You don't have schools in Malibu?
 
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TheBramble said:
Of course it will always work. I can’t not! But what’s the angle? What’s the benefit in understanding the fairly obvious relationship between any related sets of FX pairs?

Opinion? It’s empirical fact. Of the ‘many situations’ where these two pairs do exactly that – give me the data. Post a chart, whatever. Because if I post charts showing just how uncorrelated they are you’ll suggest I’m being selective.

Then maybe best if you develop that line because the snippets you’ve shared with us thus far make not much sense and suggest no edge or purpose whatsoever.

Excellent.







edit: ...a few hours....? You don't have schools in Malibu?
Click to expand...


What i get about this, is that if USDJPY and EURUSD both are overbought as he says and i sell both of them, then that's as good as selling EURJPY, so hes just telling me to sell EURJPY. I think the point hes trying to make is that if you're looking to sell EURUSD, check USDJPY as well to see whether its overbought , because selling EURJPY might be more profitable than EURUSD alone. To me this just seems too obvious to be considered an edge or wise words.
 
brettus said:
What i get about this, is that if USDJPY and EURUSD both are overbought as he says and i sell both of them, then that's as good as selling EURJPY, so hes just telling me to sell EURJPY. I think the point hes trying to make is that if you're looking to sell EURUSD, check USDJPY as well to see whether its overbought , because selling EURJPY might be more profitable than EURUSD alone. To me this just seems too obvious to be considered an edge or wise words.
Click to expand...

To most of us the correlations seem obvious because we've been trading. To a new trader it's not so obvious. It's something that gets learned as trading progresses. Look at all the "systems" for sale or for free on the internet. Rarely will you find one that suggests you check other pairs before trading, rather they all tell you to buy/sell when some indicator(s) on your current chart line up. Over time new traders realize this isn't the best way to go.

I agree there's probably no real edge just in looking at the other pairs, but it does beat trading blind.

Peter
 
wackypete2 said:
To most of us the correlations seem obvious because we've been trading. To a new trader it's not so obvious. It's something that gets learned as trading progresses. Look at all the "systems" for sale or for free on the internet. Rarely will you find one that suggests you check other pairs before trading, rather they all tell you to buy/sell when some indicator(s) on your current chart line up. Over time new traders realize this isn't the best way to go.

I agree there's probably no real edge just in looking at the other pairs, but it does beat trading blind.

Peter
Click to expand...

Yea you're probably right. I guess i'm looking for someone to tell me something new. Reading too many blaringly obvious facts at the moment. I just saw he had a live trading room, and it annoyed me that he could be getting paid to tell potential customers just that when they can find it for free on the net.
 
It's the sizing/lot size denominations that gets you when you're doing all this cross pair trading stuff. I assumed that's why those FX market makers have to have super duper mental arithmetic agility.
 
wackypete2 said:
To most of us the correlations seem obvious because we've been trading. To a new trader it's not so obvious. It's something that gets learned as trading progresses. Look at all the "systems" for sale or for free on the internet. Rarely will you find one that suggests you check other pairs before trading, rather they all tell you to buy/sell when some indicator(s) on your current chart line up. Over time new traders realize this isn't the best way to go.

I agree there's probably no real edge just in looking at the other pairs, but it does beat trading blind.

Peter
Click to expand...

I agree with you Peter..............Many new and even not so new traders do not realize that the cross pairs are a triad and are very correlated to each other..........
 
shakespeare515 said:
Why so aggressive Brettus? the part you say about eur/usd and usd/jpy going down together causes eur/jpy to go down even faster is not strange at all... it's the point. and no, no one paid, it's free right here on the board..
Click to expand...

Hello Bard from Cali. I think Brettus' point is that this is arithmetic, that's all.
 
'But what's the angle' is a good question whenever three [currencies] shall meet, cos...
 
brettus said:
What i get about this, is that if USDJPY and EURUSD both are overbought as he says and i sell both of them, then that's as good as selling EURJPY, so hes just telling me to sell EURJPY. I think the point hes trying to make is that if you're looking to sell EURUSD, check USDJPY as well to see whether its overbought , because selling EURJPY might be more profitable than EURUSD alone. To me this just seems too obvious to be considered an edge or wise words.
Click to expand...

His correlations are out of whack anyway as the two you mention will rarely be doing ANYTHING together, but forgetting that for the moment, if you’re ‘looking to sell’ Eur/Usd, you don’t need to ‘check’ anything else first. If your commitment is that Eur is weakening and/or Usd is strengthening, what else do you need to know? And the nub of my query is in your comment ‘might be more profitable than…’ as Sam’s given absolutely no indication of how he determines that.

I’m probably being unkind and possibly a little prejudiced as Sam runs a ‘come join me in my trading room’ type operation. In those circumstances I tend to see smoke and mirrors where occasionally there are none. And often there are.

But when someone ‘announces’ a major insight on special mathematical relationships that is in fact possibly the most outstandingly obvious and basic aspect of trading currencies, and when they add in a ‘special’ term (“Triad”) coined by someone else who have vaguely esoteric leanings (a “Fib” trader) and, when over the course of a number of posts they are unable to adequately address my fairly straightforward challenges to the veracity of their claims while finding it clearly impossible to explicate the apparent benefit of such knowledge, I get a little jaded, once again.

I’m not into vendor bashing for the sake of it and nor do I believe it’s impossible for an individual to operate quite freely and altruistically in sharing their skills and knowledge (we all do that to varying degrees), it’s just when it’s all a little too polished but nothing shines that I begin to wonder.
 
TheBramble said:
His correlations are out of whack anyway as the two you mention will rarely be doing ANYTHING together, but forgetting that for the moment, if you’re ‘looking to sell’ Eur/Usd, you don’t need to ‘check’ anything else first. If your commitment is that Eur is weakening and/or Usd is strengthening, what else do you need to know? And the nub of my query is in your comment ‘might be more profitable than…’ as Sam’s given absolutely no indication of how he determines that.

I’m probably being unkind and possibly a little prejudiced as Sam runs a ‘come join me in my trading room’ type operation. In those circumstances I tend to see smoke and mirrors where occasionally there are none. And often there are.

But when someone ‘announces’ a major insight on special mathematical relationships that is in fact possibly the most outstandingly obvious and basic aspect of trading currencies, and when they add in a ‘special’ term (“Triad”) coined by someone else who have vaguely esoteric leanings (a “Fib” trader) and, when over the course of a number of posts they are unable to adequately address my fairly straightforward challenges to the veracity of their claims while finding it clearly impossible to explicate the apparent benefit of such knowledge, I get a little jaded, once again.

I’m not into vendor bashing for the sake of it and nor do I believe it’s impossible for an individual to operate quite freely and altruistically in sharing their skills and knowledge (we all do that to varying degrees), it’s just when it’s all a little too polished but nothing shines that I begin to wonder.
Click to expand...

well I for one am getting sick of this vendor bashing:LOL:
 
TheBramble said:
But when someone ‘announces’ a major insight on special mathematical relationships that is in fact possibly the most outstandingly obvious and basic aspect of trading currencies, and when they add in a ‘special’ term (“Triad”) coined by someone else who have vaguely esoteric leanings (a “Fib” trader) and, when over the course of a number of posts they are unable to adequately address my fairly straightforward challenges to the veracity of their claims while finding it clearly impossible to explicate the apparent benefit of such knowledge, I get a little jaded, once again.
Click to expand...

About this quote, you say its so painfully obvious this correlation... here is a post from this board a while back from a trader who apparently did not understand this, in fact he did not get an adequate response to his question.. if it is so common knowledge, why didn't any of the traders on this board help him out?

here is a quote from that post:
But I see a lot of time, when EUR/USD goes up, so does USD/JPY,. The same happens when EUR/USD goes down - USD/JPY goes down too.

Of course, it has to do with the EUR/JPY rate changing, but it seems strange that those two pairs would go up and down at the same time so frequently.

Why is that?
Click to expand...
Did you notice he is observing exactly what you say never happens?

here is the post..
http://www.trade2win.com/boards/for...-jpy-why-isnt-there-inverse-relationship.html

It seems this Triad post I have started actually fills a void for the gap in knowledge on this board..

I am sorry you are getting jaded, you say i haven't been straight forward, read again my posts in this conversation, it has been nothing but straightforward explanations, none of the "smoke and mirrors" talk you have been putting out there.

I must say I do appreciate and enjoy honest debate and conversation, can we please keep it genuine?

If not that's cool too..

Sam
 
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