Correlation Trading - Basic Ideas and Strategies

This is a discussion on Correlation Trading - Basic Ideas and Strategies within the Forex forums, part of the Markets category; Hey Ivan what are your settings ? meanwhile I promise to get down more detail on how the indicator "moves ...

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Old Sep 1, 2009, 3:32pm   #61
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NVP started this thread Hey Ivan

what are your settings ?

meanwhile I promise to get down more detail on how the indicator "moves and feels" next

Neil

Last edited by NVP; Sep 1, 2009 at 3:43pm. Reason: because I am a spelling moron
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Old Sep 1, 2009, 3:43pm   #62
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NVP started this thread one more thing on the run.........if you notice all my Charts are based on taking the USDGBP core chart....then hiding it completely and enlarging the Indicator tothe exclusion of all else !

I do this to ensure the feed is consistent verses potentially the "slower" feed pairs? (eg CHFJPY)
If I need a Chart I bring it in seperately alongside the core Indicator Charts

we need a metatrader Guru to say if this is necessary.....also you may see that my charts are an hour behind verses GMT (no idea why ??) - also when I publish the Forex vs Gold/Crude/Equities Indicators this timezone/Feed stuff becomes even more critical as they are not the same Trading open/close periods to Forex

but then nothings perfect !
Neil
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Old Sep 1, 2009, 4:01pm   #63
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think I can see where you are !

NVP started this thread Hi Ivan

before I disapear again trying to keep this going.....

heres my 200Ma/Delta 1 chart that I think is 5min like yours......the red vert line is about where you were I think (??).....I tend to pack a lot of bars into my charts for more overview/analysis etc etc

Thoughts.......I have added the +/- 0.00010 ob and os lines in again to illustrate a point here - we probably would have made a few dinaros on a fast trade here (selling yen or Dollar and buying Euro or GBP) but I would be unhappy to trade as they are all kinda in no mans land and I want at least 1 currency to have moved above/near the Dotted lines and then top be falling/rising back towards the zero before I am comfortable with trying a retrace trade

plenty more to come and I am really enjoying pouring this out now as I had got rusty on loads of this - never having created a journal or document before !

Neil
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Old Sep 1, 2009, 4:06pm   #64
 
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"Settings"

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Originally Posted by NVP View Post
Hey Ivan

what are your settings ?

meanwhile I promise to get down more detail on how the indicators "moves" next

Neil
I hope you didn't mistake the 5.3.3 stochastic for a couple of the FxCorrelator pairs!

On the 5 min chart which I posted above I used Delta settings of 3. I "removed" all the other lines which had no bearing. So far I have not experimented with the 200MA setting. Will keep that for another day

The way I entered the trade was to select the pair to trade using your correlation method, with a 5.3.3 stochastic added in to fine tune entry. Once the GBP line and the JPY line reached full deviation on 5 min TF, the stochastic was already straining at the lead to reverse.

At that point I entered LONG the EURJPY and SHORT the EURGBP.
The pair made about 120 pips between them at the peak. Not bad for 40 minutes "work".

Love it!

But one of the problems traders have - at least it is one of mine - is to know when to exit the trades. Here again the Stochastic can be a good indicator, though I would prefer we keep the method as free as possible without adding indies. There is no rule that says we have to vacuum up every pip that falls into our pip-basket ... just most of them! There is always another trade.

I think it is far preferable to miss out on a few pips by taking an early shower, than it is to give back pips that you already had in your rucksak! You do feel better about it for some reason.

I'm done for the night - it's almost 1am here on the Aussie east coast. I've had a ball - listening to Bee Gees on Youtube while I play the markets. I have just finished listening to El Condor Pasa, The Boxer, Sound of Silence and right now: "I am a Rock" all from Simon and Garfunkel. I grew up with the halcyon music of the 60's and 70's in my well-spent youth.






Maybe tomorrow night it will be ABBA and The Beach Boys.

Aaahhh! Didn't we have just the best music?
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Old Sep 1, 2009, 4:06pm   #65
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NVP started this thread all the same .............can people now see why I call the USD Yen currencies a tag team ?

These guys are the Global "Risk" barometer currencies and I want to compare them to the Vix later on in this thread to see how close they are for potential use in trading....

Neil
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Old Sep 1, 2009, 4:10pm   #66
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Originally Posted by Ingot54 View Post
I hope you didn't mistake the 5.3.3 stochastic for a couple of the FxCorrelator pairs!

On the 5 min chart which I posted above I used Delta settings of 3. I "removed" all the other lines which had no bearing. So far I have not experimented with the 200MA setting. Will keep that for another day

The way I entered the trade was to select the pair to trade using your correlation method, with a 5.3.3 stochastic added in to fine tune entry. Once the GBP line and the JPY line reached full deviation on 5 min TF, the stochastic was already straining at the lead to reverse.

At that point I entered LONG the EURJPY and SHORT the EURGBP.
The pair made about 120 pips between them at the peak. Not bad for 40 minutes "work".

Love it!

But one of the problems traders have - at least it is one of mine - is to know when to exit the trades. Here again the Stochastic can be a good indicator, though I would prefer we keep the method as free as possible without adding indies. There is no rule that says we have to vacuum up every pip that falls into our pip-basket ... just most of them! There is always another trade.

I think it is far preferable to miss out on a few pips by taking an early shower, than it is to give back pips that you already had in your rucksak! You do feel better about it for some reason.

I'm done for the night - it's almost 1am here on the Aussie east coast. I've had a ball - listening to Bee Gees on Youtube while I play the markets. I have just finished listening to El Condor Pasa, The Boxer, Sound of Silence and right now: "I am a Rock" all from Simon and Garfunkel. I grew up with the halcyon music of the 60's and 70's in my well-spent youth.






Maybe tomorrow night it will be ABBA and The Beach Boys.

Aaahhh! Didn't we have just the best music?

when I was a spotty adolencence disco had just happened (mid/late 70's)......luckily my parents had introduced me to the quality stuff in the 60's so I had something decent to fall back on when my white suit was in the Cleaners !

Neil
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Old Sep 1, 2009, 4:16pm   #67
 
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Originally Posted by NVP View Post
Hi Ivan

before I disapear again trying to keep this going.....

heres my 200Ma/Delta 1 chart that I think is 5min like yours......the red vert line is about where you were I think (??).....I tend to pack a lot of bars into my charts for more overview/analysis etc etc

Thoughts.......I have added the +/- 0.00010 ob and os lines in again to illustrate a point here - we probably would have made a few dinaros on a fast trade here (selling yen or Dollar and buying Euro or GBP) but I would be unhappy to trade as they are all kinda in no mans land and I want at least 1 currency to have moved above/near the Dotted lines and then top be falling/rising back towards the zero before I am comfortable with trying a retrace trade

plenty more to come and I am really enjoying pouring this out now as I had got rusty on loads of this - never having created a journal or document before !

Neil
I think the reason your charts are 1H behind could be something to do with the broker whose MT4 you are using. I use FXLite - which is geared for the New York Close. If that is not it, then maybe either your computer or your broker is set on daylight-saving time? Apart from those 2 thoughts, I have no clue.

Yes - I think you are correct - that was the point I chose to make my trade. I do not understand though, what you meant by: " ... all my Charts are based on taking the USDGBP core chart... " but I am sure it is a simple thing.

I would like to nail down what you class as a good trade or at least a good point to enter - after that we don't know what the market will give us. Maybe we should be taking a peek at the 15 min and maybe 30 min TF as well, before deciding to take a trade - 5 min trades are by nature more scalping-types. I was lucky to get those pips, I do concede - rarely can one pick a breakout without luck!

I will experiment more with those Delta settings - I think this is a fantastic package of yours Neil - congratulations on an excellent piece of work. Chat again tomorrow mate.
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Old Sep 1, 2009, 4:17pm   #68
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NVP started this thread [QUOTE=Ingot54;880608]I hope you didn't mistake the 5.3.3 stochastic for a couple of the FxCorrelator pairs!

On the 5 min chart which I posted above I used Delta settings of 3. I "removed" all the other lines which had no bearing. So far I have not experimented with the 200MA setting. Will keep that for another day

The way I entered the trade was to select the pair to trade using your correlation method, with a 5.3.3 stochastic added in to fine tune entry. Once the GBP line and the JPY line reached full deviation on 5 min TF, the stochastic was already straining at the lead to reverse.

At that point I entered LONG the EURJPY and SHORT the EURGBP.
The pair made about 120 pips between them at the peak. Not bad for 40 minutes "work".


Love it!

But one of the problems traders have - at least it is one of mine - is to know when to exit the trades. Here again the Stochastic can be a good indicator, though I would prefer we keep the method as free as possible without adding indies. There is no rule that says we have to vacuum up every pip that falls into our pip-basket ... just most of them! There is always another trade.

I think it is far preferable to miss out on a few pips by taking an early shower, than it is to give back pips that you already had in your rucksak! You do feel better about it for some reason.


WOW !!!!! - nice going Ivan !


thats why I posted this baby in the end - to get proper Traders involved so we all can make money and learn

Despite a gambling orientated upbringing (long story) and other distractions in the past I confess here that i am not an experienced trader....just someone who messes around a lot with charts / indicators and Trading ideas for future use in this Great business!

The Indicator will provide an Edge.........I dont believe it can be a pure system in itself and will need help of which there are multitudes of ways !

Neil
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Old Sep 1, 2009, 8:08pm   #69
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apologies......

NVP started this thread sorry Ivan / all

work has been nuts today and will be tomorrow (still here !)....i'll try to get some posts in during the fun tomorrow..........given his rapid learning curve I give ingot54 (Ivan) another week of practice and we will both be responding to any questions on the Indicator / Thread !

more followers contributors needed please to join the Army - we wont bite !
Neil
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Old Sep 2, 2009, 6:19am   #70
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more stuff on the indicator

NVP started this thread Hi ingot54 / all

ok some thoughts on the FXCorrelator before I go to work....I will miss lots of detail (writing detailed "how to" books will never be my job) but hats what forums are for

this is what I do........

I use a free metatrader package courtesy of ODL.....they offer free feeds and have never given me grief for still not having set up a live account with them

When I do play a little (not much in last month or so) its a virtual with Worldspreads...I was introduced to them by a chap called John Bartlett who coaches Trading in the Uk (cheque please JB !).and offers some decent inexpensive courses mainly for Newbies with some robust trading systems.


Set-up
bring up a new GPBUSD Chart in Metatrader
make the chart options line chart , remove grids and hide line by colours
load in the FXCorrelator and expand the window to remove the pair chart
play with the MA/delta settings based on your tastes/needs for this chart
hide certain currency pairs by clicking the colour to none
play with lines also if you want (bold, dotted etc etc) - cancels if TF changes (doh !)
then create as many as I need

I use 1 currency pair chart for all my Indicator charts...why ? because I read somewhere that you need a popular feed pair to ensure the indicator updates as fast as possible expecially for 1 min charts (??).....probably C**p actually !

Next are the settings...(whats the time here ?..ok i got a little more time)
Neil
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Old Sep 2, 2009, 6:42am   #71
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the Settings.....

NVP started this thread Right....

the FXcorrelator is deceptively simple regarding formulas etc etc but very powerful in what it portrays......

its almost like using a Macd with just the 2 lines or perhaps 2 MA's on a chart or 2 RSI's overlaid on a normal pair....................except one of the pairs (the second currency)
is not UASD or CHF or whatever.......its all other Currencies (apart from the lead pair) together...

so the USDollar (mr Green) in the charts is pretty close to the USDollar index as offered on some trading platforms, GBP is pretty Close to the Sterling Index which I have no idea is offered at all.....and so on !

the MA dictates the Baseline for how the Currencies will move......a longer MA (200-500) means you get a nicer and more realistic platform to guage distances from the Delta setting you add......however this will naturaly be slower regarding crossovers etc etc as yuo are looking at 200 Crossovers vs say a MA setting of 55 or 21 which will be crossing over much much faster and more frequently (actually these levels do my brain in !).......Try it and play......

the Delta will smooth th eline as required......1 = real bar pricing so on a MA200, Delta 1
setting you are viewing how the price of a currency is performing on a 200MA verses everything else and any crossovers will be (95% accurate) at when on the pairs chart the MA1 crosses the MA200

ease back on the Delta throttle and it smooooooths things just like increasing a second MA line on any chart......hence a 200/13 FX correlator is much smoother than a 200/1 setting..........nice to look at but remember you are now well off the pace if you are
trying to trade it

Everything the FXCorrelator does is aligned to the Dynamics of Moving average techniques and Trading systems.........plenty of benefits but notoriously lagging !

I would add charts but brain hurts and havnt had a coffee yet
Neil

umm next is trading ideas but got to get ready now........
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Old Sep 2, 2009, 7:00am   #72
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Trading Idea 1

NVP started this thread Hi all

simplest is best so heres first one

since the FXCorrelator isolates each currency as a single entity you finally get to see how the varmits move !

and yes there they are...... cycling backwards/ forward up and down, everything people drone on about is true ! (Eliot waves, cycling, HH/HL. LLLL HHH (?) blah blah blah)

so heres the first and very simple trading methodology.......

set up 2 or 3 charts with the indicator on 3 TF's (1,5,30 or 5,1h,4h ) whatever you want !
have the same setting (200 on a Delta 2 or 3 is nice.....1 is a little jerky)
Remove some currencies that you are not interested in to make it simpler to watch
(put on the Tag team (Yen,USD) + GBP and Euro as minimum...although thats just me)

then watch the flow !!!!...........thats it

think about it..if you see something moving upwards (2 steps forward/1 step back - or HH,HL / LL,LH) on the Higher TF's you have a "trend"

Wait for it to be falling back a little in its main trend thrust..........

then drop down to lower TF (which naturally will be opposite trend of Higher TF) and wait for the lower TF to start moving back in same direction as higher TF

add any indicators you need on the actual Pair chart you chose to trade for support and comfort blankets............ !

me - i used to "just do it" as the actual Pair chart sometimes will be screaming not to do the trade as it is totally focused on the 1 pair and not the whole picture that FXcorrelator is showing you.........

sorry - no coffee - no attachments........i'll add later !

Aaaah - Coffee........ Attachment now added

Attachment now added
Neil
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fxcorrelator5min-vs-1h.jpg  

Last edited by NVP; Sep 2, 2009 at 9:54am. Reason: no coffee = crap spelling , 2 Charts is simpler
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Old Sep 2, 2009, 10:44am   #73
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Danarm and his thread....Correlation ?

NVP started this thread aaahhh..........this guy uses correlation in some of his strategies/calls.....excellent thread and I have been following it for a while now

its mentioned here.....then i'm sure theres a template of how to trade later in the thread talking about correlations + I know that something called art of Pimpology that is also linked somewhere as a more Newbie thread (oops that may be on another Wedsite/forum)

anyway - another sucessful respecter of the Corry !

http://www.trade2win.com/boards/trad...ut-pips-6.html

Neil
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Old Sep 2, 2009, 2:35pm   #74
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ingot54 is on fire !

NVP started this thread hi everyone and I see we have had over 5,000 visits to the Thread already....so thankyou !

dont be afraid to pop in and discuss.......Ingot54 is already crashtesting the FXcorrelator for all its worth and I have asked him to bring this action to the thread more now as we have been sharing a lot of cosy PM chats up to this point.......

Ivan dont break it !!!!!!!!!! (ha ha)

Neil
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Old Sep 2, 2009, 2:48pm   #75
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hi everyone and I see we have had over 5,000 visits to the Thread already....so thankyou !

dont be afraid to pop in and discuss.......Ingot54 is already crashtesting the FXcorrelator for all its worth and I have asked him to bring this action to the thread more now as we have been sharing a lot of cosy PM chats up to this point.......

Ivan dont break it !!!!!!!!!! (ha ha)

Neil
Some would say and I would ofcourse never be one of them - that if Ivan is doing this in Aus ... then he might be doing things upside down ?

ho ho ho

(Sorry, late night - couldn't resist)
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