Best Thread Correlation Trading - Basic Ideas and Strategies

[NVP]

hey all


well well well....Gold certainly is in the news at the moment

heres a weekly goldmeter .....default setting is 20ma

the violet line is Gold .....the others are our usual currency lines and the colours are the same (I think i ditched the CHF line to show the gold line)

so think of Gold like a currency same as the other lines around it - its priced is relative to the other currencies as well

what do you see ?

I see sell sell sell .............and USD is rising so inevitable the XAUUSD chart is a massive sell :clap:

check out the signature area below for more information.........save yourself all the fees on those Gold expert sites and systems and gurus......this ones gratis ....just add your brain to the equation and trade what you see dudes....:smart:

N

hey ...have all those buy gold sites stopped saying buy gold yet ?........nope they are saying to average down ....hahahahahahhaha.........those guys crack me up !.......:cheesy:

 

[Purple Brain]

NVP, been following your thread with great interest as I have been developing something similar. You're presumably using some bespoke algo to provide the individual currency strengths while I'm just using a Walter Mitty lash up involving effectively nothing more than degree of slope across all the majors and deconstructing it into the constituent elements. I come up with extremely similar plots to your which is as heartening as it is interesting.

MY question is, how you use these plots. You posted a composite showing both a 4-hour and a 15-minute chart with specific regard to Japanese Yen. Do you get on board with the longer term slope strength/weakness and then exit on a reversal on the shorter term?

 

[Purple Brain]

NVP, been following your thread with great interest as I have been developing something similar. You're presumably using some bespoke algo to provide the individual currency strengths while I'm just using a Walter Mitty lash up involving effectively nothing more than degree of slope across all the majors and deconstructing it into the constituent elements. I come up with extremely similar plots to your which is as heartening as it is interesting.

My question is, how you use these plots. You posted a composite showing both a 4-hour and a 15-minute chart with specific regard to Japanese Yen. Do you get on board with the longer term slope strength/weakness and then exit on a reversal on the shorter term?

 

[NVP]

NVP, been following your thread with great interest as I have been developing something similar. You're presumably using some bespoke algo to provide the individual currency strengths while I'm just using a Walter Mitty lash up involving effectively nothing more than degree of slope across all the majors and deconstructing it into the constituent elements. I come up with extremely similar plots to your which is as heartening as it is interesting.

MY question is, how you use these plots. You posted a composite showing both a 4-hour and a 15-minute chart with specific regard to Japanese Yen. Do you get on board with the longer term slope strength/weakness and then exit on a reversal on the shorter term?

Hey PB

I've been playing with strengthmeters since the early 2000's ......sure I have developed a few Algos over the years and in truth I am very lucky as I have always managed to attract some seriously good Programmers/Traders to help me...

In fact for the last month or so I have been working with someone who has worked with the best of the best in this field so I count myself a very very lucky bunny...

Strengthmeters are seriously under-rated as trading tools ..........I invite people to consider my "7p's" below and apply them to my humble default 20ma setting on the G8 and immediately you start to realise the potential to profit from the rules and patterns that materialise again and again

alongside that I would suggest in your own experimentation and Research to :-

1) Keep rules objective - always prove your gut feel analysis
2) Keep it simple - too many rules destroy good core systems
3) ensure the System is Tradable - too many systems are impossible to trade

That last one is a kicker.........being "in the moment of trading" is completely different to looking back 2 bars and saying I would have taken the trade there....

As James bond always says to Q .............."its different in the field"

Slopes are an issue for me as its a little subjective - personally I would always advocate absolute measures such as closing bars that have exceeded defined values like the Zero line ........and remember that momentum is a key measure in any trading system

let me know how its going :smart:
N

 

[Purple Brain]

Strengthmeters are seriously under-rated as trading tools ..........I invite people to consider my "7p's" below and apply them to my humble default 20ma setting on the G8 and immediately you start to realise the potential to profit from the rules and patterns that materialise again and again

Slopes are an issue for me as its a little subjective - personally I would always advocate absolute measures such as closing bars that have exceeded defined values like the Zero line ........


N

What are the "7p's"?

And what do you mean "personally I would always advocate absolute measures such as closing bars that have exceeded defined values like the Zero line". What would be an example of a defined value and what is the zero line?

NVP, thank you for your response as it's a rare thing to have someone being so genorous with their methods and time. Very much appreciated.

 

[Purple Brain]

Sorry, didn't see the attachment to your post the first time I read it. Please ignore my question about the 7ps.

 

[Purple Brain]

Without wishing to embarrass you with a flurry of compliments, that Powerpoint slide is among the most useful set of bullet-points I have seen.

 

[NVP]

Without wishing to embarrass you with a flurry of compliments, that Powerpoint slide is among the most useful set of bullet-points I have seen.

Thanks......a few years back I made a concious decision to start posting here at
T2W to help clarify my own thoughts and processes

like online journals it stops you getting Lazy and promotes self-discipline

N

 

[NVP]

What are the "7p's"?

And what do you mean "personally I would always advocate absolute measures such as closing bars that have exceeded defined values like the Zero line". What would be an example of a defined value and what is the zero line?

NVP, thank you for your response as it's a rare thing to have someone being so genorous with their methods and time. Very much appreciated.

the Zero is part of my basic trading system offered here for free ...read the signature area for details and have a play :smart:

N

 

[Purple Brain]

Just read your primer and installed the indicator. Stunning work NVP.

The first two points which jump out at me and although appear self-evident are far from intuitive, so I'd appreciate your comments.

1. You never trade usd against jpy
2. There is an inverse relationship between usd and the DJ index.

Why does the yen of all the 8 majors have this special relationship with usd?

Why is there an inverse relationship between usd and DJ index?

Looking at the current action we look likely to get DJ moving above the sma 20 and usd and jpy moving below the correlator zero line. The nzd and eur appear to be the most strengthening of all the currencies. If this occurs/continues, would I be right in thinking a short nzdusd and/or long eursud would be the way to play it?

 

[NVP]

Just read your primer and installed the indicator. Stunning work NVP.

The first two points which jump out at me and although appear self-evident are far from intuitive, so I'd appreciate your comments.

1. You never trade usd against jpy (not in this system - in others I happily do)
2. There is an inverse relationship between usd and the DJ index....(yes and no.......its not as prevelant as it was)


Why does the yen of all the 8 majors have this special relationship with usd? - historically the relationship is "carry trade" driven ......CHF used to form part of this trio as well until it became the Euro's "bitch"

Why is there an inverse relationship between usd and DJ index? - see above...the carry trade

Looking at the current action we look likely to get DJ moving above the sma 20 and usd and jpy moving below the correlator zero line. The nzd and eur appear to be the most strengthening of all the currencies. If this occurs/continues, would I be right in thinking a short nzdusd and/or long eursud would be the way to play it

i'm not at screens today but you only ever buy (above zero) rising currencies and sell falling currencies (below Zero) .....so in this scenario above you buy NZD and Euro into selling the YEN and USD.......
?

hey PB

see above in italics :smart:

N

 

[NVP]

I also have a few older videos at youtube if you are interested ...may explain things a little better

youtube FXcorrelator

N

 

[Purple Brain]

The carry trade. When you borrow the currency with the lowest interest rate (jpy) and sell that to buy the currency with the higher (earning) interest rate and pocket the difference on the rates - plus/minus any currency rate appreciation. Is that correct?

But I still don't get the connection between the usd and the DJ index. A strong stock market means more dollars are required to buy stocks and therefore the strength of the usd should rise, not fall. I've obviously got this bit wrong so would appreciate understanding what I'm missing, other than a few brain cells.

Is there an equivalent inverse relationship between the FTSE and gbp?

Thanks for the youtube suggestion. I'll check it out.

 

[NVP]

oh dear

2 innocent pokes by me at moneyweeks gold publications and my comments are being sin binned again .......all I was doing as talking about Chinas Data and its credibility

who said that the press was free ?
N

 

[NVP]

The carry trade. When you borrow the currency with the lowest interest rate (jpy) and sell that to buy the currency with the higher (earning) interest rate and pocket the difference on the rates - plus/minus any currency rate appreciation. Is that correct?

But I still don't get the connection between the usd and the DJ index. A strong stock market means more dollars are required to buy stocks and therefore the strength of the usd should rise, not fall. I've obviously got this bit wrong so would appreciate understanding what I'm missing, other than a few brain cells.

Is there an equivalent inverse relationship between the FTSE and gbp?

Thanks for the youtube suggestion. I'll check it out.

remember carry trades can also embrace othr markets (like Equity) and currencies....... with "risk on" trades people buy riskier assets and fund them from cheaper sources (like selling Yen and USD) .........its a little more than just intercurrency movements .........

google any stuff on intermarket relationships, correlation etc etc as its a good read ............a guy called john murphy is also a good read on this subject

N

N

 

[NVP]

Mornin all

Yen playing the rollercoastergame as usual...........and nice to see the USD falling alongside its Yen pal yesterday ..that always gives me more confidence to trade

Yen is a very volatile currency and can cut both ways ......so always handle yen pairs with Kid gloves .....especially GBPJPY

N

 

[NVP]

heres the goldmeter on a 4hr TF..........golds collapse was foretold on this indicator as the Violet line (absolute Gold vs all currencies) was already bottom of the pile.......and then the heavens opened !

This system is stupidly simple .......Gold can be seen as a currency - so I treat it as such on this indicator.......and since everyone says you should note the performance of gold vs all the "fiat" currencies I do on this indicator....

.....and when gold gets either 100% above or 100% below ALL the fiat currencies what does it tell you to do ? :innocent:

later :smart:
N

 

[NVP]

Jees.........i am really struggling to get decent screen time this week and having to focus on pre work trading .....................will try to get live later this week if I can during the meat of the London session

N

 

[NVP]

I also promise to take a look soon at my (lack of) website situation as well

if you've been following the saga my IT partner has had an ongoing disagreement with our Web provider and it has gone very sour indeed with my websites now down

I will take a look and try to get resolution in the next few weeks

N

 

[NVP]

I also promise to take a look soon at my (lack of) website situation as well

if you've been following the saga my IT partner has had an ongoing disagreement with our Web provider and it has gone very sour indeed with my websites now down

I will take a look and try to get resolution in the next few weeks

N

hey all

as a Temporary measure I have fired this up ....contact me here if you prefer not to chat on T2W

cheers
N

http://fxcorrelator.blogspot.com/