Best Thread Correlation Trading - Basic Ideas and Strategies

[NVP]

jees ....that means evey goldbug stupid junkmail scammer is going to tell me they were right about buying gold again.....

wheres that junkmail filter button !!

N
e

 

[NVP]

That is possible. However, I would also say that what you are seeing isn't really a correlation. The Mexican Peso is highly volatile. There are many currencies that are highly volatile, the South African Rand, the Indian Rupee, the Hungarian Forint. Many many minor currencies have massive fluctuations. The Swedish Krona will regularly move 700 or so pips in one direction and then within a couple of hours reverse the move entirely! That is 1400ish pips of movement in one day. Regularly!

Try the SA Rand against the USD. Woh... It is often 2000 pips in one day. My broker gives me a spread of 80 pips on the USDZAR!!! And that is nothing compared to how much it moves.

These are not really correlations with the vix. They are simply highly volatile currencies, it is not quite the same thing. Going out on a limb here as I obviously haven't checked, but pull up a vix chart and overly any of these currencies and I am not sure you will see a correlation. You might see that as the vix increases, vol also increases in a particular currency. But that is what the vix is measuring - S&P volatility, which is a gauge of general market vol.

Just my midnight thoughts...

J

yep - and dont confuse correlation of 2 instruments/Currencies with directional strength.............they are not the same thing and help confuse matters in this field

N

 

[NVP]

UsdMxn and Vix: a positive correlation that has lasted for several months. If we bet on the explosion of the volatility, then we might sell Mxn.

or not.....

 

[NVP]

The volatility of USDMXN is at its lowest in recent months, just like the Vix. The positive correlation exists and overlaying USDMXN and Vix we can notice the perfect synchronicity of the movement. USDZAR instead is no longer related to the Vix.

if it works for you do it .....and best wishes for finding your path

N

 

[NVP]

mornin all.

Dow still trucking...........

N

 

[NVP]

the Dows success is amazing

heres a weekly Dow with a 3ma and a 20ma ovelayed....that 3/20 crossover is what I use on my 4hr FXcorrelator these days (the 3/20 crossover being the Zero line) and gives me a smoother idea of where the moves are ............so on this DOW chart we would look to buy Dow when the 3 was above the 20 ma and vice versa ........

jees thats some nice moves.......i'm in the wrong business ?

perhaps not ....the other chart reveals our 20/3 FXcorrelator on the same weekly..........selling yen since last September hasnt been to shabby either !

you decide ....:smart:
N

 

[NVP]

Beware ....

Gold under attack again......USD following south (so far) so the effect is not so profound on XAUUSD

you have been warned goldbugs

N

 

[NVP]

Mornin all...

the Green USD has been on holiday in the South now for nearly a week....

what is he like ?....no card, no phone call...

and its making the Goldbugs get excited again as they hope it stimulates gold back into life......

Jees..shall we tell them or not ? :whistling

Nice action if you follow the "Naked" FXcorrelator rules of trading when USD and Yen are same side of the Zero.......on that 1hr TF chart - monster action monday and then yesterday as the boys collapsed again for more Pip carnage

N

 

[elisab]

Interesting screenshot. I don't know why our charts look so very different.
Like I said though, if you trade the USDMXN based off a correlation with vix, then well done, good for you...

J

I think that in order to get an efficient portfolio, you could buy the S & P500 selling Mxn, an alternative idea of hedging against adverse market movements.

 

[NVP]

hey all

busy busy busy this morning since dawn.......will get on line at some point with charts

later
N

 

[NVP]

I think that in order to get an efficient portfolio, you could buy the S & P500 selling Mxn, an alternative idea of hedging against adverse market movements.

hey there E

could you drop that on a chart here to give us an example ?.....thanks

N

 

[Jedster2001]

hey all

busy busy busy this morning since dawn.......will get on line at some point with charts

later
N

Hi N,

Hope things are well...

ECB rate decision in about 10 minutes. Analyst are anticipating a rate cut, so it won't come as a surprise, but the move will all depend on the additional comments. If they don't drop the rate, anticipate a BIG rally.

Equally, if they announce negative deposit rates, it would be a real shock and EUR will fall big time...

Is everybody ready for the fireworks....

 

[NVP]

well I see that USD and Yen are both back south now on the 1 Hr....so perhaps we will get a run .....or perhaps not !

N

 

[Pipsaholic]

Looking for a list or diagram that lists all the global financial markets correleations with the euro? I understand they change hourly/daily however the common movement we expect?

 

[NVP]

Looking for a list or diagram that lists all the global financial markets correleations with the euro? I understand they change hourly/daily however the common movement we expect?

hey P

Been a while ...I hope your Trading journey is going well :smart:

Do the various searches ..........Ouanda usually covers this stuff fairly well and Kathy lien has good work on Correlation......

any particular reason for this enquiry ?

if you can programme Mt4 (?) I suggest you take my FXcorrelator and add the markets you want replacing the lesser needed currencies on the screen....you have 8 lines that can be shown on the standard indicator

I mainly use FXCM's UK platform so I am limited to Commodities and Equities.....but theres others that have more opportunities than that

Dont change the formulas though on the G8...that gives you the TRUE movement of the EURO against the Market which I suspect is what you seek to compare to other markets .just add the other markets as extra lines and then display them on the Indicator....

Equities will generally be positively correlated to Euro most of the time (read my thread here).......then personally it all goes a little vague to me regarding Bonds , Gold , Oil etc etc .........in truth my correlation work is more linked to watching USD and Yens movements to these markets that then impacts on the others .......a subtle but important angle......

I do follow Correlation in my strategies but its never as plain as people think........its taken me 10 years so far to get a reasonanle hold on what works and what doesnt

N

 

[NVP]

mornin all......

heres the week..ive marked out the main moves on the Dow and also the USD and Yen where they were the same side of the Zero line

Also ive then shown in writing where they inversely correlate (Dow one way and the USD/YEN the other direction) which is a decent signal for me to trade

clearly the more signals you need in any system - the later you get into the market to trade them .....if you read this thread you will know I say this a lot .........so you could

1) trade naked (just trade when USD & Yen are same side of Zero and ignore the Dow

2) use faster MA's than the 20ma (faster in - but you will get whipped more)

3) decide to trade either the Yen or Dow against the prevailing Dow signal...

the list is endless dudes .........you would not believe how the simple 20ma default system here with 8 currencies can have so many variations applied to it (look up my 7p's charts here - there are millions of ways to vary this indicator and the patterns it produces :smart

anyway ..........the chart below shows some decent signals .....hope you did well this week so far

N

 

[NVP]

Beware ....

Gold under attack again......USD following south (so far) so the effect is not so profound on XAUUSD

you have been warned goldbugs

N

heres golds week.........you can read about my system free below in the signature area .......

there was a beautiful trade earlier this week based on my rules...... and then yesterday a big move on gold north that was not supported by a USD demise so I didnt trade it .......

sure I should have done as it was a nice trade on reflection .......but without strict rules you will never have a solid system to trade and build on

without strict rules you will vasilate and jump between fads and fancies and you will not see the woods for the trees in your own approach and you cannot improve them as you are building everything on shifting sands.....

so set some basic trading rules and then apply them rigidly day in day out ......sure tweak them along the way but dont chop and change every 5 minutes as you cannot then develop the more important skills of MM and discipline and mindset that are needed to win in trading

any idiot can build a half decent system around trend following......but most people cant apply the important rules to make it profitable

(hint - discipline & decent Exit strategies) :smart:
N

 

[NVP]

heres the week on a 500ma 1hr chart

The Dow got hammered mid week but has rallied well.....I would not expect further increases on that move today and would be surprised to see it challenge the weeks high.......if anything am hoping for some falls today and to capitalise on that in the forex market :-

I' ll watch for continued gains on USD and/or YEN

i'll watch for another currency to drop the ball and fall below Support levels in the week....the rock'n roller has been AUD and I have placed a levl there that I will trade if it falls below it

Euro is tooo obvious as a sell and already may have taken enough heat this week

GBP is always a nice fallback if it dumps


game on ....the clock is ticking......bring it

N

 

[NVP]

watch the euro re sells .........my systams are flagging a possible dump

 

[NVP]

sorry if you miss it .........i picked up a few pips off the last 2 x 15m bars so far