Best Thread Correlation Trading - Basic Ideas and Strategies

[lechatchat]

let me try and find one of my old indicators and post it here ..........once you see the diffs its easy to copy / paste ...............N

Yes that would be great!

Thanks,

L

 

[NVP]

Yes that would be great!

Thanks,

L

as soon as I sort out my connection issues will post it here

N

 

[NVP]

hey all

heres the week ........left is a 1 hour TF with a 500ma/delta1 setting to show the weeks moves with minimal skew ..........the right chart is the last month on a weekly chart on a 1ma to show the pure Currency moves per week

if you dont understand these then ask me here .......and I will expand further on the many many different ways to use strengthmeters

Yen and USD got bumped this week.......selling them made the money

GBP had a greeeeeeat week.......with a real kicker from wednesday .....(thats GBP as top dog for the second week running per the right side chart)


the FXcorrelator keeps it simple .........go ask the other sites and vendors and experts to comment on the moves this week currency by currency

you'll be there all day as they discuss each PAIR.........and be bored to tears ........

The FXcorrelator can sum up any trading situation for 8 currencies in seconds...........which is why I have developed my own version and use it 24/7.... 365 days a year

later
N

 

[NVP]

hey Jedster...........

I was trying to update a few old indicators on my Platform for the guys here .... and the strangest thing

If I duplicate an indicator with a new name (to then tweak it) I cannot load the new indicator (still the same) onto my charts ..despite the old one working and being EXACTLY the same

Eh ?
N

 

[NVP]

heres the Guardian article I may have mentioned a while back

I spent about an hour talking to David and it looks like its a pretty good piece

and John (Barlett) owes me a beer for putting them in touch !

remember most things are available for free if you research andwork a little harder yourself

N


Trialling 'learn to trade' stock market websites: can you get rich quick? | Money | The Guardian

 

[NVP]

I know this is not related to my Strengthmeter ramblings here but nonetheless I will adopt the same strategy for individual currencies as below if the conditions merit

Traders do it up and down it seems
N

http://www.trade2win.com/boards/first-steps/176822-general-trend-direction-fx.html#post2166312

 

[NVP]

morning all

woody Allen recently said that 80% of being sucessfull was just "Turning up".....

well like most mornings I was here at 6am (or earlier mostly) on the charts ..........shame about the other 20% then .......!!

N

 

[NVP]

here we are another day and another Dollar .........

we have Yen and USD still south on the left higher TF chart ...Hmmmm

i'm going to let the dow break north or south before I get bothered today

N

 

[NVP]

thanks for the feedback on the learning to trade video.........(on youtube - FXcorrelator channel)

sure its a little amateur around the edges but I mean every word I say and even if one Newbie manages to avoid the clutches of this new breed of "Sellinar" Vendors our business has sadly spawned then the job is worth it .......

Remember most things are available for free in the early years as you build your knowledge.......the Web and forums like this will steer you well .......you dont need to pay a fortune to learn about the basics !

Neil
NVP

 

[NVP]

mornin all........

My basic free system here advocates trading when the yen and USD are aligned above or below the Zero and the dow is in the OPPOSITE position on its own 20sma....

these days especially on a 20sma that can be a rare event ......and if you go to higher and higher MA settings naturally it gets even rarer.....

so if you are sitting on your hands and want a little more action you have to bend the rules.....and pay the consequences if it gets more choppy and dont blame me !

1) reduce the ma setting on the FXCorrelator and also the dow SMA line ......you can go down to even a 5ma if you want to play Whipsaw !

2) Consider using an EMA based system ..........I have the FXCorrelator EMA edition somewhere and will drop it in here if wanted

3) stay on the standard settings but start to only take 2 out of the 3 conditions - which in effect means you wiil always have a trading signal ..........not perfect ! (so you trade when Yen&USD are same side , or Yen and DOw are opposite , or USD and Dow are opposite..trading the currency mentioned in the usual manner and even considering the other currency as a partner..........so if Dow is above 20sma and USD is south of the Zero .....consider selling the U/J alongsdie any other USD sells)

4) use some / all of the above in combination !

thats it .........ive broken the rules for you !.......you have been warned !

N

 

[NVP]

heres the recent periods discussing the last post above

The Dow is hammering the 15,600 line .......interesting day ahead as a wall of money continues to attack us equities ......hmmmm

anyway look at the ticks on the charts ...........

Red ticks are full system alignment - great !
Yellow ticks mean the Dow and Yen are aligned so only trade the Yen pairs
Green ticks mean only dow and USD are aligend so only trade USD pairs

Yes I can use this trick in my own personal systems ......but again I encourage people to experiment to find their own paths.........

This thread just touches the tip of the iceberg and I just want to get people into using strengthmeters which are incredible tools and massively underated in forex trading in my opinion ......

in everyday life people live and die by ratings and relative comparisons to other products ....but not so in forex where relative strength is even more important to know ......

good trading
N

 

[NVP]

going to try to go VPS to solve some long standing issues

i'm going in ........cover me !!

Free MetaTrader VPS from Amazon AWS - YouTube

 

[elisab]

If you are thinking about a rise in oil, then buy Nok…

 

[Jedster2001]

If you are thinking about a rise in oil, then buy Nok…

I'm not sure I entirely understand that statement. Whilst Norway does produce some oil, I doubt the Krona would be massively affected by surging oil prices.

Further, I attached a chart showing the USDNOK with Brent overlaid. There is clearly no correlation in this chart.

Would you like to expand how and why you think this?

Perhaps your statement should have said:

"If you are thinking about a rise in oil, then buy OIL"...

 

[elisab]

I'm not sure I entirely understand that statement. Whilst Norway does produce some oil, I doubt the Krona would be massively affected by surging oil prices.

Further, I attached a chart showing the USDNOK with Brent overlaid. There is clearly no correlation in this chart.

Would you like to expand how and why you think this?

Perhaps your statement should have said:

"If you are thinking about a rise in oil, then buy OIL"...

UsdNok on reverse scale.
As you can see, in the long term, the correlation WTI / UsdNok is quite high. I prefer WTI to the Brent in my analysis.
Historically, the correlation is around 0.5

 

[Jedster2001]

UsdNok on reverse scale.
As you can see, in the long term, the correlation WTI / UsdNok is quite high. I prefer WTI to the Brent in my analysis.
Historically, the correlation is around 0.5

I'll say first off, if you are actively trading this, and making money, then very well done.

However, if is fair to say that the majority of people would not recognise a correlation between USDNOK and WTI. Attached is a screen shot of that chart. I adjusted the chart to use WTI instead of Brent and I have also inverted WTI (as you suggested) so that it plots its movements in the same direction as NOK (as opposed to being inverted).

From that chart, I just can't see how you can say that there is a correlation. Sure, there are some points where they both go up, or both go down at the same time, but the majority of the chart is completely uncorrelated. You say a correlation of about 0.5 exists, but a value of 0.5 would be interpreted statistically to mean a very low correlation. Correlation values generally (and I am massively generalising here) should be above at least 0.75 before being considered to be statistically correlated.

Further, when dealing with correlation, one has to (at least partially) understand the fundamentals that cause two instruments to be correlated. There is no real reason for NOK and WTI to be correlated, and the chart bears this out.

Now, as an alternate screen shot, see the second diagram of a good correlation. This is a screen shot showing the dow, and overlaid with the SP500. We do expect a correlation between the dow and the SP500, we understand the fundamentals behind it, and can also explain why (occasionally) the correlation breaks down.

I think it might be more helpful to people (certainly it would be more helpful to me) if you were able to make more detailed posts explaining the reasoning behind the strategies that you are using, and explaining the charts. As it is, posting a chart with a one line comment doesn't really get us very much down that track of understanding what you are doing and how you are doing it.

Thanks
J

 

[NVP]

Morning all.......

as the Dow continues to press that 15,600 line the signals tell me to stay watching USD and Yen sells .......at least one of them should usually be offering trades

and go opposite if the Dow crumbles below that channel now forming

Regards
N

 

[NVP]

since the downstairs of my house is now under seige from plasterers and decorators I've had to remove and hide all my PCs & stuff until further notice

should have charts back tomorrow or friday unless I can get VPS up in the interim

will come back on other non chart stuff later

cheers
N

 

[NVP]

http://www.trade2win.com/boards/for...-basic-ideas-strategies-1452.html#post2167362

Thanks J........

Elisab you have been a recently consistent contributor to this thread and I am very very grateful for all contributions.......Correlation/Strengthmeter based systems and analysis are woefully absent in most Forums......and mainly they are also inaccurate and uninformed in Nature

What Jedster (and I) are saying is that we would like you to post here more background on your own approaches and the profitability you are seeing whene using these systems.....

We are both here to happily learn and also share ideas regarding these specialist areas of trading
and as Jedster is responding in that last post - he has concerns as to whether such a strategy on NOK/OIL can be sustainable or profitable in the long term

In my opinion there are very few markets and Instruments where decent correlation does exist and can be monetised.....but many many many others where the correlation is spurilous at best and you will get very burned trying to attach consistency or profitability to them for trading purposes ........

These are all certainly interesting from a research and novelty angle but not for me i'm afraid unless I see the proof of the pudding ..........

So looking forward to some more input from you and indeed your defence of the OIL/NOK disussion above if you have been profiting from this relationship

Myself ? - sure I am aware of the COMMDOLL arguments regarding CAD, AUD,NZD and indeed NOK enjoying revenues from their natural resources and the theoretical correlation to the Currency Value ............but in truth I see it more as an easy option re the "Experts" commentaries to us when they are not sure why a currency has moved and Crude oil has moved the same way for the period being discussed !!..........

So these relationships are not concrete enough for me to have ever built a strategy around here at this thread but I am happy to be proved wrong !

regards
N

 

[NVP]

UsdNok on reverse scale.
As you can see, in the long term, the correlation WTI / UsdNok is quite high. I prefer WTI to the Brent in my analysis.
Historically, the correlation is around 0.5

a 0.5 Correlation reading is pretty light to me ......and like having a Lazy PHD qualified son ..........

some potential there but trying to extract any money will be difficult !!

N