Best Thread Correlation Trading - Basic Ideas and Strategies

[NVP]

volume of forex traded ?

hmmmmm

I am well aware that in forex we do not have the luxury of a closed market structure that can provide volumes traded to assist in market analysis

but can I ask the general question here of what do we have in forex and is it of any use ?

in terms of daily volumes of currencies traded (G8) i am also going to take a guess below and am happy to be corrected :-

Highest to lowest in daily average volumes.......obviously if a currency is in the news then its demand increases dramatically

USD .........by miles I suspect as acknowledged global currency
Yen......due to far East Markets size & preference + west utilise carry trades
Euro.......due to size of countries requirements ?
GBP........assuming its next but not sure at all !
CHF........?
AUD.........guess... could be higher actually
CAD........guess....... could be higher actually
NZD......bottom due to country size ?....but its a good carry trade !!

spreads probaby are biggest clue to this......??

Why am I/ asking ?............not sure yet but i'm sure it will be useful
in the end !

N

 

[NVP]

Hi N,

Welcome back to the dark side! How is the manflu thingy?
Simon.

anti biotics working well ...........trying to convince wife that beer is also useful in the process but shes not buying at moment......damn :innocent:

we are both stuck in lounge now with me on pc....jees....feels like i'm back in my first studio flat !!

N

 

[NVP]

2010 and finally we are rolling

right ......lets look long term charts

heres a 4h 1000/1 corrie (left)....alongside my index corrie set on 750/1 as the 1000/1 setting is to much for some of the feeds (not enough bars in charts)...close enough believe me for this exercise !

so what do we see.........heres my 2 pennuth but c'mon look yourself !

corrieindex (right chart)

the demise of the markets and commodities in dec seems to have subsided now and we have consolidation plus small increases on some markets with Crude (brown) bouncing back well + gold (gold) and FTSE (red) both displaying HH/HL so far in jan

Dax (blue) & S&P (Grey) flattish but overall its positive activity in Jan so far.....I do not comment on these markets but use them (espec Gold and S&P) as a correlator to Forex plays......

you all know the score by now..the indications above in jan should indicate lower Tag team espec the gold/USD signal....so is this true ?

4h Corrie (left)

around 23rd dec the tag team did noticably turn down....yen first then USD followed as gold starting kicking back upwards, so correation was quite good here....both still falling slowly but retraces are high and causing a big channel so be careful when picking entries to sell them....also tag are diverging currently so watch it

personally I think that the tag should already be lower than this but looks like the Euro pair (E/G) are taking the low ground in their place which is interesting.....notice we also have the others on top of pack creating 3 very seperate tribes at present !

AUS & NZ is probably the int rate differential and Crude could be firing off of the crude oil rebound (?)......they are playing to true correlations though and on the right side of the Tag team based on other markets

Sterling is just pants at moment (the currency is struggling to find any light in the tunnel at present.....) and Euro is also below the tag but for how long if markets keep pushing up ?

the swissie is always a nice benchmark currency for everything and sitting bang in the middle does not surprise me......In more normal circumstances I would expect to see E & G closer to it.......

Predictions ?

nonononononono.....not starting that !......all i will say is watch key S/R levels, pay attention to price patterns (HH/HL or LL/LH) and the core correlation / market ideas we always discuss hers on this thread...no magic buttons or formulas, just cold analysis and common sense.

personally I think the tag s/be weaker so if the markets start to bomb a little I think we have some nice plays buying tag and selling others.....particularly Europair assuming they fall back into strict correlation mode and bomb with markets

Thats the long range then :smart:
N

 

[NVP]

3 ducks update

ok dokey........heres phreddies territory at the moment

i have 2 corries up on G8 currencies.....setting on 60/1 which is the 3 duck setting from Captain currency

im not bothering with showing the 5m as thats the trigger trade chart and i'm just trying to give an overview here......

corrie can be use at any MA setting of course in multiple chart set-ups but we have started with the 60m (3 duck) as its so well known as a starter....

so what do i see ?

well in theory I should simply say that any currency that is above (below) another curency in both charts is a candidate for a trade due to the combined TF supremecy...so really therefore I see CAD & AUD as buys against most others and Yen & GBP as sells against others.....ok ? ...use the 5m 60ma corrie as a trigger

however let me add some more subtlety to this as the recent movement of currencies prior to current position does normally ield interesting clues....

first off I like my G8 world to be nice and correlated as (my personal view) it adds to the probability of the movements to come....therefore I like the Tag (Yen/USD) moving together as when this is happening their dual-power is undesputed and will move the others more predictably in the opposite direction....

we have some divergence at present so confuses the situation.....even if you can get them on same side of zero is a bonus for me and will make trades more predictable....not happening on the H1 as you can see

my calls ?

for me only the yen and the euro are showning downward bias (shape) on the 1h and the 4h....I need some more downward action on the GBP on that 1H to convince me to sell it and thats it really re sellers.....you gotta be below the zero really to consider sellers in the first place unless you are going for a convergence gamble play on a big o/b position....(not bad sometimes on Yen or GBP when they are overbought)

Buy-wise its CAD or AUD but to be honest I'm not a gret fan of trading either (espec CAD)and I need some more action on the 1H before I get exited again as they are both consolidating a little....for me USD is the real powerball on the 1h already into the top half but consolidating a little at present (but its still below Zero on the 4h !)

see how confusing it is.......especially when tag diverge

IF YOU PUT ME ON THE SPOT

Sell E/U.......If Gold falls now I think USD will continue to go up and Euro looks weak + USD is above it on both 1h and 4H......GBP as a sell against USD is a possibility but boy that GBP is twitchy re whipsaws and could also run upwards with USD....(as we have no correlation on TagTeam remember :smart

but what do I know ?
N

 

[NVP]

todays action..tough in the trenches ?

Hi all

heres a quick update on todays action thru corries eyes

theres 3 pairs charts on the left....15m

across the top is my indexcorrie with Green being usd on 5m 20/1 setting

then middle chart is a 1000/1 corrie 5m and right is a 30m corrie 1000/1
4 currencies Tag + G+ E

overview

early hours trading was real smooth.....Tag up and Europair down....shame we all are asleep !

first trading opp is 8.25 ish....(first green vert on the 2 charts) gold falls below zero on the index corrie and so does (grey) S&P....the classic superboost scenario for the tag and to sell europair.....but what a lottery......GBP yielded down but Euro went up with Tag

9.40 same opportuntiy arose again......and euro yielded but GBP went up with Tag


11.05 I may have taken another pop at same (although gold was gradually moving upwards).....complete disaster

then finally 11.35 one more for for luck again as gold fell below zero....again Euro fell but GBP rose with USD......jees !!

this is very very frustrating as we got 3 out of 4 spot on re buying USD but our currencies yielded varying results as GBP and Euro swung around to much and were not correlating together at the same time.........a day like this we may as well have traded Gold instead as 3 out of 4 is good......!

so how the hell do we get more of a handle on how E/G is correlating to the tag

JRP....you were sitting in the ok corral today with a pop gun so dont feel to bad .....!

until tomorrow pardners (systems willing)
N

 

[NVP]

sorry.......late on parade

good action buying G selling U...the 15m 7am bar was beautiful in identifying GBP's burst upwards and it took out U and E for many many pips so far to date
(see the green horizontals on the 3 pairs 5m charts)

todays action is totally down to GBP's strength...the markets are moving USD but as you can see U/E & Yen are stationery compared to GBP's action...

in fact ive dropped a small 5m 60ma chart in on the 5m 1000/1 main corrie (small centre chart)......look at the domination of the red line here ! ......for corrie/3 duck fans fans this chart is the trigger 5m 60ma for that particular system....i'll post that next for the fans......phreddy to also update if he gets on

hope JRP got some pippage.........suspect so

gbp still piling up and heading for a resistance level on the 30m (far right)...watch if USD breaks that support on 5m and 30m as well........

ok got to do some work now
N

 

[NVP]

3 ducks system update below.....

a few changes from my ramblings last night

GBP has totally taken over the show but due to the strict rules you have to wait for all 3 charts to align before trading....since GBP was at bottom of the 4h its only Yen and euro (and now just about USD) that you could have bought GBP against so far.....

this is the conflict of different rules based systems......I suspect most scalpers have already got at least 50 pips + on G/U so far this morning but the 3 ducks is only just opening up that trade possibility .........

you pays your money and takes your choice !

what next ?

the tag are still not correlating so i'm uncomfortable to be honest......euro continues to look weak on the 3 ducks (as I said last night) but the Usd is falling as well.....

Yen looks like its making a comeback behind GBP.....jees who knows as s&p futures are flattish....

strict rules are buy GBP and sell USD/CHF/Yen/Euro.....but perhaps that train has gone looking at the 5m and a GBP retrace is imminent ?

later dudes......:smart:
N

 

[NVP]

gold on the 1m and 5m nearly below zero finally .......could slow down USD and possibly start to raise/flatten it......doesnt mean GBP wont keep going up though.......

I need some Tag correlation !!!

N

 

[NVP]

hmmmm.....yes things have flattened :|

so now we wait........gold moving into sub zero territory on the indexcorrie looks like continuing to force USD upwards or at least maintain neutrality for now........

perhaps Yen will wake up now ?
N

 

[jrplimited]

Hi N and all else,

Big caution day to day as its nfp later on. Surprisingly I thought markets were quite bubbly this morning instead of their usual indecision behaviour prior to the nfp data release - maybe making up for yesterday perhaps? Onto what I saw:-

GU; First trade was buy stop at 59808 which got filled during first part of 08:25 bar and price immediately shied away but only for a low MAE and took another three agonising bars to move solidly away from entry point and upwards. Got a tad nervous around the 09:10 bar as price faltered somewhat but it eventually carried on and took me out with TS on 10:15 bar's low for 38 pip profit.

EU; Took a wee while to find anything to start with, then had buy stop filled at 43272 during 08:45 bar, watched it rise slightly, then retrace, and rise again only to retrace again but this time I had managed to move initial SL up a few pips so was taken out during 10:05 bar for 15 pip loss. Second trade was sell stop at 43128 filled during 10:30 bar's low, price backed off somewhat then duly obliged by popping down and mororing on south. TS taken out during 11:20 bar for 11 pip profit.

EG; Waited to see who out of E or G would slide south first but from chart it was apparent that E was weakest so entered short on opening 08:50 bar at 89464, suffered a very small MAE before price engaged gear and motored off downwards. Trade closed during 11:40 bar (TS finally hit) for 14 pip profit.

Easy to see now on reflection that I should of bailed that first EU long trade having seen a clear break of EG downwards whilst GU was upwards, but in the heat of battle I dont really get the chance to make those sort of hindsight decisions, plus I do try and stick by my own rules to boot, plus its snowing, plus blah blah.... Excuses!

Be careful this afternoon and trade well - regards,
Simon.

 

[NVP]

ok......the ole usd has oblidged with some upwards bias and Yen is finally following as well...... so correlation returning to the tag


personally I feel USD has more to go upwards and with correlation back in fashion i am more comfortable looking to buy Tag ansd sell europair on appropriate pairs signals

now the lull before the US opening.........

JRP......howdya do ?
N

 

[NVP]

Hi Guys

heres the index corrie I talk about stripped to 3 lines

Gold , USD (green) and the GBP (red)

its on a 20/1 corrie setting (the usual one i follow for this) and ive removed the other lines/markets to show how interesting the relationships are here and the endemic problems relating to trading success.....

so all I do is look for when gold moves above or below the Zero line (ie it breaches its 20ma)...and I use this to predict what the USD is gonna do.........

I have no idea how any other currency is going to react apart from relying on my "power law" correlation principles I keep preaching to you........that is that generally all other G6 currencies will move against the TAG when Usd & Yen are moving together.....

So how did this work on the 5m so far today ?

heres about 5-6 trading scenarios re the Gold crossover all on the Green Verticals

Trade 1 (L to R).....4am
nice gold rise but all USD does is stay neutral.........GBP kicks around and you would have lost out....what this tells you though is that a rising gold futures price is not driving USD down - so potentially USD could be bullish in disguise ??

Trade 2 .....5.20am
following from above the drop of gold does now allow USD to push upwards and trading against GBP here as an example yielded a few pips (see how GBP drops)....not rockafeller though

Trade 3 ......6.45am
at last we are in London opening territory.....that retest on golds rise from below that then breaks the zero is a perfect signal to expect a USD Fall and it does !....you had to wait though, and then perhaps wait for the conventional 20ma pair crossover on GBP before reaping the big pips.....if you had gone to soon GBP was not ready (not sure re other currencies) and you would have been whipsawed out.......

Trade 4......9.25am was beautiful in opposite direction.......
an early retest warns us not to go in toooo soon, but then lovely action as GBP falls and USD rises...we do not have the luxury here of waiting for a crossover on the G/U so we are playing a pure convergence trade on G/U

Trade 5...11am is a shame.........USD does oblidge by falling as Gold rises above the Zero but USD is being closely tracked by GBP so this is not the pair to trade....also correlation of tag has been crap today so that doesnt help...and contributes to the mess

Trade 6.....(12.05pm)....messy......the sell gold and therefore buy usd is clear enough but USD is pretty high (o/b ?) already so it makes you nervous of further immediate extension....which proves a correct analysis as /usd falls a little.....GBP falls like a stone though so that is very helpful if you decided to bite the bullet and play the G/U regardless....

so thats it really.......theres lots of further work to do on how we scalp trade the G / U / E triangle but I hope you are starting to see the potential here re adding this as a condition of trading .......

the index corrie is available by pm'ing me direct and sorry but its conditional on people contributing a little to this thread

ask any questions here please i am happy to chat
N

 

[NVP]

Hi N and all else,

GU; 38 pip profit.

EU; 15 pip loss........Second trade 11 pip profit.

EG; 14 pip profit.

Easy to see now on reflection that I should of bailed that first EU long trade having seen a clear break of EG downwards whilst GU was upwards, but in the heat of battle I dont really get the chance to make those sort of hindsight decisions, plus I do try and stick by my own rules to boot, plus its snowing, plus blah blah.... Excuses!

Simon.

Our resident professional gunslinger delivered..........mainly on the ole G/U which was nice earlier.....Simon caught my Trade 4 analysis explained in earlier post above ...including the hiccup i mention !

anything 30+ pips on what was on offer in trade 4 was top gun trading

N

 

[NVP]

jees usd has collapsed and gold has exploded !!!!!

no tag correlation again with Euro favouring Yen and GBP favouring USD

usd is rocking............bring on the NFP's

N

 

[jrplimited]

Hi N,

Yeah seeing that one, nfp was a nuke for cousins across the pond. Stay out for at least another 15 minutes or so as market made a large gap.
Simon.

 

[NVP]

correlation now as yen falls with USD..........

 

[NVP]

i havnt seen usd move this much for a long time..........whoa !

gold is responding as anticipated by flying up

N

 

[NVP]

Tee Hee......just spent 1st 2 hour session training my newbie....shes now gone off to lie in a darkened room as to much information

I'm gonna recommend her going thru babypips for a general overview as I think its quite good from memory ?

N

 

[jrplimited]

Hi N,

Dont know too much about babypips but I see from various posting around the shop that its a good place to start. Some of the bucket shop and SB sites also get into surprisingly well laid out explanations.

I'll be contacting you over the weekend - have a real good one and great to see you recovering from 'flu and net connection problems.

Regards,
Simon.

 

[NVP]

Hi N,

Dont know too much about babypips but I see from various posting around the shop that its a good place to start. Some of the bucket shop and SB sites also get into surprisingly well laid out explanations.

I'll be contacting you over the weekend - have a real good one and great to see you recovering from 'flu and net connection problems.

Regards,
Simon.

i'll shop around re training...........yep ....contact me as funnily enough I have few plans to go out much (more snow already this morning in west sussex)

N