Best Thread Correlation Trading - Basic Ideas and Strategies

[danjuma]

the dj-30 is the us30!

Many thanks.

 

[deebee1]

Many thanks.

no worries bud...

 

[NVP]

Hey Gang

As ive just briefed my VIP Crew......That Dow is under big big Pressure today after some gains in the week

just gotta be hunting buys on the yen and usd ?

(yellow and Green lines on the right chart) 😏

N

 

[NVP]

Hello NVP,
Just 2 or 3 questions please:


1. Is the free FXCorrelator indicator on your blog Free FXCorrelator Indicator & Video |FXCORRELATOR, the most up-to-date?

YES

2. For your 80/20 system, which time frame(s) do you use?

any ....but safely 15m TF upwards is best

3. Would the DJ-30 be the same thing as the US30 (DOW) you use? I can't seem to get this - US30 - on the MT4 platform I am using, so was going to use the free charts on FreeStockCharts.com, but can't get the US30 either, but got amongst others the DJ-30, which prices seem similar to the US30 in your examples.

YES - use them

Many thanks
Dan

NVP :smart:

 

[NVP]

Hey Gang

As ive just briefed my VIP Crew......That Dow is under big big Pressure today after some gains in the week

just gotta be hunting buys on the yen and usd ?

(yellow and Green lines on the right chart) 😏

N

yep - easy money today 👍

N

 

[NVP]

Hey Gang

if you want to see the big moves today (as above) 👍

Heres 2 versions of by simple strengthmeter ......symbols adjusted on each based on the platform you have - try them .....FXCM formats fit most platforms these days

YELLOW = JPY
LIME = USD
RED = GBP
BROWN = CAD
GREY = CHF
TURQUOISE = NZD
BLUE = Euro
ORANGE = AUD

ask me any questions - you know where I am :smart:

N

 

[danjuma]

1. Is the free FXCorrelator indicator on your blog Free FXCorrelator Indicator & Video |FXCORRELATOR, the most up-to-date?

YES

2. For your 80/20 system, which time frame(s) do you use?

any ....but safely 15m TF upwards is best

3. Would the DJ-30 be the same thing as the US30 (DOW) you use? I can't seem to get this - US30 - on the MT4 platform I am using, so was going to use the free charts on FreeStockCharts.com, but can't get the US30 either, but got amongst others the DJ-30, which prices seem similar to the US30 in your examples.

YES - use them

Many thanks NVP. 🙂

 

[NVP]

hey all

Well we are more than 6 weeks into the year and what is going on ?

The Dow is driving North.....is there no end in sight to that train ?

and using my FXcorrelator on a 1,000ma setting
http://www.trade2win.com/boards/for...-basic-ideas-strategies-1065.html#post1787370

the Yen(Yellow) and USD (green) are being driven south by carry trades........although the Greenback has had more limited falls due to other factors making it more favoured at times

the Grey Swissie (right chart) is FLAT......🙁 boo hoo......look what those nasty swiss bankers have done to my lovely Swissie.....total manipulation now and no fun at all as we cant use it in Carry plays anymore 😢

Steady buy action from AUD (orange) and NZD (light blue) - no surprises there off of carry trades - but not a riot due to more sombre Local economics

CAD (Brown) - slight Falls from catching the USD cold

Euro and GBP ..........Early falls now recovered..Jees the euro is defying Gravity !

since mid Jan my 80/20 system on higher TF's has been pretty much in "permasell" on the USD and Yen so I hope my gang have been making dinaros

Thats all :smart:
N

 

[NVP]

Nice Gold since early Jan as well....but I dont teach my Gold stuff here

not rocket science though...........Gold is my 9th currency I trade the same alongside the other G8

N

 

[Miko1]

nice stuff you guys post here. May I add my 2 cents 😉

Someone tried using the fxcorrelator together with overlayed charts?
From some testing this looks promising...



But this method can result in big drawdowns if the correlation takes some time to converge. So don't trade it blindly. Define entry and exit strategies and better predefine when it is time for you to abandon the trade.

This is not intended to be a stand alone tarding method but more some food for though! ;-)

 

[NVP]

Hey M

interesting !

my main concern is the scaling here as you are really just trading Euro against the GBP and at the mercy of the 2 different USD pairing sliding price scales (?)

On the FXcorrelator that can be signalled by just isolating the red (GBP) and blue (EURO) Lines and setting the MA to the setting you want to see where they crossover :smart:

I dont trade GBP against the Euro.........all my trades are USD pairing based - selecting the most promising currency to trade in the opposite direction to where the USD is going .....

N

 

[Miko1]

hey,

yes, you are absolutely right. If you buy E/U and short G/U you end up buying E/G.

But the point I am trying to make is that in general E/U and G/U are highly positive correlated instruments. So you wait till the correlation breaks down and pairs move in oposite directions and then you tade accordingly. 🙂

And yes, the scaling issue is something I am working on.
And another yes for the MA-Crossover. That's a good thing ;-)

( I also mailed you ;-) )

 

[NVP]

hey,

yes, you are absolutely right. If you buy E/U and short G/U you end up buying E/G.

But the point I am trying to make is that in general E/U and G/U are highly positive correlated instruments. So you wait till the correlation breaks down and pairs move in oposite directions and then you tade accordingly. 🙂

And yes, the scaling issue is something I am working on.
And another yes for the MA-Crossover. That's a good thing ;-)

( I also mailed you ;-) )

Hey M

in responding to above ..they dont correlate enough for me to use it seriously as a strategy.........sure they will generally both break in opposite direction to the USD but again I dont tend to rely on it and looking for large divergences on the E/G pair can be a dangerous game

Good points though and respect 👍

N

 

[Miko1]

Thanks for your feedback and you got some valid points. I am not trying to convince you, just exchanging ideas and views 🙂

Here you can also see the corrleation table. 93% ~ on a weekly basis (watch out, at one point it broke down big time and that's when you need rules to exit), 86%~ and a daily basis. And you can see how the correlation varies on an intraday perspective and that is exactly what I think makes it attractive.



Maybe some food for thought ;-)

 

[NVP]

hey M

think about what those stats really prove....to me they mean nothing and I am only interested in figures right at point of trade

anyway sent you some ideas that may help ....and may even be same as yuors already ...hope they help :smart:

good trading
N

 

[NVP]

M there are some convergence divergence posts on this forum and some thoughts of mine how to trade them ......search under some key words like convergence

respect
N

 

[Aspen Trading Group]

Thanks for your feedback and you got some valid points. I am not trying to convince you, just exchanging ideas and views 🙂

Here you can also see the corrleation table. 93% ~ on a weekly basis (watch out, at one point it broke down big time and that's when you need rules to exit), 86%~ and a daily basis. And you can see how the correlation varies on an intraday perspective and that is exactly what I think makes it attractive.



Maybe some food for thought ;-)

In my experience measuring the correlations among FX pairs provides no edge at all. It is a common misconception that the behavior of one FX pair will be useful in predicting the behavior in another pair.

Now, what is useful is/are correlations between FX pairs and various asset classes.

 

[NVP]

Hi Guys

yep 100% agree.........I look for negative correlation of Equities to Yen and USD and then trade the other currencies against them accordingly

I have nothing really tangible or consistent to use to justify trading the GBP against the Euro apart from Economic news releases, fundamentals or perhaps indicators that show significant overbought/sold signals

so not an edge in sight for me :smart:

N

 

[NVP]

like last few hours....

I dont really need to follow peripheral trading signals when the big green one is moving like this....easy pips :smart:

N

 

[NVP]

hey all

take a 500ma FXcorrelator and slide it next to the mighty dow (US30)

heres the dailys..... and Dow futures hit 13,000...wow !

this year so far the play was "risk on"

buy dow - sell Green usd and Yellow Yen (although the usd has been a far tougher nut to crack than the Yen that was the easy sell)

classic buys in 2012 so far were the AUD(orange),NZD(light blue),the red GBP and surprisingly the blue Euro as well....(go figure !)

and with the US Economy doing well that usd buy into Yen has also been a nice nice play

whatever you do and however you view the markets - a Strengthmeter shows you clearly whats happening....which is why personally I 100% follow strengthmeter based Trading systems...why settle for something less ? 😉

N