Hi DreamLiner
Ive been trading correlations for 6 months with good success and would like to share some important points that have really helped me to avoid losing trades; Time Frame and Pair Choice.
Time Frame:
In my experience M1 and M5 are just too short and consistent profits will elude you.
Ive been trading M15 and M30. If I get a signal in M15, i try to compare the same signal in M30. If M30 is still a long way off from a signal, I wait longer until I feel comfortable or until both M15 and M30 give a signal. Over time you will get a feel for the pairs and their movements and when to enter. M15 and M30 give regular signals with acceptable draw down.
H1, H4 and D1 take a lot longer to give signals and draw down can be significantly more. In a nutshell: Less signals, more stable, more draw down, higher profit per trade, BUT less trades.
Pair Choice:
Don't trade negatively correlated pairs! Not worth it! Believe me I've tried.
Trade only positively correlated pairs with a total of 3 different currencies one of which "MUST" be hedged ie: (Buy)EurCad (Sell)EurUsd. This way you are hedged for any risk event on "EURO". Risk events for "CAD" or
"USD"increase the deviation between "CAD"and "USD" and is where you make your money on entering when they are about to retrace (READ: Overbought - Oversold). This way your risk is reduced.
The only risk to really watch out for is risk events that strengthen (or weaken) both "CAD" and "USD" at the SAME TIME! So always check the news for the 2 "NON Hedged" currencies before palcing your trade.
Here is a list of pairs I have traded on M15 and M30 with consistent profits.
I chose pairs based on correlation periods over 6 months (120 trading days) and 12 months (240 trading days). All pairs are correlated above 80%, at least on my brokers platform. Some pairs may be missing cos my broker does not have it.
EURCAD EURUSD
EURJPY EURUSD
EURAUD EURCHF
EURAUD EURUSD
EURCHF EURJPY
GBPJPY GBPUSD
AUDCAD AUDUSD
AUDCAD AUDJPY
USDCHF CADCHF
AUDUSD AUDCAD
EURUSD EURCAD
Big Thanks to all the folks in the thread especially DL and SMJones for the Tradable Correlations Indi (Mataf.net is a distant memory now!)
I hope my input might help everyone to be a more profitable.
Regards CKP
Ive been trading correlations for 6 months with good success and would like to share some important points that have really helped me to avoid losing trades; Time Frame and Pair Choice.
Time Frame:
In my experience M1 and M5 are just too short and consistent profits will elude you.
Ive been trading M15 and M30. If I get a signal in M15, i try to compare the same signal in M30. If M30 is still a long way off from a signal, I wait longer until I feel comfortable or until both M15 and M30 give a signal. Over time you will get a feel for the pairs and their movements and when to enter. M15 and M30 give regular signals with acceptable draw down.
H1, H4 and D1 take a lot longer to give signals and draw down can be significantly more. In a nutshell: Less signals, more stable, more draw down, higher profit per trade, BUT less trades.
Pair Choice:
Don't trade negatively correlated pairs! Not worth it! Believe me I've tried.
Trade only positively correlated pairs with a total of 3 different currencies one of which "MUST" be hedged ie: (Buy)EurCad (Sell)EurUsd. This way you are hedged for any risk event on "EURO". Risk events for "CAD" or
"USD"increase the deviation between "CAD"and "USD" and is where you make your money on entering when they are about to retrace (READ: Overbought - Oversold). This way your risk is reduced.
The only risk to really watch out for is risk events that strengthen (or weaken) both "CAD" and "USD" at the SAME TIME! So always check the news for the 2 "NON Hedged" currencies before palcing your trade.
Here is a list of pairs I have traded on M15 and M30 with consistent profits.
I chose pairs based on correlation periods over 6 months (120 trading days) and 12 months (240 trading days). All pairs are correlated above 80%, at least on my brokers platform. Some pairs may be missing cos my broker does not have it.
EURCAD EURUSD
EURJPY EURUSD
EURAUD EURCHF
EURAUD EURUSD
EURCHF EURJPY
GBPJPY GBPUSD
AUDCAD AUDUSD
AUDCAD AUDJPY
USDCHF CADCHF
AUDUSD AUDCAD
EURUSD EURCAD
Big Thanks to all the folks in the thread especially DL and SMJones for the Tradable Correlations Indi (Mataf.net is a distant memory now!)
I hope my input might help everyone to be a more profitable.
Regards CKP