All things are relative

All things are relative

Finding out the right relation to something when trading with currency pairs.
Qualified instruments are extremley seldom to which a trader could refer to by parsing the forex market & Likelihood - he's good company.

A forex trader may look at the value of their chosen instrument versus the value of correlative pairs to try and determine what price may do.

On many trading platforms, there are 40 or more instruments to trade.
But which ones should you trade?

That is 40 charts comb through. However, if you are looking at multiple time frames you are looking at 3 to 5 charts for each instrument!
That is more than 120 different charts.

That would take a lot of time to identify which instruments to trade.
More than likely, traders will just stick to one to five pairs to keep their analysis simple.
However, they kick themselves because they miss the 200 pip move (e.g. in AUDCHF) because it is not the pair they are watching.

West Texas Oil, 2015 Mai 06

relative - adjective
having reference or regard; relevant; pertinent (usually followed by to)

relative
/ˈrɛlətɪv/
adjective
1.
having meaning or significance only in relation to something else; not absolute: a relative value
2.
(prenominal) (of a scientific quantity) being measured or stated relative to some other substance or measurement: relative humidity, relative density Compare absolute (sense 10)
3.
(prenominal) comparative or respective: the relative qualities of speed and accuracy

Relative could also be:
see #8, please.

http://www.barclayhedge.com/research...arbitrage.html

Understanding Relative-Value Arbitrage
Relative-value arbitrage is an investment strategy that seeks to take advantage of price differentials between related financial instruments, such as stocks and bonds, by simultaneously buying and selling the different securities—thereby allowing investors to potentially profit from the “relative value” of the two securities.
Before we explain that, let’s review the concept of arbitrage. Arbitrage, at its most simplest, involves buying securities on one market for immediate resale on another market in order to profit from a price discrepancy. But in the hedge fund world, arbitrage more commonly refers to the simultaneous purchase and sale of two similar securities whose prices, in the opinion of the trader, are not in sync with what the trader believes to be their “true value.” Acting on the assumption that prices will revert to true value over time, the trader will sell short the overpriced security and buy the underpriced security. Once prices revert to true value, the trade can be liquidated at a profit. (Remember, short selling is simply borrowing a security you don’t own, selling it, then hoping it declines in value, at which time you can buy it back at a lower price than you paid for it and return the borrowed securities.) Arbitrage can also be used to buy and sell two stocks, two commodities and many other securities.
Relative-value arbitrage is also referred to as “pairs” trading. That’s because with relative-value arbitrage, an investor invests in a pair of related securities. Ideally, these securities will have high correlations, meaning they will tend to move in the same direction at the same time.
Stocks in the same industry that have trading histories of similar lengths are often used in relative-value arbitrage. Automotive stocks GM and Ford are good examples, as are pharmaceutical stocks Wyeth and Pfizer. But indices, such asthe S&P 500 Index and the Dow Jones Utilities Average, can also be used in relative-value arbitrage. So can index-tracking stocks, such as the QQQQ (which tracks the Nasdaq Composite Index) or the SPY (which tracks the S&P 500 Index). In fact, when it comes to choosing securities, the sky is the limit: Relative-value arbitrage works not only with stocks, but also with futures, options, currencies and commodities.
Whatever securities are used, when the prices of the two securities diverge—meaning one security rises in value and the other security falls in value—the relative-value arbitrageur buys one security and shorts the other. When the prices converge again, the relative-value arbitrageur closes the trade.
Because relative-value arbitrage requires securities to be correlated in price, it is typically used in a sideways market, which is a market that is neither rising nor falling, but trading within a specific range. Whether a market will continue to stay within a specific range can be difficult to evaluate, however, as markets can change direction quickly. So, relative-value arbitrage requires the knowledge and skill to evaluate not just individual securities, but the markets as well.

Because of these risks, large institutional investors—such as hedge funds, private equity firms and investment banks—are the major user of relative-value abitrage.
In summary, then, while relative-value arbitrage may help increase returns in difficult market environments, such as sideways markets, it requires significant expertise, and is best used by sophisticated investors who are willing to accept its risks.
Get comprehensive and up-to-date information on 6100 + Hedge Funds, Funds of Funds, and CTAs in the Barclay Global Hedge Fund Database.

Forex in relation to COT
e.g.

http://fxtrade.oanda.com/analysis/co...nts-of-traders

COT Forex - CFTC's Commitments of Traders
Net non-commercial positions for major currency
These graphs show the CFTC's Commitments of Traders (COT) weekly data: net positions for "non-commercial" (speculative) traders in the U.S. forex futures markets, along with open interest contracts held by all parties. This futures data influences and is influenced by the spot forex market, and is considered an indicator for analyzing market sentiment.

Watch a Video Tutorial

http://www.forexfactory.com/attachme...9&d=1430908874

About Commitments of Traders
The Commitments of Traders (COT) is a report issued by the Commodity Futures Trading Commission (CFTC). It aggregates the holdings of participants in the U.S. futures markets (primarily based in Chicago and New York), where commodities, metals, and currencies are bought and sold. The COT is released every Friday at 3:30 Eastern Time, and reflects the commitments of traders for the prior Tuesday.
The COT provides a breakdown of aggregate positions held by three different types of traders: commercial traders (in forex, typically hedgers), non-commercial traders (typically, large speculators), and nonreportable (typically, small speculators).
The Net Non-Commercial Positions shown in the chart above are from contracts held by large speculators, mainly hedge funds and banks trading currency futures for speculation purposes. Speculators are not able to deliver on contracts and have no need for the underlying commodity or instrument, but buy or sell with the intention of closing their sell or buy position at a profit, before the contract becomes due. These contracts, sold in lot sizes that vary by currency, net out to have either a surplus of buy requests (positive values in the chart) or sell requests (negative values).
The Open Interest represents the total number of contracts, including both buy and sell positions, outstanding between all market participants. That is, the total of all futures and/or option contracts entered into and not yet offset by a transaction, by delivery, by exercise, and so on. These figures are not netted, but instead show overall volume (that is, interest).
Note: In the futures market, the foreign currency is always quoted directly against the U.S. dollar. In the spot forex market, some currencies are quoted the opposite way. For consistency, these graphs provide futures market position data on a reverse axis (with negative values above the 0-axis) whenever the quote order is opposite the spot forex notation. This is the case for the Swiss Franc, for example, which in forex is quoted against the US dollar (USD/CHF).

http://www.quora.com/What-is-relative-value-fx-trading

What is relative value fx trading?

Daniel Lindsay, Blogger on MahiFX.com and Full Time F... (more)
Relative Value trading refers to the practice of comparing different instruments to determine how they differ, then placing a trade with that knowledge. A forex trader may look at the value of their chosen instrument versus the value of correlative pairs to try and determine what price may do.

http://qph.is.quoracdn.net/main-qimg...t_to_webp=true


As an example; the EURUSD and USDCHF are inverted, correlative pairs in that they move in a very similar way. A trader looking for a relative value may look and see if there is any serious deviation between the two that may herald a correction on one chart or the other.

The trader may also use the basic currency indexes to find areas of potential divergence versus currency pairs.

As an example; the USD Index may show the Dollar to be in a strong Bullish trend with the Euro in a strong Bearish trend. The two trends are battling for supremacy on the EURUSD instrument. A break in either trend on their respective Index may herald a shift on the EURUSD chart. If the Euro breaks, one could reasonably theorize that it is time to go long on the EURUSD.

http://en.wikipedia.org/wiki/Relative_currency_strength

Relative currency strength
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http://upload.wikimedia.org/wikipedi...-_flowindi.png
Relative currency strength for USD/EUR/GBP pair

The Relative currency strength (RCS) is a technical indicator used in the technical analysis of forex market. It is intended to chart the current and historical strength or weakness of a currency based on the closing prices of a recent trading period. It is based on Relative Strength Index and mathematical decorrelation of 28 cross currency pairs. It shows relative strength momentum of selected major currency. (EUR, GBP, AUD, NZD, USD, CAD, CHF, JPY)
The RCS is typically used on a 14*period timeframe, measured on a scale from 0 to 100 like RSI, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels80 and 20, or 90 and 10occur less frequently but indicate stronger momentum of currency.
Combination of Relative currency strength and Absolute currency strength indicators yield entry and exit signals for currency trading.

Contents

1. 1 Basic idea
2. 2 Signals
3. 3 Indicator
4. 4 Advantageous for trading strategies
5. 5 See also
6. 6 References

Basic idea
Indicator basic idea is "buy strong currency and sell weak currency".
If X/Y currency pair is in an uptrend, it shows if it is due to X strength or Y weakness.
On these signals one can choose the most worthy pair to trade.

Signals
You can use Relative currency strength for pattern trading as well, among basic patterns which can be used are: cross, trend break, trend follow,divergencies divergencies.

1. http://upload.wikimedia.org/wikipedi...gnal-cross.png
   Cross
2. http://upload.wikimedia.org/wikipedi...trendbreak.png
   Trend-break
3. http://upload.wikimedia.org/wikipedi...divergence.png
   Divergence

Indicator

1. http://upload.wikimedia.org/wikipedi...px-RCS-ACS.png
   Combination of Relative currency strength and Absolute currency strength
2. http://upload.wikimedia.org/wikipedi.../120px-RCS.png
   Absolute currency strength

Advantageous for trading strategies

1. Most commonly used as combination with Absolute currency strength
2. information indicator to realize which currencies are being demanded, this is ideal indicator for trend follow traders
3. help for scalpers looking for strength trend (trader can see both absolute and relative strength)
4. instrument for correlation/spread traders to see reactions of each currencies on moves in correlated instruments (for example CAD/OIL or AUD/GOLD)

See also

1. Absolute currency strength
2. Currency strength
3. Currency pair
4. Relative Strength Index
5. Forex
6. Technical analysis

Forex charts are based on market action involving price. There are five categories in Forex technical
analysis theory:

Indicators
(oscillators, e.g.: Relative Strength Index (RSI))

Number theory
(Fibonacci numbers, Gann numbers)

Waves
(Elliott wave theory)

Gaps
(high-low, open-closing)

Trends
(following moving average).

http://finance.wharton.upenn.edu/~bo...orecasting.pdf

http://fxtrade.oanda.com/analysis/currency-correlation

Currency Correlation
Compare how currency pairs have moved relative to each other

Availability of Instruments
Not all instruments are available in all regions. For example, Gold and other metals are not available to U.S. customers, but are available to Canadian customers.

How to Read the Table
Each cell of the table shows the correlation coefficient between the two currency pairs (vertical headings) over the corresponding time period (horizontal headings). The following categories indicate a quick way of interpreting the table values. Note that a negative correlation means the two currency pairs correlate in the opposite directions (e.g. when the price for one goes up, the other one goes down and vice versa)

1. 0.0 to 0.2 Very weak to negligible correlation
2. 0.2 to 0.4 Weak, low correlation (not very significant)
3. 0.4 to 0.7 Moderate correlation
4. 0.7 to 0.9 Strong, high correlation
5. 0.9 to 1.0 Very strong correlation

This is one of the most exiting currency pairs, IMO
(which should be trade exclusively with one seperate account).
Since 2014.10.30 you could make much profit when trading the daily range ~71.20/70.50/69.90 & ~74.70/75.20/76.0 (see #15).

http://www.xe.com/currencycharts/?fr...to=XAG&view=1D

XE Currency Charts (XAU/XAG)
Gold Ounce to Silver Ounce Chart
This XAU/XAG Chart lets you see this pair's currency rate history for up to 10 years! XE uses highly accurate, live mid-market rates.

XAUXAG, Daily, 2015 Mai 06

EURUSD, H4, 2015 Mai 06
EURUSD, Monthly, 2015 Mai 06
Maybe a shooting star at H4 could be strong enough for a slightly movement downside.
Daily seems to be in a range. Weekly could be develope the market force for running down the previous candle (big movement upside, ...if so), so also the monthly bar.
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