Disliked{quote} You may not be making one of the common mistakes, but since they are common mistakes it means lots of people make them: 1. There is no such thing as a correlated market that always leads, or always mean reverts. AT least not for trader with a retail sized account. 2. In choosing to use a correlated market as a value guide for your traded market, it should not be too correlated otherwise it won't give any trade opportunities (big divergences). 3. The best, but most dangerous correlations are ones where the correlated market is something that...Ignored
I saw many promising strategies with linear or even exponential profit line that obviously have not been working in production due the look ahead bias
Speaking about correlation trading I think that the biggest obstacle for us, the retailers, is to overcome a trading costs. As you rightly emphasised these kind of trading usually does not cover swaps, spread etc.
Chase value, not price