Anyone trade Positive/Negative Correlated Currency Pairs? | Forex Factory

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Anyone trade Positive/Negative Correlated Currency Pairs?

  • #1
  • First Post: Mar 4, 2013 9:34am Mar 4, 2013 9:34am
Hi,

Anyone been trading positive/negative correlated pairs ?
How do you trade them ?
Can share your experience and findings ?

Thanks.
Forex is my business
  • #2
  • Edited 10:36am Mar 4, 2013 10:20am | Edited 10:36am
Sure...

In certain markets you can take advantage of resilience of a currency to the moves made by the market.

When I say market I mean the dependent variable.

For example... If you take the EUR/USD, AUD/USD and EUR/ USD you can say the USD is the dependent variable as it is the common denominator. So going by this logic you can look at the trend of the USD alone and then judge the strength or weakness against it of the independent variables.

Example: EUR and GBP both fall 100 or so pips but the AUD stays in a range this whole time.

The EUR and GBP then start retracing slightly and the AUD responds by increasing it's spread difference against these other two. Kinda like it's floating on thin air. Of course this would signal a buy for the AUD. Simply buying the strongest currency in a potentially oversold market.

If you think of it as in, the "market" being above or below the "outlier" and PUSHING or PULLING it. From a technical perspective

In certain markets though this will work against you because the market may be focused on the accumulation or distribution of US Dollars and so moves made by the independent variables will simply be manufactured to hit liquid zones in order to gather the USD.

In other words the MARKET is steamrolling the little currencies that are tied to it.

So that's basically how I trade confluence... It only woks in certain market types. Typically when the market is uncorrelated to the dependent variable. i say dependent variable and not the USD because you can use the same logic by using the EUR for example as you market or common denominator and testing the cross pairs against the EUR.

Maybe some ideas for you maybe some not. My 2 cents is served.
Time hides Nothing
  • #3
  • Mar 4, 2013 1:32pm Mar 4, 2013 1:32pm
i also use the correlation of pairs and more importantly market sync. like cindy,and others there are some uses from watching the overall market in this way,

on occasion there some extremely rewarding gifts
  • #4
  • Mar 5, 2013 8:06am Mar 5, 2013 8:06am
Thanks for your replies, Cindyxxx, diceman555.

Need some time to digest the info.
Forex is my business
  • #5
  • Mar 5, 2013 10:32pm Mar 5, 2013 10:32pm
Yuppers. I trade them to diversiy my risk and save on commission costs because one of the currency pair might have lower quote price and commissions are calculated based on total transaction value.

I use this table to find the correlated pairs. The only thing is not all brokers offer quotes on all of the correlated pairs especially one of the pair is an exotic one.

http://www.myfxbook.com/forex-market/correlation


Good trading!!
Make your losses in demo. Earn your profits live.
  • #6
  • Mar 5, 2013 11:23pm Mar 5, 2013 11:23pm
Thanks for the link Forexia.

Quoting Forexia
Yuppers. I trade them to diversiy my risk and save on commission costs because one of the currency pair might have lower quote price and commissions are calculated based on total transaction value.

I use this table to find the correlated pairs. The only thing is not all brokers offer quotes on all of the correlated pairs especially one of the pair is an exotic one.

http://www.myfxbook.com/forex-market/correlation


Good trading!!
Forex is my business
  • #7
  • Mar 5, 2013 11:58pm Mar 5, 2013 11:58pm
Like Cindy XXXX , I too look for a currency pair that independently shows less strength / weakness in relation to it's peers .
I'll aim to sell / buy it when the market direction turns . In my case , the 3 pairs I follow are AUD/USD , EUR/USD & GBP/USD .
  • #8
  • Edited 4:26am Mar 6, 2013 12:32am | Edited 4:26am
So you are trading USD ?

For me, to trade EURUSD, I'll look for EUR cross pairs e.g. EURJPY, EURAUD, EURCAD, EURGBP, EURNZD to find where EUR is heading (direction as dictated by the majority). Then I'll check USD index for USD direction.
IF EUR is UP, USD index UP, no trade. That is, I only trade when there is a clear reverse direction for both.


Quoting Balmain Boy
Like Cindy XXXX , I too look for a currency pair that independently shows less strength / weakness in relation to it's peers .
I'll aim to sell / buy it when the market direction turns . In my case , the 3 pairs I follow are AUD/USD , EUR/USD & GBP/USD .
Forex is my business
  • #9
  • Mar 6, 2013 12:55am Mar 6, 2013 12:55am
Quoting incomeideas
So you are trading USD ?

For me, to trade EURUSD, I'll look for EUR cross pairs e.g. EURJPY, EURAUD, EURCAD, EURGBP, EURNZD to find where EUR is heading (direction as dictated by the majority). Then I'll check USD index for USD direction.
IF EUR is UP, USD index UP, no trade. That is I only trade when there is a clear reverse direction for both.
The EUR accounts for something like 60-70% (can't remember the exact figure) of the Dollar index. Food for thought
Time hides Nothing
  • #10
  • Mar 6, 2013 4:24am Mar 6, 2013 4:24am
Yup, it is 57.6% and EUR/USD is quite inversely related.

Quoting CindyXXXX
The EUR accounts for something like 60-70% (can't remember the exact figure) of the Dollar index. Food for thought
Forex is my business
  • #11
  • Mar 7, 2013 10:50am Mar 7, 2013 10:50am
Quoting Balmain Boy
Like Cindy XXXX , I too look for a currency pair that independently shows less strength / weakness in relation to it's peers .
I'll aim to sell / buy it when the market direction turns . In my case , the 3 pairs I follow are AUD/USD , EUR/USD & GBP/USD .
Haha!! I follow these three pairs too. I call them "The Three Stooges"
Make your losses in demo. Earn your profits live.
  • #12
  • Mar 7, 2013 10:51am Mar 7, 2013 10:51am
Quoting Forexia
Haha!! I follow these three pairs too. I call them "The Three Stooges"
Yeah I think I heard fti once refer to them as the "3 Pilars".

I just call them my bitches haha jokes jokes.
Time hides Nothing
  • #13
  • Mar 7, 2013 10:57am Mar 7, 2013 10:57am
Quoting CindyXXXX
Yeah I think I heard fti once refer to them as the "3 Pilars".

I just call them my bitches haha jokes jokes.
LOL... I was trying to have my posts rated "G" for everyone.
Make your losses in demo. Earn your profits live.
  • #14
  • Mar 7, 2013 11:02am Mar 7, 2013 11:02am
Quoting incomeideas
So you are trading USD ?

For me, to trade EURUSD, I'll look for EUR cross pairs e.g. EURJPY, EURAUD, EURCAD, EURGBP, EURNZD to find where EUR is heading (direction as dictated by the majority). Then I'll check USD index for USD direction.
IF EUR is UP, USD index UP, no trade. That is, I only trade when there is a clear reverse direction for both.
Hmmn... I was thinking since the Euro shows up in so many correlated pairs, what I was thinking is maybe look for divergence. Let's say if majority of the EUR-pairs are going one direction, UP, but if one of them, let's say EURCAD, is going the oppposite direction, DOWN, then we can deduce that CAD is strong and then proceed to short USD/CAD if that direction is confirmed.

Never tested this theory though; I just got inspired by your post now...
Make your losses in demo. Earn your profits live.
  • #15
  • Mar 7, 2013 1:46pm Mar 7, 2013 1:46pm
this is a snap shot of how i watch the market,im looking for overall market harmony and agreement,market sync,now this generally only happens maybe 1 or 2 times a week.

when this market agreement takes place it can last from hours to days,if the market is positive the risk currencies gain in value the doller weakens.and visa versa,but the important thing is they must all be in perfect harmony.

watching the market this way gives me some key information,firstly i am trading when the market enters a phase of non random behavour,for many reasons the whole market temporally agrees.

secondly i can see market momentum.i watch the flows of transactions,it gives me very clear entries.there waves all peak together and wash out as a new wave builds.ican see as the individual pairs reach there resistence levels,this is key information.this can takes from minutes to hours as the waves push up against the s/r,then one will break and others follow,these are were i add positions.i record the values constantly looking for hints of stalling and market turns,i could type pages and pages about this.

one could trade from this alone without ever looking at a chart,but why would we when we have them,the information on my charts consists of averaged price levels and calculated levels from those averages.from monthly downwards all on one 2 min chart,so i have all the information i need to trade from.

off late finding harmony as above has been harder or i should say i have had to adapt slightly to these present market conditions

i only trade cable and the ftse100 with this particular perspective,
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  • #16
  • Aug 16, 2019 7:33am Aug 16, 2019 7:33am
I am finding that, these days, the relationship between currencies which were generally recognised as the more reliable positive and negatively related pairs has deteriorated so that it is now difficult to find the consistency in behaviour that could previously be identified and traded. At the beginning of the year I achieved over 30 profitable trades with no losses but now it's hard to find anything that can be traded by using simple criteria of finding positive pairs that have temporarily moved away from their normal close/parallel relationship. It seems to that the Forex market behaviour has changed and
become more erratic so that it is now almost impossible to trade correlated pairs with confidence. I am continuing to use the same criteria as before but now I can find next to nothing worth trading - either the relationship between the pairs has become completely random or they are moving within such a tight distance from each other that there's not enough movement to produce more than a few pips profit. Anyone else finding a similar problem?
  • #17
  • Aug 16, 2019 12:29pm Aug 16, 2019 12:29pm
Quoting Forexia
{quote} Hmmn... I was thinking since the Euro shows up in so many correlated pairs, what I was thinking is maybe look for divergence. Let's say if majority of the EUR-pairs are going one direction, UP, but if one of them, let's say EURCAD, is going the oppposite direction, DOWN, then we can deduce that CAD is strong and then proceed to short USD/CAD if that direction is confirmed. Never tested this theory though; I just got inspired by your post now...
the time zone is of paramount importance in this matter.
  • #18
  • Nov 8, 2019 12:21pm Nov 8, 2019 12:21pm
Hi,

I have stalked this forum on and off for many years, but I now have a question I would like to pose to the group. Since as a new member, I cannot start my own threads, I am injecting this post into threads I have found that discuss correlated pairs. This post doesn't necessarily directly apply to the posts above, however -- apologies for that.

I run an EA across many pairs simultaneously. I run this on small size and very wide stops. For some 'similar' pairs, such as EURNZD and GBPNZD, for example, I will run one of those pairs long-only and the other short-only. I do this because I don't want to find myself in effectively the same bad trade twice, in the event that they both go against me for basically the same reason (e.g. broad NZD weakness, for example).

I am looking for logic I can work into my EA so that instead of choosing, for example, to have to run EURNZD long-only and GBPNZD short-only, that I can define those two pairs as 'correlated pairs.' What that would mean is that if both pairs were flat, and then one triggered in either direction, the trade would be taken. As long as that trade is open, then the other pair will not open a trade in the same direction, but it will open a trade in the reverse direction if it sets up. And so on.

Has anyone seen this done or can point me to a thread, indicator, EA, or code that performs a similar function?

Thanks in advance.
  • #19
  • Nov 13, 2019 8:12am Nov 13, 2019 8:12am
Quoting Swifty
I am finding that, these days, the relationship between currencies which were generally recognised as the more reliable positive and negatively related pairs has deteriorated so that it is now difficult to find the consistency in behaviour that could previously be identified and traded. At the beginning of the year I achieved over 30 profitable trades with no losses but now it's hard to find anything that can be traded by using simple criteria of finding positive pairs that have temporarily moved away from their normal close/parallel relationship....
yes, this strategy can be very profitable if done well.
  • #20
  • Nov 13, 2019 9:37am Nov 13, 2019 9:37am
u can see this: https://www.forexfactory.com/showthread.php?t=876071
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