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SpreadTrading Correlation Journal (an overview)

  • #21
  • Nov 27, 2019 6:58am Nov 27, 2019 6:58am
CADJPY/EURJPY

SELL Spread

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No stress, spread is your friend
  • #22
  • Nov 27, 2019 7:29am Nov 27, 2019 7:29am
Quoting Dmh
{quote} What you do with selling USDJPY and buying GBPJPY is directional trading. I don’t use technical analysis or indicators and never did. I just want you to be aware that GBPJPY / USDJPY = GBPUSD. Selling USDJPY and buying GBPJPY is exactly the same as buying GBPUSD if you like it or not. It is not an opinion, it is a fact.
In traditional and directional trading it is a fact and not an opinion. you are right. but in the spreadtrading this statement is totally wrong. I try to explain myself in my poor English. in a traditional market the price can go either up or down only. also in sideway it will always fluctuate above and below. in non-directional spread trading this statement loses importance. if you have been careful I have not written I buy this, I sell this other as you are used to do. but I wrote something very specific: I buy or sell spread. if I only bought gbpusd I don't know where the market is going anyway. in spreadtrading the instrument becomes GBPJPY / USDJPY and I buy or sell the relative strength of this instrument (which is an all one) which is composed of two crosses strongly, and I repeat strongly, correlated between them that create a new tool which is the spread between the two of them. these crosses, will tend to fall within a median price range as they are strongly correlated. Buy spread when the distance from the average is negative and sell when this distance is positive. not having a unique tool called GBPJPY / USDJPY I am obliged to sell the best performing and buy the weakest and vice versa.
No stress, spread is your friend
  • #23
  • Nov 27, 2019 8:20am Nov 27, 2019 8:20am
Quoting drpepper72
{quote} In traditional and directional trading it is a fact and not an opinion. you are right. but in the spreadtrading this statement is totally wrong. I try to explain myself in my poor English. in a traditional market the price can go either up or down only. also in sideway it will always fluctuate above and below. in non-directional spread trading this statement loses importance. if you have been careful I have not written I buy this, I sell this other as you are used to do. but I wrote something very specific: I buy or sell spread. if I only...
I think I know what you mean. Sounds something like this https://www.forexfactory.com/showthread.php?t=160912
  • #24
  • Nov 27, 2019 9:20am Nov 27, 2019 9:20am
Quoting Dmh
{quote} I think I know what you mean. Sounds something like this https://www.forexfactory.com/showthread.php?t=160912
indeed this is a thread that served as a starting point for my reflection for this strategy that I am developing. Tthe basic concept of this strategy is very similar to this thread. I have everything clear and a blind faith in the fact that the standard deviation works in the related crosses. but I still have to find a great entry point. sometimes too soon and the momentary divergence widens. I repeat I have a blind faith in the strategy and in the principle that all that is not in balance sooner or later comes back in median
No stress, spread is your friend
  • #25
  • Nov 27, 2019 10:08am Nov 27, 2019 10:08am
thank you very much drpepper72 for this interesting system...
Please could you explain in more detail how you choose the candidate pairs for each trade?
thank you for your time
  • #26
  • Edited 12:03pm Nov 27, 2019 10:13am | Edited 12:03pm
UPDATE NOV 27, 17:10

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-88 pips

No stop loss! no stress!
Spread is your friend

UPDATE NOV 27, 19:02

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-72 pips (12 trades open)

No stop loss! no stress!
Spread is your friend
No stress, spread is your friend
  • #27
  • Nov 27, 2019 10:54am Nov 27, 2019 10:54am
Nice thread. If i can ask to u: how u choose legs of spread trading? Correlation?
  • #28
  • Nov 27, 2019 11:01am Nov 27, 2019 11:01am
Quoting drpepper72
{quote} indeed this is a thread that served as a starting point for my reflection for this strategy that I am developing. Tthe basic concept of this strategy is very similar to this thread. I have everything clear and a blind faith in the fact that the standard deviation works in the related crosses. but I still have to find a great entry point. sometimes too soon and the momentary divergence widens. I repeat I have a blind faith in the strategy and in the principle that all that is not in balance sooner or later comes back in median
It looks interesting. For the entry: if you trade CADJPY/EURJPY you can find your entry at EURCAD. CADJPY above median line, EURJPY below median line and EURCAD at support/demand; sell CADJPY buy EURJPY. Just a thought.
  • #29
  • Nov 27, 2019 11:55am Nov 27, 2019 11:55am
Quoting Dmh
{quote} It looks interesting. For the entry: if you trade CADJPY/EURJPY you can find your entry at EURCAD. CADJPY above median line, EURJPY below median line and EURCAD at support/demand; sell CADJPY buy EURJPY. Just a thought.

somehow it is correct. this is one of possibilities. but not only this. clearly I also have other methods to evaluate relative strength crosses. The main and most important thing is that the two crosses have a positive correlation over the long term (3/6 months) on the timeframe considered of at least 85%. this means that for 85% of the time if the nominator goes up the denominator goes up and vice versa. the thing as you can well understand becomes interesting when they take different directions.
No stress, spread is your friend
  • #30
  • Nov 27, 2019 12:05pm Nov 27, 2019 12:05pm
Quoting MQLTrade
Nice thread. If i can ask to u: how u choose legs of spread trading? Correlation?

Ciao, yes! only a strong correlation on the medium / long term (6 months). correlation of at least 85%
No stress, spread is your friend
  • #31
  • Nov 27, 2019 12:10pm Nov 27, 2019 12:10pm
Quoting drpepper72
GBPUSD/NZDUSD BUY Spread {image}
SpreadTrading closed

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GBPUSD/NZDUSD +37 pips
No stress, spread is your friend
  • #32
  • Nov 27, 2019 12:20pm Nov 27, 2019 12:20pm
Quoting eljames1807
thank you very much drpepper72 for this interesting system... Please could you explain in more detail how you choose the candidate pairs for each trade? thank you for your time

Hi. in this strategy the main concepts are:
1- non-directional trading
2- every tool you use is only a single part (nominator / denominator) of a single instrument. eurusd / gbpusd (nom./den) is a single tool
3- the two parts in question must have a correlation of 85% in the last six months
4- do not buy or sell simply one or the other but buy or sell the spread between the two instruments.
5- the only indicators are the correlation and strength of the crosses at that time. There are no indicators that decide me to enter but only correlation and strength.
No stress, spread is your friend
  • #33
  • Nov 27, 2019 1:36pm Nov 27, 2019 1:36pm
Quoting drpepper72
CADJPY/EURJPY SELL Spread {image}
SpreadTrading closed

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CAD/JPY EUR/JPY +16 pips
No stress, spread is your friend
  • #34
  • Nov 27, 2019 2:21pm Nov 27, 2019 2:21pm
Brother
you can show screenshots of your charts at the time of your entry ...
a picture is better than a thousand words
  • #35
  • Nov 28, 2019 12:56am Nov 28, 2019 12:56am
Quoting drpepper72
GBPCAD/NZDJPY BUY Spread {image}
SpreadTrading closed

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GBPCAD/NZDJPY +64 pips
No stress, spread is your friend
  • #36
  • Nov 28, 2019 1:18am Nov 28, 2019 1:18am
profit / loss update after 7 closed trades


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+307 pips


Still in progress

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- 92 pips
due human error to enter to fast in gbpaud/gbpnzd in 5m TF (now check to 30m TF) and manually strategy. impossibility to check at night
No stress, spread is your friend
  • #37
  • Nov 28, 2019 1:47am Nov 28, 2019 1:47am
Quoting eljames1807
Brother you can show screenshots of your charts at the time of your entry ... a picture is better than a thousand words
Hi, thanks for being interested in my thread.
Sorry, this is a report of a strategy that I have adopted for more than a month and studied for a long time. is a strategy based on the strength of related currencies. as written above it was created to invite you to adopt this type of trading. entry point and closed point in my charts you don't need. you won't see anything but a normal mt4 chart. I want to invite you to abandon the usual trading. everyone must find their own strategy. maybe the non-directional as is the spread trading is not for some. others prefer the comfort of indicators. I'm trying a new approach
look for only indicators that make you view currency strength, difference in percentage of the price and so
I can give you (as I am doing) ideas. the rest is up to you.
go to google and search:
currency correlation
relative currency strength
spread trading
on youtube there is a very interesting video of how to explain the spread trading from which I took a lot to create my "trading vision". This is it:

Inserted Video


It's in Italian but there are many in English
Grazie, ciao
No stress, spread is your friend
  • #38
  • Nov 28, 2019 6:42am Nov 28, 2019 6:42am
AUDJPY/GBPJPY

BUY Spread

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No stress, spread is your friend
  • #39
  • Nov 28, 2019 7:16am Nov 28, 2019 7:16am
Quoting drpepper72
New entry now! {image} Buy Stoxx50 Sell FTSE100 Spread bought to 0.5009 {image}
SpreadTrading Closed

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Stoxx50/FTSE100 -6 pips
No stress, spread is your friend
  • #40
  • Nov 28, 2019 7:35am Nov 28, 2019 7:35am
EURJPY/GBPCHF

BUY Spread

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No stress, spread is your friend
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