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MT4 MTF Correlation table and Correlation oscillator indicators 155 replies

Trading Crosses Using Correlation and Strength of Major Pairs 2 replies

Tribute to Madlen and other good programmers- Correlation indicators 2 replies

Using usd/chf - eur/usd correlation to see moves in EUR/USD 46 replies

Using PNN to capture the correlation between past and present data... 1 reply

- Joined Apr 2011 | Status: Member | 2,036 Posts

but these tables cannot be used for anything.

the correlation should be viewed on a chart.

the correlation should be viewed on a chart.

1

As a declared lover of currency and pair strength meters, I share from my observation one although obvious but important note. Choosing the correct CSM or PSM is not a random process or simply because it looks good or because it is recommended by an expert or vendor. Having tested many (almost all) of the ones out there over the years, the simplest conclusion in my case is that this should be adjusted as much as possible to your operating strategy. In other words, if you mainly use moving averages in your strategy, then you should choose a CSM or PSM that is encoded to analyze MAs, if you mainly use RSI, it would be more appropriate to use a CSM or PSM that is encoded to analyze RSI, so same if you use ADX, Hi and Lo daily, MACD, Stocastics and so on, or if it is a combination of them. The point is, CSM or PSM preferably be related to your primary analysis tool.

With reference, certainly MADdash, PSA to name a few are a work of art.

With reference, certainly MADdash, PSA to name a few are a work of art.

Humble & Kalcker CLO2 = Covid killer

2

- Joined Aug 2006 | Status: Member | 2,562 Posts

DislikedWith reference, certainly MADdash, PSA to name a few are a work of art.Ignored

If only to confirm the trade you are about to take or taken.

Follow the Money

- Joined Sep 2011 | Status: Member | 1,079 Posts

Disliked{quote} I agree the 2 best on this forum, are the MaDash & PSA, again both Free Indicators with plenty for adjustability. If only to confirm the trade you are about to take or taken.Ignored

Humble & Kalcker CLO2 = Covid killer

- Joined Apr 2011 | Status: Member | 2,036 Posts

I read a thread and I think a lot of useful information is missing or ignored.

I know because I use the correlation strategy, but not in the form it appears in my in this thread.

i'm not spoiling the thread but it won't work that way.

I know because I use the correlation strategy, but not in the form it appears in my in this thread.

i'm not spoiling the thread but it won't work that way.

- Joined Sep 2011 | Status: Member | 1,079 Posts

DislikedI read a thread and I think a lot of useful information is missing or ignored. I know because I use the correlation strategy, but not in the form it appears in my in this thread. i'm not spoiling the thread but it won't work that way.Ignored

You are not contributing to the thread,

It's like getting detention in school and not being told why.

If you have a system, Please share, If you don't want to share,

please don't come and give out detention and not tell us why,

It doesn't help and it doesn't contribute.

You need to make up your mind.

You either want to contribute or criticize,

I am open-minded and will listen to anything, like you, I want to make a correlation strategy work.

- Joined Aug 2006 | Status: Member | 2,562 Posts

A very comprehensive powerful tool and sometimes can be overwhelming to the uninitiated. Again supplied totally free of charge by Hanover.

Attached Image

Follow the Money

1

- Joined Apr 2011 | Status: Member | 2,036 Posts

Disliked{quote} You are not contributing to the thread, It's like getting detention in school and not being told why. If you have a system, Please share, If you don't want to share, please don't come and give out detention and not tell us why, It doesn't help and it doesn't contribute. You need to make up your mind. You either want to contribute or criticize, I am open-minded and will listen to anything, like you, I want to make a correlation strategy work.Ignored

you are lagging behind in professional development.

- Joined Sep 2011 | Status: Member | 1,079 Posts

Disliked{quote} this correlation strategy has long been discussed in previous threads. you are lagging behind in professional development.Ignored

- Joined Nov 2007 | Status: Member | 3,018 Posts

Hey fellas, just a note of clarification. I've tried to trade these concepts in the past and gave up on them. But I've researched and even tested it a little. so FWIW

There is a difference between correlation and strength. They are two separate concepts.

Correlation refers to sameness. Divergence of sameness offers opportunity to get in at a discount with the idea that the correlation will continue. It is a follow the leader strategy. There are plenty of threads etc. where you can learnt the concepts.

Strength refers to which currencies are moving the most and that ha nothing to do with mathematical sameness (correlation).

One needs to be clear on the two entirely different concepts and how to use them together (at least in theory)

The idea is not to identify the strong currency against the weak in the past, but rather to use a change in sameness (correlation) to arbitrage the timing of entry into the market. In theory you identify the leader and the follower. The leader goes up and you expect the follower to then "follow" and also go up (or down in negative correlation).

Put simply -

1. Strength = gives you DIRECTION

2. correlation = gives you TIMING OF ENTRY

In theory the idea of combining strength and correlation to time entry into the market is great. In practice, not so much.

1. the correlation indicators aren't very good as a practical matter. (some have suggested co-integration to replace correlation)

2. the amount of disruption in correlation is not large enough to cover spreads

3. IF you want to play the follow the leader strategy, you have to identify the leader and the follower, which the indicators won't do for you. So, ultimately it's just guessing.

I've seen lots so these threads and most don't even understand the concepts. let alone the implementation. Most just trade the currency strength indicators and wrongly call it correlation.

Whichever currencies are moving the most on any given day (strength) are "correlated" in the general sense (but not in mathematical terms necessarily) that they are both moving a lot that day. The correlation indicators will not necessarily show those currencies or pairs as correlated though.

You do not need a correlation indicator for that, but you can borrow the follow the leader type of concept from the correlation trading ideas.

It's still guessing, because there isn't any actual mathematical correlation necessarily just because two currencies are both moving a large amount in the same direction on any particular day. It's really just hoping the momentum continues for the two currencies that are moving a lot that day.

If you are implementing a strategy to trade momentum based on currency strength indicators, the correlation indicators will only confuse the issue.

I'd love to see you fellas prove it wrong, but math is math. Correlation does not equal strength no matter what kind of fancy math one devises.

Just as an interesting aside, PI is the only constant found in every single thing to do with numbers, every single time. It's all big circle and it goes round and round. Sorta like the correlation threads that always confuse strength and correlation.

I do hope it will be helpful to the discussion. I'd suggest folks identify two things with consistency for the type fo trading:

1. direction

2. timing

I'm here to learn from you all who have succeeded where i have failed and can show how to identify those two things consistently.

Kind Regards

PS I've not tried hanover's linear regression strength indicator so i'm interested to see how folks do with that. Regression to the mean is really replacing correlation though. It seems like a good idea.

Does regression help identify the leader and the follower?

There is a difference between correlation and strength. They are two separate concepts.

Correlation refers to sameness. Divergence of sameness offers opportunity to get in at a discount with the idea that the correlation will continue. It is a follow the leader strategy. There are plenty of threads etc. where you can learnt the concepts.

Strength refers to which currencies are moving the most and that ha nothing to do with mathematical sameness (correlation).

One needs to be clear on the two entirely different concepts and how to use them together (at least in theory)

The idea is not to identify the strong currency against the weak in the past, but rather to use a change in sameness (correlation) to arbitrage the timing of entry into the market. In theory you identify the leader and the follower. The leader goes up and you expect the follower to then "follow" and also go up (or down in negative correlation).

Put simply -

1. Strength = gives you DIRECTION

2. correlation = gives you TIMING OF ENTRY

In theory the idea of combining strength and correlation to time entry into the market is great. In practice, not so much.

1. the correlation indicators aren't very good as a practical matter. (some have suggested co-integration to replace correlation)

2. the amount of disruption in correlation is not large enough to cover spreads

3. IF you want to play the follow the leader strategy, you have to identify the leader and the follower, which the indicators won't do for you. So, ultimately it's just guessing.

I've seen lots so these threads and most don't even understand the concepts. let alone the implementation. Most just trade the currency strength indicators and wrongly call it correlation.

Whichever currencies are moving the most on any given day (strength) are "correlated" in the general sense (but not in mathematical terms necessarily) that they are both moving a lot that day. The correlation indicators will not necessarily show those currencies or pairs as correlated though.

You do not need a correlation indicator for that, but you can borrow the follow the leader type of concept from the correlation trading ideas.

It's still guessing, because there isn't any actual mathematical correlation necessarily just because two currencies are both moving a large amount in the same direction on any particular day. It's really just hoping the momentum continues for the two currencies that are moving a lot that day.

If you are implementing a strategy to trade momentum based on currency strength indicators, the correlation indicators will only confuse the issue.

I'd love to see you fellas prove it wrong, but math is math. Correlation does not equal strength no matter what kind of fancy math one devises.

Just as an interesting aside, PI is the only constant found in every single thing to do with numbers, every single time. It's all big circle and it goes round and round. Sorta like the correlation threads that always confuse strength and correlation.

I do hope it will be helpful to the discussion. I'd suggest folks identify two things with consistency for the type fo trading:

1. direction

2. timing

I'm here to learn from you all who have succeeded where i have failed and can show how to identify those two things consistently.

Kind Regards

PS I've not tried hanover's linear regression strength indicator so i'm interested to see how folks do with that. Regression to the mean is really replacing correlation though. It seems like a good idea.

Does regression help identify the leader and the follower?

1

- Joined Feb 2009 | Status: Member | 2,108 Posts

here is indi trading Yen pairs, I made it from another indi long time ago, you can actually do from that whatever pairs you want, like eurusd-usdchf-eurchf, just change pairs in code

Attached File

YEN-MIRROR.mq4 9 KB | 78 downloads

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- Joined Nov 2007 | Status: Member | 3,018 Posts

DislikedThis is a trade I missed last Thursday, the trade itself is quite easy to see, the entry point is quite easy to see, where the moving average crosses the currency strength meter shows the US pair is in third place from the top, and the Australian and British pound, are bottom and second from the bottom this was a four-hour chart we also have divergence in place clearly marking where the trend was going to change direction, so for me, I would trade this but I missed it, if you have any questions about this trade or these charts. Please let me know....Ignored

That is a good strategy(divergence). I'm not sure the correlation indicators matter much though for divergence trading. Your chart shows currency strength indicators but not correlation indicators (I think?). If you can use divergence to identify timing, then great. I'm not sure you need any indicators at all for that.

I guess I'm not clear exactly what you are doing or attempting to do. Can you please clarify. Have you found the indicators to be helpful? If so, have you thought about why? TYIA

PS Is there any way to automate your strategy? It seems cumbersome to draw divergence lines.

Good thread redfan. TY for starting it.

- Joined Nov 2007 | Status: Member | 3,018 Posts

DislikedGood technique but something is missing. For example you only use usd based currencies and common ones. I think Eur and chf correlation will deteriorate in these days eurchf should go up from 1.0526 . Generallyyou should find the best money to buy and the best money to sell.Sometimes this could be correlation pairs.generalizing is wrong. Anyway thanks for your sharing.Ignored

So far it looks to me what redfan is showing is using strength indicators and using divergence lines to identify timing (which seems like a fine idea to me). I suspect the correlation indicators are simply to illustrate concepts and not of any practical use. Like I said, I'm open to be proven wrong. I do think it's better to simplify if possible though.

- Joined Nov 2007 | Status: Member | 3,018 Posts

DislikedConsider the difference in pip value too. USDJPY has a better pip value than USDCAD. KP {quote}Ignored

That has always been my issue with strength indicators. As far as i can tell, they do not seem to "normalize" or correct for the difference in pip value between currencies as you put it. I wonder how a programmer could account for that? I don't think it matters with bid/ratio indicators or strength indicators based on bid ratio though? Am i wrong?

- Joined Sep 2011 | Status: Member | 1,079 Posts

Disliked{quote} That has always been my issue with strength indicators. As far as i can tell, they do not seem to "normalize" or correct for the difference in pip value between currencies as you put it. I wonder how a programmer could account for that? I don't think it matters with bid/ratio indicators or strength indicators based on bid ratio though? Am i wrong?Ignored

I wasn't an expert on correlation trading, it's just that all the sites I visited the only way they were trading it,

was Strong versus weak,

And for the past 12 weeks, I've been looking at charts where you could use an indicator, and where you could see an entry point,

I tried putting divergence lines on charts versus charts instead of putting it on an RSI chart and have had mixed results,

I'm looking at this moment at pairs that are 99% the same Mirror Image,

I look for candle colour,

There seems to be a candle that doesn't conform to the colour pattern and then that develops into an entry point,

the trouble with this system is you have to stare at the screen and wait for every candle to close

to compare it with the candle below, again, I've had mixed results,

But today your input is encouraging,

I can see we've got a wealth of experience,

it's just a matter of time when that experience we all contribute that products A trading idea

that is viable,

I'd like to say thank you to you all for your input

- Joined Sep 2011 | Status: Member | 1,079 Posts