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Trading correlation pairs by using the other pairs

  • #281
  • May 18, 2020 3:03pm May 18, 2020 3:03pm
if NZDUSD is to BUY....cross correlation tell me which cross BUY (direct correlation) or SELL (inverse correlation)
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  • #282
  • May 18, 2020 3:20pm May 18, 2020 3:20pm
AJ: AUD vs JPY -88%..... AUD strength crossed above JPY.........buy AJ......
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  • #283
  • May 18, 2020 3:30pm May 18, 2020 3:30pm
Quoting MQLTrade
This is beta test, he send to me......i have to try, but it's exactly how i ask to him......a complete suite. Now let's see if it works {image}
Looking at this again the 4 best trades should be
AUDJPY
NZDJPY
EUR JPY
CADJPY
if we're going off currency strength
The Great British pound is weaker than CAD

If we looking at correlation then if the AUDJPY goes down then AUDUSD and USDJPY should also go down
the same with NZDJPY is go down then NZDUSD and USDJPY should also go down,
the same with EURUSD is go down then USDJPY and EURJPY should also go down,
The odd one out is the CAD. Perhaps that's why it been left off the list,
looking at the correlation dashboard CAD is clearly neither strong or weak the highest number is 59.7 and the lowest -54.7
  • #284
  • May 18, 2020 3:33pm May 18, 2020 3:33pm
Quoting redfan
{quote} Looking at this again the 4 best trades should be AUDJPY NZDJPY EUR JPY CADJPY if we're going off currency strength The Great British pound is weaker than CAD If we looking at correlation then if the AUDJPY goes down then AUDUSD and USDJPY should also go down the same with NZDJPY is go down then NZDUSD and USDJPY should also go down, the same with EURUSD is go down then USDJPY and EURJPY should also go down, The odd one out is the CAD. Perhaps that's why it been left off the list, looking at the correlation dashboard CAD is clearly neither...
Best trade with strength daily?

As best trade advisor is only for 8 crosses: EURJPY, GBPJPY, AUDJPY, NZDJPY, EURCAD, GBPCHF, AUDCAD, EURAUD.
  • #285
  • May 18, 2020 3:38pm May 18, 2020 3:38pm
Quoting MQLTrade
AJ: AUD vs JPY -88%..... AUD strength crossed above JPY.........buy AJ...... {image}

excellent. Look forward to
  • #286
  • May 18, 2020 3:39pm May 18, 2020 3:39pm
Quoting MQLTrade
{quote} Sorry i don't understand what u meaning. Dashboard Correlation i think must say for exaple USD how is correleted with other currencies....strength give direction Example: correlation USD & NZD is -70%...great, they are moving on opposite way.....NZD is stronger than USD, so NZDUSD is to BUY........this is my thinking
Diagram on post #277 is a currency strength meter not a correlation dashboard.
Diagram on post #281 is a correlation dashboard.
It never gets easier, you just get better
  • #287
  • May 18, 2020 3:44pm May 18, 2020 3:44pm
Quoting Shabs19
{quote} Diagram on post #277 is a currency strength meter not a correlation dashboard. Diagram on post #281 is a correlation dashboard.
LINES are Currencies strength

Table on 277 is CORRELATION BETWEEN CURRENCIES (EUR vs JPY, USD vs CAD ...and so on)

Table on 281 in CORRELATION BETWEEN CROSSES (AUDCAD vs EURJPY, USDCAD vs AUDUSD......and so on)

THe first one (277) it's useful to find the FIRST CROSS to TRADE, the second one (281) is useful to find CROSSES CORRELATED to FIRST ONE to MADE CORRELATION TRADING
  • #288
  • May 18, 2020 3:51pm May 18, 2020 3:51pm
GBPCAD, show how is important correlation between CURRENCIES:

even if CAD is stringer than GBP (and cross again above).....GBPCAD goes down little (about 45 pips....a short sideway) because GBP e CAD are directly correlated......on short term.....and this is not a good cross to trade in this case

Negative correlation between CURRENCIES is a propeller to movement.....because currencies goes on the opposite way, and strength can do its work

Of course this is IMHO..... just experimental
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  • #289
  • May 18, 2020 3:55pm May 18, 2020 3:55pm
Quoting MQLTrade
AJ: AUD vs JPY -88%..... AUD strength crossed above JPY.........buy AJ...... {image}
Is the currency strength based on the past 100 15m bars on a 15m chart ?
That is a lot of lag for a signal on a 15m chart. I expect that the indicator is adjustable.

Purely on Market structure, the signal to buy was confirmed at least 20 bars before. (5 hours before)
It never gets easier, you just get better
  • #290
  • May 18, 2020 3:57pm May 18, 2020 3:57pm
Quoting Shabs19
{quote} Is the currency strength based on the past 100 15m bars on a 15m chart ? That is a lot of lag for a signal on a 15m chart. I expect that the indicator is adjustable. Purely on Market structure, the signal to buy was confirmed at least 20 bars before. (5 hours before)
I setted on GBPCAD:

- TABLE CORRELATION CURRENCIES: TF 15min, BARS 100

- STRENGTH: TF DAILY

All parameters can be modified by user
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  • #291
  • May 18, 2020 4:02pm May 18, 2020 4:02pm
Quoting MQLTrade
{quote} LINES are Currencies strength Table on 277 is CORRELATION BETWEEN CURRENCIES (EUR vs JPY, USD vs CAD ...and so on)
No such thing, as Correlation between currencies, only strength of one vs another. If that is what it is showing.

Quoting MQLTrade
{quote}Table on 281 in CORRELATION BETWEEN CROSSES (AUDCAD vs EURJPY, USDCAD vs AUDUSD......and so on)
This is a correct statement. We are comparing the movement of currency pairs against one another.

Quoting MQLTrade
{quote} I setted on GBPCAD: - TABLE CORRELATION CURRENCIES: TF 15min, BARS 100 - STRENGTH: TF DAILY All parameters can be modified by user {image}
As I thought it is using 100 15m bars to analyse, lot of lag for intraday trading.
It never gets easier, you just get better
  • #292
  • May 18, 2020 4:10pm May 18, 2020 4:10pm
GBPCHF: GBp vs CHF -84%..... GBP crosse above CHF.......GBPCHF BUY, with BIG MOVEMENT
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  • #293
  • May 18, 2020 4:20pm May 18, 2020 4:20pm
Quoting MQLTrade
GBPCHF: GBp vs CHF -84%..... GBP crosse above CHF.......GBPCHF BUY, with BIG MOVEMENT {image}
Example, if you are uisng an 8 period moving average on your chart, then your strength meter should also calculate over 8 periods, at the most 16 periods to get a higher TF reading.
Strength indicators can be used as confirmatory signals to show you are on the correct side of trend, but worry here is entering late.
It never gets easier, you just get better
  • #294
  • Edited 5:39pm May 18, 2020 4:32pm | Edited 5:39pm
Quoting MQLTrade
{quote} Sorry i don't understand what u meaning. Dashboard Correlation i think must say for exaple USD how is correleted with other currencies....strength give direction Example: correlation USD & NZD is -70%...great, they are moving on opposite way.....NZD is stronger than USD, so NZDUSD is to BUY........this is my thinking

exactly... sometimes been called a "double gap" in these threads on forex factory..that alone is enough to make a great EA one would think. double gaps offer double the pips b/c the instruments/currencies are moving in opposite directions

.............................................................................................................................................



now what if they are moving in the same direction(positive correlation)? then it is a follow the leader strategy if we are talking pairs trading one would think ......




follow the leader offers a very reliable trade IF the correlation is very strong. And the two currencies offer a "spread" between them (opportunity to trade)..... the follower is almost guaranteed to follow is the theory... plus you are trading in the direction of movement of both pairs..... with the "trend" (strength actually) so to speak

I'm not sure how to do follow the leader with correlation of currencies themselves though? Any thoughts?

I'd have to test the indicators and get back to ya'll but it's till the same thing

1. drection (that is easy)

2. timing (divergence, with the idea the follower will return to the initial same direction as the leader went) If both are moving at the same pace there isn't any opportunity to trade that way. But if one goes first and moves further faster than the other enough, then the other should follow suit.... <<< may need another indicator to determine timing (maybe a divergence indicator?)

I'm trying to wrap my head around it without the actual indicators lol Just some more food for thought FWIW

Others probably could add more insight

Cheers

PS reversals happen when a correlation no longer holds.... in my mind, forex is always cyclical as the currencies are relative to each other... just another thought on a possible setup to explore. divergence can possibly shows the correlation may be ending....
  • #295
  • Edited 5:38pm May 18, 2020 5:00pm | Edited 5:38pm
There is also correlation between certain currencies and the stockmarket and commodities.

What is known as Risk On and Risk Off.

AUD related to movements in Gold price, CAD movements in Oil, and USD with the Dow Jones, as is Euro with the DAX

Summary:

The fluctuation between risk appetite, also known as “risk on”, and risk aversion, dubbed “risk off”, is a daily changing sentiment on the market.
Difficult as it may seem to get insight into risk sentiment, it is a simple matter compared to tracking the stock market trend. Every day, a new rumor starts circulating, and there is a corresponding shift on stock markets. The daily fluctuations generate risk sentiment which can amount to a heavy toll on investors. One simple way of getting insight into underlying trends is by judging investors’ risk appetite. By becoming aware of market sentiment direction, traders can adjust their trading in line with it.

Risk On
When there is a sizable increase on the stock market, that is an indication of prevailing risk appetite. In this risk on mood investors have positive expectations about the economy, so they put their capital on the stock exchange and bet on high yielding currencies. As a result, stock market valuations rise and risk currencies, such as the Australian dollar and the New Zealand dollar, rally.
With low yielding instruments gains are smaller and even losses can occur. The selling of currencies offering low interest rates is done as a means to finance the purchase of higher yielding ones. That process is termed “carry trade”.

Risk Off
When investors experience risk aversion, they avoid risky instruments. In such situations they withdraw their money from shares and high-yield currencies. With a risk off market sentiment in place, there is no favorable ground for carry trade. Risk currencies are still offering positive overnight swaps, of course, but unfavorable exchange rate movements offset any interest gains. In a risk aversion setting, the safer choice for traders is the purchase of safe currencies. Examples of these are the US dollar and the Japanese yen.

There was one more safe currency until recently: the Swiss Franc. However, the Swiss National Bank intervened in August 2011, in an effort to limit the buying of CHF, which was dealing a heavy blow to the Swiss economy. Since its last major intervention, the SNB has promised to keep 1.20 for EUR/CHF as the highest level the Swiss franc would be allowed to reach against the euro.
It never gets easier, you just get better
  • #296
  • May 18, 2020 5:26pm May 18, 2020 5:26pm
Without dashboard can we find out which currency weak or strong?
  • #297
  • May 18, 2020 5:48pm May 18, 2020 5:48pm
Quoting BDfx77
Without dashboard can we find out which currency weak or strong?
Currency weakness & strength depends on what timeframe you are relating to.

For example, a currency could be strong against another currency in a 5m timeframe but in a H4 timeframe it could be the other way around.
You need to talk in context of which timeframe.
It never gets easier, you just get better
  • #298
  • May 19, 2020 2:57am May 19, 2020 2:57am
No new entries at moment.....i have to wait
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  • #299
  • May 19, 2020 2:59am May 19, 2020 2:59am
I see many input in this great tread.....wonderful
  • #300
  • May 19, 2020 3:11am May 19, 2020 3:11am
up and running

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