The higher GU, EU, the higher the crosses volatility | Forex Factory

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The higher GU, EU, the higher the crosses volatility

  • #1
  • First Post: Jul 2, 2007 6:25pm Jul 2, 2007 6:25pm
Let's go back to school:

GJ = GU x UJ

So...

ΔGJ = Δ GU x UJ + GU x Δ UJ.

Let's say GU = stalling, or ΔGU = 0


ΔGJ = GU X Δ UJ.


Therefore, as higher as Gu is, - GU is at historical highs now - every PIP variation in UJ is potenciallized, up or down. Actually every UJ pip right now is MULTIPLIED by 2.0160x

:surprised

Sorry, I'm running on booze right now... But that's pretty much it!
  • #2
  • Jul 2, 2007 6:26pm Jul 2, 2007 6:26pm
Quoting cesarnc
Let's go back to school:

GJ = GU x UJ

So...

ΔGJ = Δ GU x UJ + GU x Δ UJ.

Let's say GU = stalling, or ΔGU = 0


ΔGJ = GU X Δ UJ.


Therefore, as higher as Gu is, - GU is at historical highs now - every PIP variation in UJ is potenciallized, up or down. Actually every UJ pip right now is MULTIPLIED by 2.0160x

:surprised

Sorry, I'm running on booze right now... But that's pretty much it! [IMG]file:///C:/DOCUME%7E1/usuario1/CONFIG%7E1/Temp/moz-screenshot-1.jpg[/IMG]


So what are you saying?
Patience + Humility + Study = Success
  • #3
  • Jul 2, 2007 6:29pm Jul 2, 2007 6:29pm
Quoting DutchTrader
So what are you saying?
I'm saying that every pip variation in UJ is multiplied by the current GU price ( in case of GBPJPY).

So the higher the GU price, the higher is GJ's volatility...

Well, we agree that GJ = GU x UJ, no?
  • #4
  • Jul 2, 2007 6:39pm Jul 2, 2007 6:39pm
Quoting cesarnc
I'm saying that every pip variation in UJ is multiplied by the current GU price ( in case of GBPJPY).

So the higher the GU price, the higher is GJ's volatility...

Well, we agree that GJ = GU x UJ, no?
Yep, that I agree on.
Patience + Humility + Study = Success
  • #5
  • Jul 2, 2007 6:43pm Jul 2, 2007 6:43pm
far be it for this humble trader to point out the flaw in your otherwise meticulous argument but wouldn't it stand to reason that UJ would also have to be trading higher in order for volatility to increase?
quote of the day: . It's like deja-vu all over again
  • #6
  • Jul 2, 2007 6:47pm Jul 2, 2007 6:47pm
Quoting DutchTrader
Yep, that I agree on.
Just do the homework now
  • #7
  • Jul 2, 2007 7:01pm Jul 2, 2007 7:01pm
hang on a minute, i'm vaguely drunk so don't blame me if this is wrong but:

if GJ is UJ * GU

and GU is at 2.0000 and UJ is at 122.00

then GJ would be at 244.00


suppose GU now rises to 2.0001 while UJ remains the same

GJ would now be at 244.01(22)

a gain of 1.22 pips

now suppose GU falls to 1.9999, again UJ remains the same

GJ would now be at 243.98(78)

a loss of 1.22 pips.

I don't get it
quote of the day: . It's like deja-vu all over again
  • #8
  • Jul 2, 2007 7:06pm Jul 2, 2007 7:06pm
if GJ = GU x UJ
GJ => 2 decimal
GU => 4 decimal
UJ => 2 decimal

UJ win by number

a 1 pip in UJ = 100 pip in GU
  • #9
  • Edited 7:32pm Jul 2, 2007 7:12pm | Edited 7:32pm
ok

following from this

we now assume GU as static at 2.0000 and that UJ falls to 1.2199

we now have GJ at 243.98 ( a loss of 2 pips)

if UJ rises to 1.2201 and GU remains static

We now have 2.4402 ( a gain of 2 pips)

proof (er... I think) that UJ determines the price of GJ more than GU and that volatility is not increased.

so there :

edit: Hmmm, on reflection I am guessing my addled brain has made a mistake in my last sentence. however one might as well say that every rise in UJ will cause GJ to be more sensetive to changes in GU.

conclusion - the higher GJ gets the more volatile it becomes
quote of the day: . It's like deja-vu all over again
  • #10
  • Jul 2, 2007 8:12pm Jul 2, 2007 8:12pm
NO!

Take this, for example, UJ went from 122.00 to 122.50. = 50 pips change

Scenario 1)

Cable was steady at 1.9900

So UJ moving from 122.00 to 122.50 would cause GJ to move from 242.78 to 243.77 = 99 pips

Scenario 2)

Cable steady at 2.0200

UJ moving from 122.00 to 122.50 would make GJ go from 246.44 to 247.45 = 101 pips.

So the same 50 pips push in UJ caused 99 pips in GJ or 101, depending on the price od GU.


Seems a 2 pips bullshit at first sign, but with GU biased for new highs, and I mean, big time new highs, GJ is both providing amazing profits or amazing drawdowns... Volatitity increases as GJ goes higher
  • #11
  • Jul 2, 2007 8:36pm Jul 2, 2007 8:36pm
Okay, after reading it 3 times, it now makes sense. Good thing I wasn't drunk...lol

So what is the consensus of how high the GJ can go??????
  • #12
  • Last Post: Jul 2, 2007 8:44pm Jul 2, 2007 8:44pm
I agreed after shaking off idiocy.

The same would also be true if you reversed it however.

Scenario 1)

UJ was steady at 122.00

So cable moving from 1.9900 to 1.9950 would cause GJ to move from 242.78 to 243.39 = 61 pips

Scenario 2)

UJ steady at 125.00

Cable moving from 1.9900 to 1.9950 would make GJ go from 248.75 to 249.38 = 63 pips.

So the same 50 pips push in cable caused 61 pips in GJ or 63, depending on the price of UJ

Therefore even though GJ is more responsive to price changes in UJ, volatility correlation between UJ and GU remain the same, whichever moves higher. In both circumstances GJ volatility increases.
quote of the day: . It's like deja-vu all over again
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