Ranging vs Trending Correlation | Forex Factory

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Ranging vs Trending Correlation

  • #1
  • First Post: Dec 21, 2006 2:28pm Dec 21, 2006 2:28pm
Is there any type of correlation between say if a pair is trending heavily, the other is ranging? This may sound like a strange question and it probably is but I thought I would ask anyway. Thanks.
"Its not where your at, but where your coming from"
  • #2
  • Dec 21, 2006 3:05pm Dec 21, 2006 3:05pm
Sure there is. Think about this... If the GBPUSD is trending up and the EURUSD is trending up, they are both very correlated maybe about .98...
So if these are both moving higher and are highly correlated, then by definition EURGBP must be ranging, because neither the Euro or the Cable is stronger

BTW, that is precisely what EURGBP mostly does. It ranges...


Quoting athalon7
Is there any type of correlation between say if a pair is trending heavily, the other is ranging? This may sound like a strange question and it probably is but I thought I would ask anyway. Thanks.
  • #3
  • Dec 21, 2006 3:07pm Dec 21, 2006 3:07pm
Quoting athalon7
Is there any type of correlation between say if a pair is trending heavily, the other is ranging? This may sound like a strange question and it probably is but I thought I would ask anyway. Thanks.
I will be happy to assist a bit, though I need to be certain I understand. Are you talking about say nzd/usd going up say.. 4% while aud/usd only going or staying in a range of +.5, -.5%? How does this affect the overall correlation between the pairs?

Let me know,
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #4
  • Dec 21, 2006 3:15pm Dec 21, 2006 3:15pm
Quoting smjones
Sure there is. Think about this... If the GBPUSD is trending up and the EURUSD is trending up, they are both very correlated maybe about .98...
So if these are both moving higher and are highly correlated, then by definition EURGBP must be ranging, because neither the Euro or the Cable is stronger

BTW, that is precisely what EURGBP mostly does. It ranges...
although your example holds true often, your logic is false. Both Cable and euro may go up against the dollar but one may be rising at a much much faster pace and therefore eurgbp will not range for that day. EIther way I dont know if that was what he was really asking.
Man who scratches ass should not bite fingernails
  • #5
  • Dec 21, 2006 3:47pm Dec 21, 2006 3:47pm
Thanks for your response, but of course my logic is actually correct. You are speaking apparently of a day range I am speaking of longer term range. I cannot say whether or not that is what he asked. It appeared to me that was the question.


Thanks Scott


Quoting Leugimp
although your example holds true often, your logic is false. Both Cable and euro may go up against the dollar but one may be rising at a much much faster pace and therefore eurgbp will not range for that day. EIther way I dont know if that was what he was really asking.
  • #6
  • Edited 7:04pm Dec 21, 2006 3:51pm | Edited 7:04pm
Also, If one currency is rising much faster than the other, the correlation would not be .98. It would be somewhat less.



Quoting smjones
Thanks for your response, but of course my logic is actually correct. You are speaking apparently of a day range I am speaking of longer term range. I cannot say whether or not that is what he asked. It appeared to me that was the question.


Thanks Scott
  • #7
  • Dec 21, 2006 4:30pm Dec 21, 2006 4:30pm
Quoting smjones
Sure there is. Think about this... If the GBPUSD is trending up and the EURUSD is trending up, they are both very correlated maybe about .98...
So if these are both moving higher and are highly correlated, then by definition EURGBP must be ranging, because neither the Euro or the Cable is stronger

BTW, that is precisely what EURGBP mostly does. It ranges...
Does it now? ... didn't think of that. I think I have an idea!

And even the spread is reasonable.
Bundy's status today: "Waiting..."
  • #8
  • Dec 21, 2006 4:45pm Dec 21, 2006 4:45pm
Having a Range and Trend Bases system, working out which to use at that moment of time, has been my main worry, use the wrong one and lose.

So, I find, if GBPUSD is above 24Hour SMA and EURUSD is below, then 95% sure I'll get chop. As there both trending opposite ways so it confuses the masses.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #9
  • Last Post: Dec 21, 2006 5:04pm Dec 21, 2006 5:04pm
Quoting smjones
Thanks for your response, but of course my logic is actually correct. You are speaking apparently of a day range I am speaking of longer term range. I cannot say whether or not that is what he asked. It appeared to me that was the question.


Thanks Scott
Yeah- I was looking at large, fast moves over say a 500 pip spread. It was a pretty general question no doubt and can be interpreted many ways. To make it somewhat clearer but still open to detail: if a pair moves very fast, say 500 pips with not much of a retrace, is there a pair that would trend over the same time period. So I guess pip movement and time frame need to be considered.

There are many variables, like range, speed, pip value, etc. but it was a general question that came to mind.

Quote
So, I find, if GBPUSD is above 24Hour SMA and EURUSD is below, then 95% sure I'll get chop. As there both trending opposite ways so it confuses the masses

Please elaborate on this. It sounds interesting.
"Its not where your at, but where your coming from"
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