Close Correlation Indi

I have made an indicator which is very similair to another correlation indicator.
Just fort I would post it to see what people think and how other people might use it if at all.
So far it is giving very good buy and sell signals.
The only advantage I see with it compared to another indicator is that you can plot trend lines on the chart and if it is broke there is a high chance of trend reversal.
Currently though it will only work on two currencies that have the same currency values. It was designed for EURUSD USDCHF and EURCHF. It will however only plot the lines of two pairs.


You want to compare USDCHF VS EURCHF. You place the indicator on a USDCHF chart:

PAIR 1 = USDCHF
PAIR 2 = EURCHF


I am going to try make it have 3 pairs. And also try to get it to work for JPY pairs.

I have been looking for this kind of indicator for awhile, works good

I am using it on JPY pairs with no problems

I am a mini account so I just add m to the pair. GBPJPYm USDJPYm

Thank you for your indicator,
I am new and studding pair trading.

I am having a difficult time at understanding when to enter a hedge,

1. When the lines cross thats when they are correlated
and when the lines move apart they are less,or not correlated is this correct ?.

2. Do you enter a trade when they are correlated or not correlated

3. When looking at eurusd/usdchf Do you just enter on your correlation indicator ?

4. Buy or sell both pairs ? Do you use other indicators to determine buy or sell ?



5. I find in testing that if i buy both eurusd,usdchf , i move into profit
much faster, It the euro moves down than i go into draw down for some time

6. Do you trade the same lot size on both pairs or do you adj for the difference in price ? some people use the same lot size that help to offset
the difference is daily range of the pair.

Sorry for all the questions if some one could answer just one of them it would be help full.

Glad that it is working ok. Im suprised it works on jpy pairs, I think I confused myself, i meant it wont work on pairs of different price values. eg. it wont work with jpy pairs VS usd pairs, because JPY is 0.00 and USD is 0.0000 price.

To help answer your questions todd. it is best to explain how this is calulated.
It first calculates the difference in close price from bar number 1, to the previous bar e.g. 9:00 candle - 8:00 candle. Lets say the at 8:00 it closed at 1.5000, then at 9:00 it closed at 1.5010. The difference is +10 pips. It will then add this difference to the last difference, for a set period of bars which is 48. so lets say at 9:00 the difference was + 10 pips. The 10:00 candle shows +20 pips, running total now + 30 pips. It will continue to do this for 48 bars. So in effect its telling you whether price has increased or decreased.
It then compares this to the other pair to tell you the difference compared to the other pair difference.
So for EURUSD USDCHF, because they move in opposite directions meaning they have negative correlation, it would be best to Sell and Buy, not do same order. You sell the currency that is showing a higher close difference, and buy the pair with negative close difference.
I am not trading live with this indicator but am testing it on demo, and yes I just use it by itself.
I suggest only making a buy and sell when the value is = or greater than 0.04.
The idea is that at some point EURUSD and USDCHF will return to a difference of 0 as they are negativly correlated. So you want to sell the pair that is high and buy the pair that is low, knowing that soon they will return. If you have other S & R indicators it might also help, but the trick is to keep trading simple otherwise you never enter market.
Also do you know how to plot a trendline on the indicator? that can also help confirm whether there is a trend change.

Be carefull though as on the odd occasion even though it says to sell and buy the pairs can still move in the same direction and not change for a long time, meaning you keep loosing pips. I use this on hour chart, but might work better on higher timeframe. Take a look at when the peaks are made and whetehr price retraces or not. Then find a suitable figure that you will wait for indicator to read to set buy and sell at this level. The lower the level you have the greater the risk but more trades, the higher value you use the less risk you have but less trades.