{quote} I was also wondering what is the evaluation points, thanks honestknave for the explanation It makes more sense to use 7 on every currency then, I'm really enjoying the csDash, thanks again
- #81
- May 5, 2015 8:40am May 5, 2015 8:40am
- Joined Nov 2014 | Status: Trader | 1,300 Posts
- #82
- May 5, 2015 9:30am May 5, 2015 9:30am
- Joined Nov 2007 | Status: Trader | 3,060 Posts
{quote}
thanks honestknave! what about correlation.
JibalaPasan in post 1087 of dashboard thread wrote of correlation
http://www.forexfactory.com/showthre...23#post8211923
she talks about how pairs are correlated to each other.. nasap talks about pairs being in sync.
would you please define the correlation part.
Thanks!
- #84
- May 5, 2015 10:54am May 5, 2015 10:54am
- Joined Nov 2014 | Status: Trader | 1,300 Posts
{quote} thanks honestknave! what about correlation. JibalaPasan in post 1087 of dashboard thread wrote of correlation http://www.forexfactory.com/showthre...23#post8211923 she talks about how pairs are correlated to each other.. nasap talks about pairs being in sync. would you please define the correlation part. Thanks!
I'm overstepping my knowledge boundaries here, so please take everything I say with a pinch of salt (and I'm happy to be corrected by anyone more knowledgeable on the subject):
Correlation in its simplest form means a connection between two or more things.
When you see a correlation table like this:
You are seeing a comparison of 2 pairs. When one pair moves up, what does the other pair do? Does it move up the same amount? Move up a little more? A little less? Move in the opposite direction?
If there is 100% correlation, it means that whatever 1 pair does the other pair does exactly too.
You will see 100% in the table whenever both pairs are the same - the pairs move the same because they are the same (a pointless figure on the table, but illustrates the point):
If you see -100%, the pairs are doing the exact opposite to each other. One goes up, the other goes down. Equal and opposite.
Which naturally leads on to, "how do we measure correlation"? Typically, it involves some maths :nerd:
But it is important to realize that there are different ways to measure correlation. Different techniques will yield different results.
Much like there are several ways to measure currency strength (csDash uses one method, but I have various other methods which all yield different results).
Then you have the whole gray area between -100% and +100%, where pairs are kind of doing the same/opposite thing but not entirely. What level of correlation do we consider significant?
The reason I am curious about these correlation tables is that they only compare 2 pairs at a time. What exactly is it bringing to the table, so to speak? (pardon the pun!)
When we measure basket strength (like csDash or the spreadsheets it is based upon), we are indirectly measuring correlation and also getting a larger picture of the market. The correlation tables are only looking at 2 pairs, but basket strength throws 7 pairs into the mix. If you think about it, you'll generally only get the extreme strength measurements when everything is moving together i.e. correlated. And not only correlated, but correlated over a wider spectrum.
Undoubtedly correlation is offering us a different perspective to currency strength, but I would like to explore how useful it is.
My apologies that the explanation is vague, but I have only just started to explore it myself.
Perhaps someone more knowledgeable can chip in
- #86
- Edited 2:21pm May 5, 2015 11:06am | Edited 2:21pm
- Joined Nov 2007 | Status: Trader | 3,060 Posts
{quote} Interesting you should mention this, because I have been giving correlation some thought over the last few days. I'm overstepping my knowledge boundaries here, so please take everything I say with a pinch of salt (and I'm happy to be corrected by anyone more knowledgeable on the subject): Correlation in its simplest form means a connection between two or more things. When you see a correlation table like this: {image} You are seeing a comparison of 2 pairs. When one pair moves up, what does the other pair do? Does it move up the same amount?...
nice honest post. my understanding is that when the little twig grow into a bigger twig and then has a trunk and then starts to branch you can count on that more.... in other words the order things happen matters..... i.e steady moves... i.e 1 minute turns into 5 minute turns into 15 minute.... when it comes to correlation.... thats one thing to look for there is a video i can find about it if you like..... the other thing from what little i've understand from my readings is that If a strong correlation is real price usually doesn't decouple from it.... in other words when price goes a std or 2 away from a correlation, then you've got an opportunity to virtually guarantee some profit. in theory anyhow... hope that made sense.... i.e. if uchf and eu were negtively correlated by 99% over the last 3 months and this month they suddenly moved together...1 of 2 things MUST be true...1. they are decoupling and the correlation is over and that is tradeable or 2. the usual more relaible case..... they will return to negative correlation...... so when strength shows the negative returning on one pair or better yet both.. bam you have the highest probability trade available in all of trading.... exact specs not known.... but that is my limited understanding......
honest.... i saw someone do this in a video but i cant find it again..... if you overlay two highly correlated charts on top of each other they should look nearly identical...when you see significant space between them....then you have a tradeable situation because if they are highly correlated they HAVE to touch again or nearly touch.... and get back together...... otherwise they decouple.... best i can do explaining something i don't fully understand myself! lol
{quote} Interesting you should mention this, because I have been giving correlation some thought over the last few days. I'm overstepping my knowledge boundaries here, so please take everything I say with a pinch of salt (and I'm happy to be corrected by anyone more knowledgeable on the subject): Correlation in its simplest form means a connection between two or more things. When you see a correlation table like this: {image} You are seeing a comparison of 2 pairs. When one pair moves up, what does the other pair do? Does it move up the same amount?...
if the two are similar that you found...i'm wondering if the math is actually measuring correlation?
from what i'm understanding, correlation measures togetherness and CSM measures strength.. they one should not affect the other really i would think..
would it?
thanks for letting me regurgitate lol
Inserted Video
here's another formula http://www.forexhit.com/analyze-fore...relations.html
I find it interesting too.... google quantum synchronization
- #87
- Edited 1:51pm May 5, 2015 1:34pm | Edited 1:51pm
- Joined Nov 2014 | Status: Trader | 1,300 Posts
Thanks for the extra info dagoods - I'll google for the video and add it to my research. If you're talking about change in correlation, then that is really interesting stuff. But as a cold measurement...still deciding on how I would use that one (unless you're specifically looking at opening simultaneous trades or mitigating exposure).
Getting back to CSM versus correlation: there are lots of different yardsticks to measure currency strength.
The spreadsheets use the concept of bid ratio: where is the bid price relative to the day's high? If the bid happens to be the daily high, the bid ratio is 100%. If the bid is the daily low, the bid ratio is 0%.
This number then gets adjusted, factored and averaged but ultimately it is to do with how the 7 pairs are all moving.
Using the JPY example simply because you don't need to worry about base/quote (JPY is always the quote):
If all 7 pairs are close to the Daily Low, this implies JPY is very strong. Let's give them fictitious values:
USDJPY 5%
EURJPY 7%
GBPJPY 4%
CHFJPY 2%
CADJPY 4%
AUDJPY 3%
NZDJPY 5%
The average is 4.3%... a low number. As it is the quote currency, you need to turn it on its head and consider it 95.7%.
It would be fair to say that, in general terms (it all depends on how you are measuring correlation), all the pairs are highly correlated and the currency is strong.
You remove some of the correlation (less consistency in the bid ratios) and you remove the strength:
USDJPY 12%
EURJPY 83%
GBPJPY 16%
CHFJPY 23%
CADJPY 76%
AUDJPY 54%
NZDJPY 93%
The average is 51%... a middle of the road number.
So not much correlation, and not much strength or weakness.
Yes, I've fudged the maths and glossed over lots of things (apologies to all the mathematicians and purists!) but the point remains: once I've identified a strong currency and a weak currency through the CSM, what additional information am I looking to get from the correlation of 2 specific pairs?
but happy to keep exploring
Getting back to CSM versus correlation: there are lots of different yardsticks to measure currency strength.
The spreadsheets use the concept of bid ratio: where is the bid price relative to the day's high? If the bid happens to be the daily high, the bid ratio is 100%. If the bid is the daily low, the bid ratio is 0%.
This number then gets adjusted, factored and averaged but ultimately it is to do with how the 7 pairs are all moving.
Using the JPY example simply because you don't need to worry about base/quote (JPY is always the quote):
If all 7 pairs are close to the Daily Low, this implies JPY is very strong. Let's give them fictitious values:
USDJPY 5%
EURJPY 7%
GBPJPY 4%
CHFJPY 2%
CADJPY 4%
AUDJPY 3%
NZDJPY 5%
The average is 4.3%... a low number. As it is the quote currency, you need to turn it on its head and consider it 95.7%.
It would be fair to say that, in general terms (it all depends on how you are measuring correlation), all the pairs are highly correlated and the currency is strong.
You remove some of the correlation (less consistency in the bid ratios) and you remove the strength:
USDJPY 12%
EURJPY 83%
GBPJPY 16%
CHFJPY 23%
CADJPY 76%
AUDJPY 54%
NZDJPY 93%
The average is 51%... a middle of the road number.
So not much correlation, and not much strength or weakness.
Yes, I've fudged the maths and glossed over lots of things (apologies to all the mathematicians and purists!) but the point remains: once I've identified a strong currency and a weak currency through the CSM, what additional information am I looking to get from the correlation of 2 specific pairs?
but happy to keep exploring
- #88
- May 5, 2015 1:37pm May 5, 2015 1:37pm
- Joined Nov 2014 | Status: Trader | 1,300 Posts
Sorry dagoods, I didn't hit refresh before posting and I can see you added some extra info. I'll have a read through it all
and informative
- #93
- May 7, 2015 9:38am May 7, 2015 9:38am
- Joined Nov 2014 | Status: Trader | 1,300 Posts
{quote} nice nice have you seen teh indicator called abr ,average bar range? there is also a indicator called tradeable correlations.... so i know you can pull correlations data.... can you make an open source mql that uses the idea shown in the pdf about range following? that would be great
- #96
- May 7, 2015 10:49am May 7, 2015 10:49am
- Joined Nov 2007 | Status: Trader | 3,060 Posts
{quote} No, never seen those. When I get a little more time I'll take a look - thanks
cool... an other way to see "following" is to see one of the pairs that is correlated to move up the ranks and go from lets say level 3 to level 8 on the 8 level CSM, and the other one not..... lets say the other one goes to level 5 from level 2 or soemthing.... then you can bet the other one will follow the leader.... hope i'm makin' some sense here cause my peanut get confused very easily j.k. lol
- #99
- May 7, 2015 2:33pm May 7, 2015 2:33pm
- Joined Nov 2014 | Status: Trader | 1,300 Posts
{quote} cool... an other way to see "following" is to see one of the pairs that is correlated to move up the ranks and go from lets say level 3 to level 8 on the 8 level CSM, and the other one not..... lets say the other one goes to level 5 from level 2 or soemthing.... then you can bet the other one will follow the leader.... hope i'm makin' some sense here cause my peanut get confused very easily j.k. lol
- #100
- May 8, 2015 12:01am May 8, 2015 12:01am
- Joined Nov 2014 | Status: Trader | 1,300 Posts
Just a quick one:
I clean out old versions of the indicator from the thread. If you want to find the current version of csDash:
1. Click the paperclip at the top of the thread:
2. Select the file you want to see
I clean out old versions of the indicator from the thread. If you want to find the current version of csDash:
1. Click the paperclip at the top of the thread:
2. Select the file you want to see