Hello Everyone!!
I have been trading for several years but have never posted in a forum until a couple months ago when I posted some information on a correlation strategy I trade. The post originally started out as a search for help in developing an EA for position management (not automated entries). I received numerous requests for information on the strategy itself so I decided to share some of the information. It was very well received, so I thought I would continue sharing it in my free time.
My correlation strategy is simply trading more than one pair at a time and viewing all the pairs being traded as one collective unit or trade. Each pair in the correlation trade plays an integral part as the trade utilizes correlations in a manner that allows you to profit no matter what direction the market moves. It is a way to profit from the random nature of Forex by capitalizing on the random swings and algorithms between correlating currencies. The draw down is often extremely limited and little margin is required. The strategy focuses on quantum, not pip collecting.
The strategy is nothing new or exciting. Like most strategies out there this is just another person's version of something that has always been around. The strategy is common among commercial traders, financial institutes and some speculators. What I have done, is taken some of the basic theories and concepts of correlation trading and developed a strategy for Forex that has been adapted for intraday and/or short term profit. There are many variations of the strategy so it is great as a stand alone method and can also complement existing strategies due to its unique versatility.
Please Note: This is just a very general overview of one of my main correlation strategies. It is not completely thorough nor does it speak to the subjective components such as set ups, entries, and points of caution. However, there should be enough information to satisfy traders seeking strategy information.
This particular version of my correlation strategy acts as a pseudo-hedge because the currencies are traded in a manner where the USD is usually hedged. There are several reasons for this but the primary reason they are traded in this manner is because the trades have the opportunity to be profitable regardless of the direction the market moves. When I refer to trades I am referring to the collective balance of all open positions as one correlation trade involves multiple currency pairs (usually 2 pairs).
The currencies I trade for this strategy are chosen from correlation triangles I create. There are multiple correlation triangles but the most common and frequent correlation triangle I use contains the EURUSD, GBPUSD, and USDCHF. I group these three together based on their correlation coefficients which is a statistical measure of how two securities move in relation to each other. The other reasons include, but are not limited to liquidity of the pairs; and the fact that there are multiple correlation trade combinations that can act as a pseudo-hedge within the three pairs.
Once a correlation triangle is created it is important to recognize that although there are various trade combinations within the triangle, there are only a limited number of combinations that can be traded to satisfy the criteria of this correlation strategy.
It is my intention to start posting information in this forum from the forum currently hosting the info but I trade full time and that is my priority. This forum will be a side project for me when I have free time. For those who want more details before I can get them posted here, you can find them at their current location located here: http://www.goldenmoneytree.com/forum/viewtopic.php?t=974 . I have no connection to this forum it just happens to be the location where I first started to share my strategy.
If anyone has any questions please post, send me an IM, or email me at [email protected].
Cheers!!!
I have been trading for several years but have never posted in a forum until a couple months ago when I posted some information on a correlation strategy I trade. The post originally started out as a search for help in developing an EA for position management (not automated entries). I received numerous requests for information on the strategy itself so I decided to share some of the information. It was very well received, so I thought I would continue sharing it in my free time.
My correlation strategy is simply trading more than one pair at a time and viewing all the pairs being traded as one collective unit or trade. Each pair in the correlation trade plays an integral part as the trade utilizes correlations in a manner that allows you to profit no matter what direction the market moves. It is a way to profit from the random nature of Forex by capitalizing on the random swings and algorithms between correlating currencies. The draw down is often extremely limited and little margin is required. The strategy focuses on quantum, not pip collecting.
The strategy is nothing new or exciting. Like most strategies out there this is just another person's version of something that has always been around. The strategy is common among commercial traders, financial institutes and some speculators. What I have done, is taken some of the basic theories and concepts of correlation trading and developed a strategy for Forex that has been adapted for intraday and/or short term profit. There are many variations of the strategy so it is great as a stand alone method and can also complement existing strategies due to its unique versatility.
Please Note: This is just a very general overview of one of my main correlation strategies. It is not completely thorough nor does it speak to the subjective components such as set ups, entries, and points of caution. However, there should be enough information to satisfy traders seeking strategy information.
This particular version of my correlation strategy acts as a pseudo-hedge because the currencies are traded in a manner where the USD is usually hedged. There are several reasons for this but the primary reason they are traded in this manner is because the trades have the opportunity to be profitable regardless of the direction the market moves. When I refer to trades I am referring to the collective balance of all open positions as one correlation trade involves multiple currency pairs (usually 2 pairs).
The currencies I trade for this strategy are chosen from correlation triangles I create. There are multiple correlation triangles but the most common and frequent correlation triangle I use contains the EURUSD, GBPUSD, and USDCHF. I group these three together based on their correlation coefficients which is a statistical measure of how two securities move in relation to each other. The other reasons include, but are not limited to liquidity of the pairs; and the fact that there are multiple correlation trade combinations that can act as a pseudo-hedge within the three pairs.
Once a correlation triangle is created it is important to recognize that although there are various trade combinations within the triangle, there are only a limited number of combinations that can be traded to satisfy the criteria of this correlation strategy.
It is my intention to start posting information in this forum from the forum currently hosting the info but I trade full time and that is my priority. This forum will be a side project for me when I have free time. For those who want more details before I can get them posted here, you can find them at their current location located here: http://www.goldenmoneytree.com/forum/viewtopic.php?t=974 . I have no connection to this forum it just happens to be the location where I first started to share my strategy.
If anyone has any questions please post, send me an IM, or email me at [email protected].
Cheers!!!
