Best Thread Correlation Trading - Basic Ideas and Strategies

  • Thread starter Thread starter NVP
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FX4Newbies said:
Just passing through. I like the idea of your thread.

Correlation is also great for determining when a counter-trending price action may be in process. I like to use two negatively correlated instruments...like EurUsd and UsdChf for example...if you're into FX.

Here is a correlation table that you might like. It works on Live accounts. Not sure it would work on a Demo. Version 1.2.5 is out. There may have been an even more recent version...not sure about that though.

www.forexfactory.com

MT4 MTF Correlation table and Correlation oscillator indicators

Share ideas, debate tactics, and swap war stories with forex traders from around the world.
www.forexfactory.com www.forexfactory.com

Enjoy!
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Great! Does eurusd & usdchf correlation stays consistent or does it shift a lot?
 
Simon54 said:
Great! Does eurusd & usdchf correlation stays consistent or does it shift a lot?
Click to expand...
Correlation can vary. I would say off the top of my head, they may operate negatively about 80% of the time... meaning, if one is going up, the other is going down. The actual percentage may even be higher. You can also examine correlations by timeframe.
 
FX4Newbies said:
Correlation can vary. I would say off the top of my head, they may operate negatively about 80% of the time... meaning, if one is going up, the other is going down. The actual percentage may even be higher. You can also examine correlations by timeframe.
Click to expand...
Totally agree! Correlations can change with timeframes but it is useful to keep an eye specially during short term trades.
 
Hi everyone....I'm back !!!!

2024 saw me distracted on a variety of business projects so I wasn't as focused on my forex trading

2025 I'm gonna get more back in the Groove...

So what's new gang ?

N
 
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FX4Newbies said:
Very true, but I think many traders don't use it, which is why I like this thread.
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Yep unbelievable that most forex traders don't use the colossal edge provided by relative strength analysis...

Still it means more advantage for us

N
 
Simon54 said:
Great! Does eurusd & usdchf correlation stays consistent or does it shift a lot?
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There are standard pairs that traditionally correlate closer than others.....

My early posts here some 16 years ago explain the main relationships

N
 
Simon54 said:
Agreed. We gotta stick to the one which are more reliable. Do you trust EURUSD and GBPUSD more?
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Hey Simon

It's not really a question of trust...a currency will behave based on a variety of dynamics happening at that precise moment

We are all aware of those dynamics....and we have to decide the strategies we will use to find an edge

So in answer to your question....because both pairs include usd it becomes irrelevant in the equation

The question is more which of the currencies do I trust more in trading....euro or gbp

From a relative strength perspective my main criteria is trading the pair stronger than the other....on a weighted basis

Gbp is much more volatile than euro (check the atrs of their pairs)

So it's easy to be fooled into always trading gbp as it will be punching more pips per bar

If for example gu is scoring stronger than euro with them both being bull then I will probably be favouring the stronger trending pair in trades

But observant of all those things we learn to watch in forex .... timezones....news releases...support resistance.....etc etc

Trading forex is like fighting Mike tyson with a blindfold on and 1 hand tied behind your back.....its not easy 😑

N
 
Xavier1 said:
Hi Neil, this sounds like a fantastic initiative! Forex correlation is a powerful tool, and I’m looking forward to your insights on how the major currencies interact. I’m sure the indicator you’ve mentioned will be helpful too. I'll be sure to contribute any relevant references and ideas I come across. Best of luck with your studies!
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Well there's about 15+ years of posts following that one on here so enjoy !!! 😉
 
A quick update on what I do these days when trading forex

Firstly I heed to be respectful and mindful of the mod crew here.....they do a great job 👍

I've been banned many times on t2w over the years but probably for good reason .....and also many people have been banned from their posts on this thread.....

So I can't talk about certain commercial areas of my work over the years so I will stay focused on what I do daily and not go into detail

I use strengthmeters derived from my Free ones I've shared freely here for many years

They do the same thing as the original fxcorrelator but are slicker and much more customised and weighted to certain conditions and parameters for me

I still trade trend predominantly....and my entry style varies based on my perception of the market.....

I have a few variations on entry....from all out HH or LL breaches ....to pullback entries based on the traditional stuff most traders use .....it depends.....

there is no best way to trade..you have to find your niche and edge .....then spend years getting it better

N
 
NVP said:
Hey Simon

It's not really a question of trust...a currency will behave based on a variety of dynamics happening at that precise moment

We are all aware of those dynamics....and we have to decide the strategies we will use to find an edge

So in answer to your question....because both pairs include usd it becomes irrelevant in the equation

The question is more which of the currencies do I trust more in trading....euro or gbp

From a relative strength perspective my main criteria is trading the pair stronger than the other....on a weighted basis

Gbp is much more volatile than euro (check the atrs of their pairs)

So it's easy to be fooled into always trading gbp as it will be punching more pips per bar

If for example gu is scoring stronger than euro with them both being bull then I will probably be favouring the stronger trending pair in trades

But observant of all those things we learn to watch in forex .... timezones....news releases...support resistance.....etc etc

Trading forex is like fighting Mike tyson with a blindfold on and 1 hand tied behind your back.....its not easy 😑

N
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GBP volatility can be tempting. But have you ever find EUR more predictable for clearer trends?
 
Yes, GBP pairs like GBPJPY are very tempting, yesterday this pair went down and drew a long bearish candle indicating large average movement, but spread and volatility are traders' attention when trading on this pair.
 
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Zerologic said:
Yes, GBP pairs like GBPJPY are very tempting, yesterday this pair went down and drew a long bearish candle indicating large average movement, but spread and volatility are traders' attention when trading on this pair.
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Which session do you trade it London or NY?
 
I focus on 2 sessions in a week

Weekly session......its the only formalised session in forex with clear stop and start cutoffs...

And the 3 separate sessions per day

Asian
European
US

there is about 15 a week .. depending if you count trading the Asian Sunday session or the Friday late us session

The weekly is the most predictable and profitable...using higher tf entries

I never hold trades over weekends though

N
NVP said:
They both can trend well.....just give gbp more wriggle room on stops
Click to expand...
 
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