Best Thread Correlation Trading - Basic Ideas and Strategies

[jrplimited]

Hi N and all,

Its a murky Monday outside, must be the ash from Iceland burning all their folding stuff! Onto this morning's bun fight....

GU; First trade entered long at 52304 on open 08:10 bar, price went up then retraced to a few points below entry then staggered slowly upwards printing 09:30 new local high and fell over taking out TS on 09:40 sharp down bar for 8 point profit. Second trade sell stop at 52154 filled during 10:15 bar, price moved down a few points then retraced to around entry point, stalled for three bars then moved down again and made 11:10 new local low (below 1.52 level) but couldnt seem to hold it, tried again two bars later and failed miserably, rose up slowly and took out TS during 11:45 strong up bar for 9 point profit.

EU; Had to wait until 10:00 bar for sell stop fill at 34442, price moved lower on some momentum, printed new 10:20 local low, made shallow retrace and went sideways for ten bars edging slightly lower, 11:20 bar printed new local low then price decided to march back up the hill again and after 11:40 up bar trade exited for 10 point profit.

EG; Watched chart for first two hours then gave up as narrow range bars were not providing any setups.

Eeek! What a morning, during the latter half it seemed that both GU and EU wanted to drop but there just wasnt any follow through momentum. Also noticed that EU managed to fill the notorious Sunday gap, but GU failed to do this so that might be worth watching this afternoon - trade well and regards,
Simon.

 

[jrplimited]

Anyone else have a tough morning trading €/$/£/¥ on 5min charts?
My system has run into a brick wall called Reality...

Hi Gavin,

In a nutshell.... Yes! Just couldnt find any rythmn for GU and EU this morning and had to really scrap for meagre points in slow moving markets. Chin up as it is Monday after all!
Simon.

 

[GMP]

Hi Gavin,

In a nutshell.... Yes! Just couldnt find any rythmn for GU and EU this morning and had to really scrap for meagre points in slow moving markets. Chin up as it is Monday after all!
Simon.

Hi Simon
Looks like your approach coped with it alot better than mine. I hate it when the 5m don't follow the 15m. Still , could be worse - at least I'm not stuck at an airport!
- Gavin

 

[NVP]

Hi N and all,

Its a murky Monday outside, must be the ash from Iceland burning all their folding stuff! Onto this morning's bun fight....

GU; First trade entered long at 52304 on open 08:10 bar, 09:40 sharp down bar for 8 point profit. Second trade sell stop at 52154 filled during 10:15 bar, and took out TS during 11:45 strong up bar for 9 point profit.


EU; Had to wait until 10:00 bar for sell stop fill at 34442, after 11:40 up bar trade exited for 10 point profit.

EG; Watched chart for first two hours then gave up as narrow range bars were not providing any setups.

Simon.

Hi all -

Simon looks like a decent 30 odd pips made in a tough mornings activity.....my laptops travelling back via my wife home from a weekend away so not online yet

also whats the latest on all this funding leverage reduction malarky .....I suppose Goldman Sachs fiasco is hardly going to help re allowing us to all do what we want to do ?

N

 

[NVP]

Anyone else have a tough morning trading €/$/£/¥ on 5min charts?
My system has run into a brick wall called Reality...

you think thats bad ?......try calling trades without a chartscreen to link to

(although some could argue I would be safer this way )

N

 

[NVP]

Hi all

heres the view on one of my main corrie hybrids....E G and U in play for this example

till 9.45 you were gonna get killed...then it got interesting and best trades of the morning came selling euroteam into USD that kept going.

just before 12ish the USD changed direction finally and some decent GBP buys into that fall....Euro fell with Usd so that was a failed trade.....

there was then a decent E/G sell but I just cant see those dudes in my mind.....the trade was there though if you followed really simple rules and bought rising currencies and sold falling currencies (which is what strengthmeters are all about ) :smart:

....and of course theres not forgetting my correlation principles that I totally ignored above for this example

contact my home page here if you want to know more about this stuff.......

Neil
NVP

 

[NVP]

looks like tag is turning down......Euro has popped upwards as well

 

[NVP]

nice 10 pips on E/U based on that turn....G/U going ok as well.....the infamous U/J trade (Buy U/J on falling Tag) is still just in the money but thats a boat that may have sailed earlier.....

n

 

[NVP]

nope the sell u/J picked up nice pips now as well......we called the turn right on the money ....nice !

N

 

[NVP]

back to the cotton mill.......jees i've only had about 15 mins of real screen time today so that worked a treat.........

later
N

 

[GMP]

Nice little bit of 5min candle correlation here between €¥, €$ and the Dow - look at the red arrows. Not sure how common this is?

 

[tigloo]

Nice little bit of 5min candle correlation here between €¥, €$ and the Dow - look at the red arrows. Not sure how common this is?

I think that it is pretty common, if you look at EURUSD vs. DJ30, you see plenty of correlation with occasional spikes of either symbol. If you sell the faster rising symbol on the spike and buy the slower rising or falling symbol at the same time, you can earn on the retracement.

The timing is tricky, though.

 

[GMP]

System report:http://www.trade2win.com/boards/trading-journals/91616-icc-forex-system-testing.html#post1107082
Really frustrating morning but made it Back in Black (...hit the Sack...sorry) this afternoon. Started doubting what I was doing and missed opportunities as a result.

 

[GMP]

I think that it is pretty common, if you look at EURUSD vs. DJ30, you see plenty of correlation with occasional spikes of either symbol. If you sell the faster rising symbol on the spike and buy the slower rising or falling symbol at the same time, you can earn on the retracement.

The timing is tricky, though.

Hmm, I can't trade on expectations like that myself - haven't got the nerve to trust that there will be a retracement!
I didn't realise the € was quite so closely tied to the Dow though. Thought the received wisdom was to trade £¥ off the Dow.
Will have to have a play with NVP's indicator now I've got a feed with a Dow instrument.
- Gavin

 

[NVP]

Nice little bit of 5min candle correlation here between €¥, €$ and the Dow - look at the red arrows. Not sure how common this is?

Hi Mate

for me the commonality/correlation works like this

is yen in same direction as Usd ? - Y/ N
is Dow opposite direction to Yen ? - Y/N
is gold opposite direction to USD ? - Y/N

if all are yes then you have 100% TAG correlation in my books and time to look for a G6 to trade against either the yen or the USD....

you could check if the E/Y is in the same direction as the DJ or that the E/U is in same direction as gold ...but believe me in that youve missed a layer of correlation check

totally up to you though as for me the G6 choice is a secondary factor to make the trade......... :smart:

N

 

[NVP]

I think that it is pretty common, if you look at EURUSD vs. DJ30, you see plenty of correlation with occasional spikes of either symbol. If you sell the faster rising symbol on the spike and buy the slower rising or falling symbol at the same time, you can earn on the retracement.

The timing is tricky, though.

hmmmm

i'd only trade DJ to Yen on divergence/convergence and seperately USD to Gold......they all seem to be closely correlated as Yen and USd walk the same path a lot of the time

happy to be convinced that DJ correlates closer to USD though than Gold if possible

N

 

[GMP]

Hi Mate

for me the commonality/correlation works like this

is yen in same direction as Usd ? - Y/ N
is Dow opposite direction to Yen ? - Y/N
is gold opposite direction to USD ? - Y/N

if all are yes then you have 100% TAG correlation in my books and time to look for a G6 to trade against either the yen or the USD....

you could check if the E/Y is in the same direction as the DJ or that the E/U is in same direction as gold ...but believe me in that youve missed a layer of correlation check

totally up to you though as for me the G6 choice is a secondary factor to make the trade......... :smart:

N

I see, so the € has nothing to do with it, it was just a tag fall... which explains why a stuttering sterling also joined in.
Thanks Neil, beginning to get a handle on this now
- Gavin

 

[NVP]

System report:http://www.trade2win.com/boards/trading-journals/91616-icc-forex-system-testing.html#post1107082
Really frustrating morning but made it Back in Black (...hit the Sack...sorry) this afternoon. Started doubting what I was doing and missed opportunities as a result.

hey mate

unless i'm wrong are you trading U and Yen pairs against same currency ?

to be honest that to me is a very correlated trade and you are in effect doing the same thing twice....if yuo are trying to diversify your risk / porfolio I would chose one or the other - perhaps the most promising one and save the other trade for a seperatly hedged pair or possibility

re decision u or J....remember that Yen usually overtakes U when tag are in motion, so let U lead the signal on a decent pair (say on E/U) and perhaps only then take the yen trade as it accelerates past the U and really piles into the euro ....

this is the kind of stuff I want to get into on the private forum.....

up to you though
N

 

[NVP]

I see, so the € has nothing to do with it, it was just a tag fall... which explains why a stuttering sterling also joined in.
Thanks Neil, beginning to get a handle on this now
- Gavin

hey mate - read my first few posts here on the thread - its post 11 I think where i discuss my opinion that the TAg are the real correlators to the markets....the others are just secondary pairs attached to them

I hate trading non X pairs......but it can be very profitable though !

just my opinion though :whistling
N

 

[GMP]

hey mate

unless i'm wrong are you trading U and Yen pairs against same currency ?

to be honest that to me is a very correlated trade and you are in effect doing the same thing twice....if yuo are trying to diversify your risk / porfolio I would chose one or the other - perhaps the most promising one and save the other trade for a seperatly hedged pair or possibility

re decision u or J....remember that Yen usually overtakes U when tag are in motion, so let U lead the signal on a decent pair (say on E/U) and perhaps only then take the yen trade as it accelerates past the U and really piles into the euro ....

this is the kind of stuff I want to get into on the private forum.....

up to you though
N

Well, this is system-testing over & above risk exposure. The entries & exits are pair-specific rather than strategic, so I'm not bothered if a Yen trade fires at the same time as a $ trade. As well as giving me more results, it'll show me whether the system is better off trading high volume crosses such as €$, or lower volume crosses like £¥.