Best Thread Correlation Trading - Basic Ideas and Strategies

sorry - I cant tell you to hold that one now as other dynamics are at play..............

never mind all game over

until later
N
 
one of the things we could talk about later is keeping cool when every firework in the box goes off........................

the cool head will walk away with major dinaros whilst the hotheaded and/or inexperienced trader will have donated his shirt to the pack

N
 
ok off to many meetings

heres the game plan:smart:

N
 

Attachments

  • trading signals.jpg
    trading signals.jpg
    91.9 KB · Views: 141
i'd really really love to talk my corrie approach through live or even on a video stream - but time never allows .........maybe one day when I take a day off

(dont tell the wife though or the odd jobs will get in the way !)
N
 
ok my moneys on selling the europeans more into a rising tag......but i'd like the dow to fall below the current range area

and naturally I am nervous of the oversold Euro ......but then the best traders tell us the market knows no bounds and a trend isnot over till its over

N
 
tag are incredibly strong still............remember that in your trades
 
jees the Euro is looking weak ....its below that oversold level and shaping to fall again

ouch.....
 
and I think that the Aussie D will hit the oversold level today

especially if the europeans stay weak and/or the tag turns down.....
 
NVP said:
all strengthmeters are evolved from the same origins ...you cant really do much diferent apart from the individual settings and combinations etc etc

thats why the corrie is free as i would have been a charlatan to try to sell such a freely offered product (although I did update and change the correlation to G8 basket as opposed to a G7 USD basket - which is pretty fundamental).....now the customised settings are a different thing !!
Click to expand...
Cheers Neil :)
where the site again mike ?
Click to expand...
Ashraf's d'you mean?: http://www.ashraflaidi.com then look for "Forum". My userid there is same as here less the t2w. The forum is only of limited value if I'm honest, but occasionally you will get a fresh insight, or a chance to test your view. The analysis is where the value is, though as always you have to use your own judgement as to its validity. Here is a recent short video of AL on CNBC to give people who don't know him a flavour:

http://bit.ly/gzWFbj (Sorry about the advert at the beginning - it's not long)
 
NVP said:
when i'm seriously scalping I am a smash and grabber...............I cant stay in the market and mess about.........

no hesitation........smash and Grab !!!

N

Click to expand...

:) I will from now on visualise you smashing and grabbing in one of those funny masks.

NVP to Mrs NVP: "The correct term is 'Babes', Dear" :)


"Do any one of you have anything to tell me that is remotely interesting!?"
"I'm a little worried about the Yen and Dow negative correlation breaking down this morning, Sir".
 
Gold/Oil Ratio - Ashraf's take

I was wittering on about the Gold/Oil Ratio earlier, and rather than just leave it hanging, I thought I would quote a couple of excerpts from the book*, now that I have found the right pages! (I should learn to read a book index properly). For those who may be similarly challenged, the relevant pages are 153-159 and 239-240, but the 1st bit comes from 158-159:

Please bear in mind that this was (probably) written in the 2nd half of 2008.

CONCLUSION

The most cogent conclusion to be drawn from the preceding dynamics is that a bottoming in the gold/oil ratio has most often accompanied a peak in short-term interest rates, which was later followed by interest rate cuts.
The other prominent aspect of the relationship is the subsequent growth slowdown. Recessions were triggered in four out of the five cases, with the exception of case 3 (fourth quarter 1985) due to the positive growth implications of the 1986 oil price collapse.

Rather than simply focus on the price of oil and gold separately, investors ought to follow the interaction of these two important commodities. Such interaction is more appropriately measured by the gold/oil ratio, rather than say, comparing the percentage increase of both. In the case of interest rates, the yield curve indicator continues to exhibit a convincingly strong effectiveness in signalling economic downturns and rebounds via curve inversion and steepening.

The tremendous multiplicity of market- and economic-related materials inundating investors has generally helped them improve their grasp of the main drivers of financial markets as well as the functioning of basic macroeconomic relationships. But with the Federal Reserve policy makers often echoing the long-term preferences of the central bank rather than signalling the future outlook for the economy, investors are left with little direction. The increased tendency for divergence between equities and the economy has also challenged the understanding of prevailing and future developments. Integrating the analysis of short- and long-term interest rates into relative trends of commodities offers a forward-looking view into the trend of interest rates, economic growth and equities to the extent of reading important shifts in central bank policy.
Click to expand...

Pages 239-240

How Long Can Oil Stain Gold's Shine?

There is another emerging trend within the commodities universe that bears significant implications for the financial markets. The relationship between gold and oil has been highlighted by a complete leadership in the fuel relative to the metal and other commodities.

In chapter 6 we explored the historical relationship of the gold/oil ratio and how protracted declines in the ratio have persistently caused recession or significant slowdown in the US economy since the 1970s, as well as a cooling in the rest of the industrialised world. The rationale is that a plummeting ratio is a reflection of an excessive rise in oil prices, whose marked appreciation relative to gold signals cost and inflationary repercussions for importers and consumers. Figure 9.10 illustrates that the gold/oil ratio fell to a record low of 6.0 in June 2008, well below its monthly average of 15.2 prevailing since 1971. Anticipating a mean-reverting rebound in the ratio, we expect an ensuing gold price recovery toward the $1,000 record high and on to the $1,500 territory that would be consistent with the aforementioned decline in the equity/gold ratio. Such a development will likely maintain pressure on the U.S. dollarvia its inverse relationship with gold . Accordingly, the commodity story will remain and so will the decline in the S&P 500/CRB ratio.

It could also be argued that a tumble in the gold/oil ratio may also emerge on the heels of a tumble in oil prices and a more modest decline in gold. which would lift the ratio toward 9.0 or 10.0. Such an event would be accompanied by a significant rebound in the US dollar as falling oil prices ease the strain off the US and other oil importers. A pullback in oil prices is inevitable but OPEC is unlikely to allow prices to drop considerably below $100 per barrel. [ WRONG! - Mike ]

Chapter 8 made the case for a prolonged increase in the current commodities boom. The confluence of supply and demand factors boosting the broad commodity story suggests the bullish trend is unlikely to be reversed soon. And in looking at the commodities implications of further declines in the equity/gold ratio, it appears certain that real-asset values of tangibles such a metals, energy, and agriculture/food products will maintain their upwards trajectory.
Click to expand...

And from the conclusion on page 248:

The key gauges of risk appetite have been introduced so as to better track speculative funds into high- and low-yielding assets, across currency equity commodity and bond markets. And with the multitude of new currencies now becoming available for trading by retail and institutional investors, effective ranking of FX performance must go beyond comparing returns simply against the dollar or the Euro. Using gold and oil as secular benchmarks helps draw important conclusions pertaining to commodity currencies and enables more profitable trading of stronger currencies versus weaker ones.

Last but not least, financial markets make little sense without understanding the price of money. Rather than focusing on each and every pronouncement by central bank officials and risk being behind the curve or, at best, in line with the rest of the pack, investors can assess future moves in interest rates by dissecting the interaction between short- and long-term interest rates, and how their co-movements interact with the general economy, the stock market and the currency. Contrasting and comparing interest rate patterns and cross-market developments can pay major dividends in determining the next shift in central bank policy and in the price of currencies.
Click to expand...

[Nevertheless, he does pay attention to what the central banks say!]

There is also some interesting stuff about corporate bond yield spreads, and government bond yield curves and yield spreads. Tricky little blighters those, and I can't say I have fully got my head around them, to be honest. However, Ashraf has convinced me of their importance, and I feel that if one could really crack them open, one could trade Bunds (and other bonds) profitably, for example. I know some people trade them technically, but I couldn't make it work for me, so I gave up on them.


Now it has to be said that there are some quite negative reviews on amazon (among mostly positive; more reviews on .com than on .co.uk as to be expected), so not everyone agrees with his analysis. I also noticed some small mistakes in graph labelling but nothing major really. One criticism I do have is that the charts are probably designed to be viewed in colour and some are very unclear in black and white.

As I keep saying, it is not a how-to-trade book, and some people will say: Do I really need to know this stuff? Well, it's up to the individual of course, but I for one was fed up of the market moving and me not really having a clue as to why, so I set off to try to find out (coming from a completely non-financial, non-trading, non-investment background, a few years ago). Yes, I know some of it is random, some of it is noise, and some of it is technical. It was the stuff that wasn't purely technical that interested me, and this book threw some light on all that. No, it's not the whole story and it's not a holy grail - nothing is.



*["Currency Trading and Intermarket Analysis" © 2009 Ashraf Laidi ]
[ Excerpts reproduced without permission ]
 
Last edited:
Re: Gold/Oil Ratio - Ashraf's take

montmorencyt2w said:
I was wittering on about the Gold/Oil Ratio earlier, and rather than just leave it hanging, I thought I would quote a couple of excerpts from the book*, now that I have found the right pages! (I should learn to read a book index properly). For those who may be similarly challenged, the relevant pages are 153-159 and 239-240, but the 1st bit comes from 158-159:

Please bear in mind that this was (probably) written in the 2nd half of 2008.



Pages 239-240



And from the conclusion on page 248:



[Nevertheless, he does pay attention to what the central banks say!]

There is also some interesting stuff about corporate bond yield spreads, and government bond yield curves and yield spreads. Tricky little blighters those, and I can't say I have fully got my head around them, to be honest. However, Ashraf has convinced me of their importance, and I feel that if one could really crack them open, one could trade Bunds (and other bonds) profitably, for example. I know some people trade them technically, but I couldn't make it work for me, so I gave up on them.


Now it has to be said that there are some quite negative reviews on amazon (among mostly positive; more reviews on .com than on .co.uk as to be expected), so not everyone agrees with his analysis. I also noticed some small mistakes in graph labelling but nothing major really. One criticism I do have is that the charts are probably designed to be viewed in colour and some are very unclear in black and white.

As I keep saying, it is not a how-to-trade book, and some people will say: Do I really need to know this stuff? Well, it's up to the individual of course, but I for one was fed up of the market moving and me not really having a clue as to why, so I set off to try to find out (coming from a completely non-financial, non-trading, non-investment background, a few years ago). Yes, I know some of it is random, some of it is noise, and some of it is technical. It was the stuff that wasn't purely technical that interested me, and this book threw some light on all that. No, it's not the whole story and it's not a holy grail - nothing is.



*["Currency Trading and Intermarket Analysis" © 2009 Ashraf Laidi ]
[ Excerpts reproduced without permission ]
Click to expand...



hey M

have to be honest and say percieved correlations beween oil and gold leave me a little cold....and theres a fine line in this business between spirited hypotheses and mental mast*rb*tion** :whistling

the Gov bond yields are interesting though and reflect market perspective on the value of the currencies of countries concerned

naturally the Euro Country yields are VERY interesting and the spread on the lowest yielder (duh germany) vs the high yielders (whoever is rioting at the time) is always a nice indication on how messy the Euro is gonna get

later
N

** not that i'm knocking that scene......especially when someone is boring me at a dinner party and i'm allowed to retaliate !
 
You must log in or register to reply here.

Similar threads

S
Correlation Strategy
2
Replies
29
Views
31K
dreamliner
D
G
Gold Correlations
Replies
6
Views
2K
CharlesBakerfx
C
H
Correlation and Cointegration
Replies
6
Views
2K
tradern
T
F
Correlation Swap
Replies
0
Views
4K
Fartingale
F
A
Trading System Ideas
Replies
10
Views
4K
numbertea
numbertea
Top