Best Thread Correlation Trading - Basic Ideas and Strategies

[montmorencyt2w]

heres a lovely pinbar on those standard pairchart thingies

My MT4 source is an hour ahead (as I only confirmed today), so it's sometimes confusing to compare with the real time, but on my 5M chart, it bounced off a 50 SMA around then, then went back down.

TD says that pin bars are not so reliable on short TFs, although they do "work" occasionally.

I wasn't trading, but there seemed to be plenty of pips to be had off EUR/USD, depending on how aggressive one wanted to be.


On a totally different tack, I've been looking a bit more closely at USD-Yen "divergence" followed by convergence, for possible USD/JPY plays, and for those I have looked at, it seems hardly worth the candle (pun intended ). 20 pip moves at most, and the price chart looks a bit rocky. In hindsight they all prove to be more or less successful trades, but if you were trading in real time, you might be shaken off by the erratic nature of the move.

I suppose in certain market conditions, you might get better ones.

 

[montmorencyt2w]

hmmm those sells were nice on Euro and GBP.....but I was bending the rules :whistling

( its my indicator and I can do what I like )

Reminds me of a blast from the past...

...dig that hairstyle Daddy-oh.

As for breaking the rules ....

:clap:

 

[montmorencyt2w]

I cant see arrows at the bottom ?

In this chart:-

http://www.trade2win.com/boards/att...c-ideas-strategies-4-hour-corrie-settings.jpg

3 red ones around the GBP line. 4 blue ones around the Euro line.
Maybe it's something to do with them being in/around the oversold area?

Big bold arrows, bigger than the triple ones that have to line up at the top.
Sorry, maybe this is something you have explained before many times and they seem obvious to you what they are.

 

[Kruspe_Svk]

Hi NVP (btw you should call MVP )

I started to read this thread a couple days ago and it´s freakin great lookin strategy. I´m trying to watch most of your YT videos. And I also appreciated your approach in here, so many responses by you, respect.

I feel, I could learn so many things from you..I´m staying tuned

 

[montmorencyt2w]

hey M

painful hours of observation over the last few years and I have read it in my travels...........its tenuous at times but NO ONE else in the rest of the G8 comes close re such a tight correlation

try it ..........pick an MA setting and a TF and count the % time those guys spend on the same side...............(which is a much better % correlation measure than those tedious percentage charts you see........)

here you go......the picture below is the ole 20ma on a daily chart back to my pc's back bar limit...............thats 90%+ correlation

if the S&P correlates closely to the Dow then you have your answer

you can also take it even further and follow any live equity market instead of the Dow Futures..........so Nikkei in Asian session is ok as well

dont get me started on Global Equity Indices correlations......love them

I get that the Yen and the USD are very well correlated. What I am not sure about is the importance of the direction of the Dow, in relationship to:-

{ the tag team, and the likely success of trades made involving the G6 and the tag team}.

You may have established this during the course of this thread, but if I have seen it, I have lost track of it, or perhaps I just missed it.

I know that in theory, the Yen and the stock market indices tend to go in opposite directions and the same for the USD. And that we are looking for trades with one or more of the G6, in the opposite direction to the Yen and USD, and therefore they will usually be in the same direction as the stock market indices; in addition the Euro and GBP at least, are sometimes known as "risk currencies".

What I don't have though is any kind of mathematical feel for how well that "G6-with-stockmarket" relationship correlates, which would fit in with only taking a trade when the Dow is opposite to the tag team.

You may also have established this by long painful observation, whereas I only have a sort of subjective feel for it, and I wondered if it was here in this thread, or something you had established or discovered long ago elsewhere.

Perhaps, for example, you have empirically discovered that if you take a trade against the tag-team, and the Dow is pointing in the "wrong" direction, there is a high risk that the Yen or USD or both will turn round on you, and invalidate the trade?

Sorry, I don't think I am expressing this very clearly, but perhaps what I am asking is, is the "Dow Rule" based on theory or empirical testing?
The reason I ask is (perhaps obviously): Could it be sometimes keeping you out of trades unnecessarily?


Why I asked about the S&P was purely because (I think) it represents more of the US stock market as a whole, whereas the Dow is limited (in number, although I guess it represents huge companies). I have no idea exactly mathematically how well the S&P and Dow correlate; from casual observation, pretty well I think. I suppose if one were into backtesting, one could compare success rate of the "Dow Rule" with an "S&P Rule", not that I am into backtesting, I must admit.

Just found this, which admittedly is from 2006 and could no longer be true, but ~95% correlation between Dow and S&P at that time:

http://seekingalpha.com/article/195...rall-market-health-95-5-correlation-to-s-p500

 

[NVP]

mormin..............

SUPERB correlations overnight.....the tag team bedded in for the longest bear run ive seen in a long long time on the 5 mins

see how they were already south on 20 and 80 ma's early hours - almost anticipating that Dow bull run up.......excellent !

and most of the G6 took turns enjoying it

jees I wish i didnt need this sleep thing

N

 

[NVP]

My MT4 source is an hour ahead (as I only confirmed today), so it's sometimes confusing to compare with the real time, but on my 5M chart, it bounced off a 50 SMA around then, then went back down.

TD says that pin bars are not so reliable on short TFs, although they do "work" occasionally.

I wasn't trading, but there seemed to be plenty of pips to be had off EUR/USD, depending on how aggressive one wanted to be.


On a totally different tack, I've been looking a bit more closely at USD-Yen "divergence" followed by convergence, for possible USD/JPY plays, and for those I have looked at, it seems hardly worth the candle (pun intended ). 20 pip moves at most, and the price chart looks a bit rocky. In hindsight they all prove to be more or less successful trades, but if you were trading in real time, you might be shaken off by the erratic nature of the move.I suppose in certain market conditions, you might get better ones.

its been better in the past....I would only try divergence plays , and do it when the guys are both south or north of the 80 and 20mas supported by a dow move ...then buy yen into usd on upwards moves and the opposite on southerly treks

for example the overnights should have delivered some nice U/J buys but they didnt indicating usd was weaker than it should be..........such is life !

N

 

[NVP]

In this chart:-

http://www.trade2win.com/boards/att...c-ideas-strategies-4-hour-corrie-settings.jpg

3 red ones around the GBP line. 4 blue ones around the Euro line.
Maybe it's something to do with them being in/around the oversold area?

Big bold arrows, bigger than the triple ones that have to line up at the top.
Sorry, maybe this is something you have explained before many times and they seem obvious to you what they are.

hey M they are just lines mainly indicating returns from oversold positions indicating direction..........and the currencies i wanted to highlight.....and some HH's

N

 

[NVP]

Hi NVP (btw you should call MVP )

I started to read this thread a couple days ago and it´s freakin great lookin strategy. I´m trying to watch most of your YT videos. And I also appreciated your approach in here, so many responses by you, respect.

I feel, I could learn so many things from you..I´m staying tuned

you'll be sorrreeeeeeeeeee

N

 

[NVP]

I get that the Yen and the USD are very well correlated. What I am not sure about is the importance of the direction of the Dow, in relationship to:-

{ the tag team, and the likely success of trades made involving the G6 and the tag team}.

You may have established this during the course of this thread, but if I have seen it, I have lost track of it, or perhaps I just missed it.

I know that in theory, the Yen and the stock market indices tend to go in opposite directions and the same for the USD. And that we are looking for trades with one or more of the G6, in the opposite direction to the Yen and USD, and therefore they will usually be in the same direction as the stock market indices; in addition the Euro and GBP at least, are sometimes known as "risk currencies".

What I don't have though is any kind of mathematical feel for how well that "G6-with-stockmarket" relationship correlates, which would fit in with only taking a trade when the Dow is opposite to the tag team.

You may also have established this by long painful observation, whereas I only have a sort of subjective feel for it, and I wondered if it was here in this thread, or something you had established or discovered long ago elsewhere.

Perhaps, for example, you have empirically discovered that if you take a trade against the tag-team, and the Dow is pointing in the "wrong" direction, there is a high risk that the Yen or USD or both will turn round on you, and invalidate the trade?

Sorry, I don't think I am expressing this very clearly, but perhaps what I am asking is, is the "Dow Rule" based on theory or empirical testing?
The reason I ask is (perhaps obviously): Could it be sometimes keeping you out of trades unnecessarily?


Why I asked about the S&P was purely because (I think) it represents more of the US stock market as a whole, whereas the Dow is limited (in number, although I guess it represents huge companies). I have no idea exactly mathematically how well the S&P and Dow correlate; from casual observation, pretty well I think. I suppose if one were into backtesting, one could compare success rate of the "Dow Rule" with an "S&P Rule", not that I am into backtesting, I must admit.

Just found this, which admittedly is from 2006 and could no longer be true, but ~95% correlation between Dow and S&P at that time:

http://seekingalpha.com/article/195...rall-market-health-95-5-correlation-to-s-p500

hey M


my laws are based on the following eyeballed fuzzimentals thousands of hours

Dow direction = opposite Direction Yen (then USD but less pronounced)
if Yen and USD = same direction, some of the G6 must be opposite direction
find strongest G6 in opposite direction and trade it if all rules still above

in all of this I am very clear that its not the G6 in particular that are correlating positively
to the Dow - its the (zero sum game) reaction to the tag that makes it happen

I have heard that Euro and GBP correlate more to equities but I simply
trade the G6 that is strongest/weakest

and I Prefer Euro and GBP during their active hours........but look at last night !!!
and now the commdolls are strongest right now !! (See attached)


the correlation could end tomorrow but its like that great joke


a guy goes to the doctor and says his brother lays eggs like a chicken

the doctor says to bring him in and he will cure him

the guy says heck no....I love him but I need the eggs

N

 

[NVP]

the market is REALLY pumpin today.......excellent

 

[NVP]

hey all here the latest now.......

back later
N

 

[NVP]

as i leave the gbp is taking serious pain now again....

 

[NVP]

if you follow the dow / tag relationship...you must be tearing your hair out now !!!

(sometimes the magic works - some times not)

N

 

[NVP]

FINALLY...........the dows rises are turning the tag south.....

be patient and watch for the Strong G6's to emerge

Aud looks front of Queue but the GBP is always like a lightning bolt

 

[NVP]

as colin says.........

You cannot dictate to the market..........

its tooooo Big

and its tooooo Smart :smart:

also explains why the Tag may not be as tight as i'd like for a while yet.......people will buy USD alongside a rising Dow if necessary......Especially if Euro rates fall where the action recently was

N

 

[NVP]

still messy on 5 mins...CADs in the chair for rises if tag EVER falls south together !!!

 

[NVP]

Alert


and Dows just lookin fine :smart:

 

[NVP]

watch out on 5mins........we have confirmed Dow sell and tag going north again soon.......

although some party action already missed on AUD and GBP.....

sell best G6's

N

 

[NVP]

jees............slooooooooooow progress on those dudes eh !