Best Thread Correlation Trading - Basic Ideas and Strategies

[NVP]

1 big trade signal so far

 

[montmorencyt2w]

@Horatio:-
I wasn't going to anticipate Neil's reply to using EAs (but I had an idea of his view of them). However, one thing that you can do in MT4 (if you are actually trading off it, and not just using it for the charts and indicators) is to have scripts to quickly get in and out of trades, and also to quickly modify trailing stops or take-profits, or close all trades ... that kind of thing.


I have only ever spread-bet, and as most of the SB firms don't/didn't support MT4, I'd had little occasion to trade from it in the past, except on demo, and as we know, demo can be a little misleading. In comparison to the relatively simple platforms of the usual spread-bet firms, trading off MT4 can seem a little clunky at first, e.g. setting stops and TPs can be a bit of a pain, especially if price is quoted to 5-decimal places (which SLM do for the majors and are extending it).

However, one can write (or find fairly easily & modify) scripts to do this, which one could activate via hotkeys - 1-click trading if one wants. Anyway, that is a line which I am investigating as a background activity. It's not like using an EA. The judgement on whether to trade and in which direction is entirely manually taken - it's just that when you do decide, you can act fast, if the market (and your time-scales) dictate it.

 

[NVP]

tag are above zero again on low TF's (5min)

some scrappy Commdoll sell scalps on offer
N

 

[NVP]

@Horatio:-
I wasn't going to anticipate Neil's reply to using EAs (but I had an idea of his view of them). However, one thing that you can do in MT4 (if you are actually trading off it, and not just using it for the charts and indicators) is to have scripts to quickly get in and out of trades, and also to quickly modify trailing stops or take-profits, or close all trades ... that kind of thing.


I have only ever spread-bet, and as most of the SB firms don't/didn't support MT4, I'd had little occasion to trade from it in the past, except on demo, and as we know, demo can be a little misleading. In comparison to the relatively simple platforms of the usual spread-bet firms, trading off MT4 can seem a little clunky at first, e.g. setting stops and TPs can be a bit of a pain, especially if price is quoted to 5-decimal places (which SLM do for the majors and are extending it).

However, one can write (or find fairly easily & modify) scripts to do this, which one could activate via hotkeys - 1-click trading if one wants. Anyway, that is a line which I am investigating as a background activity. It's not like using an EA. The judgement on whether to trade and in which direction is entirely manually taken - it's just that when you do decide, you can act fast, if the market (and your time-scales) dictate it.

EA's ?

EA's ?

EA's ?

:smart:

 

[NVP]

here comes the big dog ...........GBP poss sell

 

[NVP]

theyre queing up ............cummon tag rise dammit

 

[NVP]

see how the tag are taking a breather and pulling south a little ?

hold hold hold

 

[NVP]

massive euro rise.......assume an announcement somewhere

 

[NVP]

nope nothign in calenders

 

[NVP]

hey all

sorry I am very very unfocussed today ...........Dreamliners correlation thread on FF is distracting me ..........its excellent

its basically betting on convergence plays on G8 Currencies that traditionally are aligned but have become heavily divergent on a Timeframe - looks like the 100ma being used that would be a nice balanced setting for this kinda Stoch play

eg .......... if you get a divorce on USD&JPY , or perhaps Euro&CHF ......you bet the convergence when they start to work back towards one another (using a convenient intermediary Currency and trading the 2 pairs long and short)

its sooo much better than that though and boy can those dudes programme

so i'm focussing on that today when I get time
N

(obsessive - moi ?)

 

[NVP]

hey Kruspe

are you lurking over there as well !!

N

 

[NVP]

hmmmm interesting ...............one of the recurring trades the play is (coding in corrie terms) trading the divergence/convergence of the USD and the Cad with the implication that these dudes correlate closely ..........

lets have a look eh !
N

 

[NVP]

I am truly gobsmacked how close these dudes are....in truth I have been so wrapped up in other things I missed the connection.....

sure I am happy when the commdolls are moving same direction as the tag team as it boosts the European opposibng trades ...but I was not aware of how very consistent the Cad is

hmmmmmm - I need to revisit my correlation rules again on CAD.......

SURE - i've always called the CAD a maverick and rarely call it against the TAG (as you can look back and read) but I have always tentatively called it part of the commdoll tribe.......I was never really keen to place it in the TAG camp......which i should be here looking at the 4h !!!

hmmmmmmm
N

 

[NVP]

see how the Australasian dudes are not as tight ?

N

 

[NVP]

are Euro and GBP chummy with the tag ...........??

hahahahahahaha
N

 

[Kruspe_Svk]

hey Kruspe

are you lurking over there as well !!

N

Hey my friend,

"lurking" is the right word , I never close this page on my Opera, only refresh.. but I´d like to have more time to study this.. I believe correlation and strenght of currency is the best way.. let´s say it´s the way which i´d like to go... so this thread is for me really motivating.. but I have one (or two) problems, could you pls help me :whistling

I understand basics of your strategy (I think).. but.. for example.. shouldnt we wait till some currency would be really strong (your touchdown zone).. and some currency really weak...to sell strong one and buy weak one and wait to return back to zero line ?

It would be possible to chat/talk (skype,fb, icq) with you sometime ? (of course I don´t want to waste your time)

:smart:

Thx, Kruspe

 

[NVP]

back to the action today ........

keep hunting tag SELLS

N

 

[NVP]

Hey my friend,

"lurking" is the right word , I never close this page on my Opera, only refresh.. but I´d like to have more time to study this.. I believe correlation and strenght of currency is the best way.. let´s say it´s the way which i´d like to go... so this thread is for me really motivating.. but I have one (or two) problems, could you pls help me :whistling

I understand basics of your strategy (I think).. but.. for example.. shouldnt we wait till some currency would be really strong (your touchdown zone).. and some currency really weak...to sell strong one and buy weak one and wait to return back to zero line ?

It would be possible to chat/talk (skype,fb, icq) with you sometime ? (of course I don´t want to waste your time)

:smart:

Thx, Kruspe

Hi Kruspe

there are 2 major trading approaches we can take on strength meters or indeed any MA based system

1) Divergence plays (when currencies are trendign away from each other)

2) convergence Plays (when currencies are considerered overbought/sold and we trade on then returning back towards the mean average)

We have actually discussed convergence strategies a lot here last year and its an absolutely solid approach to making money......

I just have focussed on divergence plays (G6 diverging from Tag team) as anyone who wanted to help me develop these did not stay the course here on the thread

Dreamliners thread on FF is classic convergence strategies on the G8 currencies and I am going to powwow with those guys once i've finnished the thread....theres huge synergies we can achieve if we take the best from each system it would seem to me (based on what ive read so far)......and i'd love it if I got a little programming assistance from their experts !

ask away here re convergence - so yes any touchdown currency could be traded against suitable others once it has confirmed (with price action) that it is heading back towards the Zero :smart:

N

 

[NVP]

hey guys

i'm happy to share a simple convergence play meter chart here......jees these are old shool but the attic is always tidy to find them and they dust off well !

heres 4 currency pairs that in my humble opinion run tight correlations
(yes I now have just added CADUSD there !)

let me recheck these old calculations again tomorrow as I just pulled it out and added the CADUSDso may not be 100% there yet..........shes rusty

all this system is doing is identifying big divergences and we then trade on the convergence play (divergence is simply calculating the difference of the 2 currencies if they were on a standard corrie chart - in this case based on the 100ma corrie 5min)

no triple combinations or multiple pairs .....just trade the pair itself

there will be some painful spreads which is why its not suitable below 30mins to a hour really unless the usd is involved in the pair and why we put this away long long ago here

the left chart is just the standard corrie for comparison

try and trackdown those times today and see if pips got delivered .........handfulls at best I suspect, eyeballing it only the Blue first trade did not retrace back and would have hurt .........but it got there in the end (second bite ) but only after a big drawdown or entering again fresh :smart:

hey all - pays your money and takes your choice

gotta go ........later
N
(Kruspe - you'll like this )

 

[NVP]

and looking at the standard corrie above...looks like some Nice nice GBP sells this afternoon !!!

N