Best Thread Correlation Trading - Basic Ideas and Strategies

[NVP]

i'm learning shedloads though..............like dont trade convergences !

 

[NVP]

hey all

i'm out of the trade at roughly B/E..........this feels like throwing darts at a board so gonna step back for a while and look at my notes ........

to many ideas in my head at the moment

N

 

[NVP]

i'm also considering reviewing it to just a 2 band max variance for the following pairs

EUR vs CHF
AUD vs NZD
JPY vs USD

N

EURCHF is around that now on the 5mins so lets see if some convergence occurs

 

[NVP]

jees I hate this game ...........should've left the convergnece team on to crush some heads........................

 

[NVP]

convergence phase is in evidence ....interesting :smart:

 

[NVP]

weve tracked that damn GBPCHF since yesterday and it finally came home (without me on it)

I figured we were gonna need some Dow pain to trigger it and it finally happened

and likewise for the EURCHF (not shown).....the CHF will generally be much more sensitive to risk plays than the Euro and move in the opposite direction when it happens

convergence........more of an Art than a science and as tricky as the trickiest fox in Trickyville !

N

 

[NVP]

Hi NVP,
Another question.. It's more like which is first, chicken or egg question.
Do you think it's typical to see pair stretches to highest band on Covergence Indicator around the News time? or perhaps, price does move to those points due to speculation that drive price to those level?
In any case, if we ought to take trade, do you recommend not trading pre/post News even if you see the good setup?

hey T

the markets have the best potential to diverge when liquidity and activity is at its peak in as many different timezones as possible.....this also will happen to be when news releases are made normally in the markets as its "business hours" for everyone

to see a currency go ballistic outside of its core timezone is unusual but not impossible
so - say the gbp in the asian overnights

I havent talked about timezones much here but will do so when I get the chance as it is fascinating and integral to trading the G8 FXCorrelator

trading pre / post news ?...........personally I would step down at least an hour before the signal and then let it settle post news.............if yuor on 5mins i'd let it go for at least 15mins or at least until the first big burst of volatility has started to diffuse

if a currency goes awol on news unfortunately the FXcorrelator skews dramatically making it difficult to see anything else going on...........but what do we expect - thats what its paid to do ! :smart:

N

 

[NVP]

thought I'd review those convergence calls earlier again given the demise of the dow

wish I hadnt as the convergence team will kill me for not letting them have some raw meat

been a long time since this video.......so time for an outing !!!

N

 

[NVP]

Crisis ?.what crisis ?

black swan dudes chew the cud.............



No rest for the weary ...

Here it is - evidence that surging crude oil prices in the face of Libyan supply worries is too much for the global economy to handle.Whatever happened to world reserve currency safe haven status? Yikes!!! Now global risk is hammering the greenback; a bad sign indeed when what was once relative good news is now taken as bad.

Looks like the dollar index has room to go lower ... MACD weekly turning down, multi-week low tested/penetrated today ...

Here is the litany of stuff:

Middle East chaos and attendant oil price surge

Rising tensions in China (Aussie of course keeps climbing against the buck on that raw material)

Potential stagflation quagmire in the UK; the pound testing its intermediate-term high against the dollar

Growing Greek and Ireland discontent; giving the euro a risk bid and also testing intermediate-term high against the dollar

 

[NVP]

is this thread structured in its learning and approach

No !!.............

N

and clearly having divergent and convergent trades on at the same time is based on the unique nature of the currencies involved at that time and therefore we can never generalise like I was potentially doing

 

[NVP]

see how the gbp came back and everyone headed for the Zero line to go home ?

Jees convergence Team i'm sorry .........i'll be super ready to let you loose next time it happens and you can have your fill of Carnage and Destruction on the poor currencies that are hung out there and overcooked

please please dont hurt me...Gulp.....Chess anyone ?

N

 

[NVP]

I prefer the Divergence team....they are clean and polite and never try to hurt me and we've been cosy friends for many years now on those lovely 80/20 plays and everything else dainty I put on the this thread.............

Cant say the Same for the Convergence Team ..........rougher and Tougher and no nice simple systems to play with as yet............potentially horrendous drawdowns and rough and tumble going against the trend and trying to call the top........

forex trading makes american football look like a picnic.....

N

 

[NVP]

hey all

getting back to more serious ideas and strategies......:smart:

some of the Basket EA threads on forex Factory are trying to replicate and capture this type of move that the FXcorrelator highlights so so well visually

if you could open multiple trades at a point where the G8 were collectively "over-diverged" as a group and then close all of those trades (or keep closing each trade at prescribed targets?) when they were deemed back inside the Neutral area - is that a decent strategy ?

well actually the answer is yes theoretically , but operationally its hard hard work - however I think this is a major part of some of the big trading houses/Hedge fund strategies given their superior Tech firepower / multiple trades per second / access to lower spreads

N

 

[NVP]

you can actually trade this much much smarter and cherry pick the best trades that show the highest probability of converging once you identify that the G8 have diverged as a group sufficiently to take a punt

doesnt take a rocket scientist to as a minimum :-

just sell all the currencies above the Zero
Just buy all the currencies below the Zero
place higher weightings on the larger Divergent pairs (?)
incorporate any correlation pairs / patterns / rules
incorporate triggers from other markets (eg Risk plays , Equity volatility)

anyone want to programme this for me ?............:whistling

N

 

[NVP]

and can someone explain this all to the Convergence team the next time we open the cage to feed them some meat ?...............

 

[NVP]

heres the 1 min recently ..............although the GBP was probably top heavy and we would prefer a more balanced spread of risk and trades across the G8

N

 

[NVP]

heres the 1 hour.............is this significant or a trick of the settings ?

hmmmmm :smart:
N

 

[horacioofman]

hi neil.

great posts on the convergency system.
i havent put my hands on it. but maybe you should look on some sort of confirmation signal as you do with US30 and 1min.
I am guessing that a confirmation signal for convergence should be find on a higher TF (to try to get rid of some volatility). but, then again, it is just a guess.

great work!!

 

[NVP]

hey all

I gotta go.....heres the 80/20 5min system that had a few cheeky trades this afternoon

later
N

 

[NVP]

hi neil.

great posts on the convergency system.
i havent put my hands on it. but maybe you should look on some sort of confirmation signal as you do with US30 and 1min.
I am guessing that a confirmation signal for convergence should be find on a higher TF (to try to get rid of some volatility). but, then again, it is just a guess.

great work!!

thks H

its gonna take us some time to get that convergence team/system in order and yep we are clearly gonna need some kinda Ma confirmations in the mix to confirm Currencies are returning - either low Ma's on same TF or drop down to lower TFs on our standard Ma's

convergence is a reall tricky critter to nail and everything we have learned and discuss here
will be inevitably in the mix....

no rush :smart:
N