Best Thread Correlation Trading - Basic Ideas and Strategies

[jrplimited]

Hi N and whoever else,

The snow has at last started to clear but its left a soggy mess behind it - something the current UK government will do come the general election! Interesting day today after last Friday's blow out and subsequent retrace, onto what I saw:-

GU; Entered long on 08:20 bar at 61294 and I got the usual retrace for a smallish MAE before price chugged away upwards. Held on during the very thin period around 09:00 then price took my adjusted SL out during 09:35 bar for a 17 pip loss - ouch! Second trade had my 61304 buy stop order filled during that big 10:00 bar thrust and I was able to let this trade ride off into the northern regions before it took out my TS during 11:45 bar for a nice and revengeful 33 pip profit.

EU; Wierdly similar to GU today. Had 45174 buy stop filled during 08:30 bar but price retreated away from this as the bar closed. Next bar hauled me out of trouble and I was off on the subsequent up/down ride before being dumped out during 09:55 bar at adjusted SL for a 11 pip loss. Curses there as the very next bar proceded to pop up again and really I should have kept my initial SL intact to stay in the market, but all that meandering had the trigger finger twitching like mad! Second trade again enterd long with buy stop at 45308 which was filed during 10:55 bar that initially looked to be a failrly decent sized bar, but the SoB had retreated by its close and then went deathly quiet for a further bar before popping up again. Price lazily went up (just where has the momentum gone today?) and down then up again and by the time the 11:45 bar had finished its trace down to a tad above my initial entry point, I'd had enough of this lacklustre performance and bailed out for a thoroughly ridiculous 1 pip profit!

EG; This looked to be completely out of sync from what I normally see on most days and with both G and E sort of following each other around hand-in-hand (just like bad news and the UK's prime minister!) and neither one willing to "break" away, so I left this pair well alone and marked it off to be watched during the afternoon session.

Will upload chart pics when I eventually find where I dropped these on my pc - ahh, the wonders of this technology thing! Anyway, not a very good morning by any means but hopefully a bit of energy will emerge later on.

Trade well and regards,
Simon.

 

[NVP]

Hi N and whoever else,

GU; for a 17 pip loss + a nice and revengeful 33 pip profit.

EU; Wierdly similar to GU today.
a 11 pip loss + a thoroughly ridiculous 1 pip profit!

Trade well and regards,
Simon.

simon......I see net positive territory above for the morning session so thats what pays the bills.....my hindsight trading/observations from the comfort of a virtual account is not the real Trading world.....yours is

N

 

[jrplimited]

simon......I see net positive territory above for the morning session so thats what pays the bills.....my hindsight trading/observations from the comfort of a virtual account is not the real Trading world.....yours is

N

Hi N,

You are correct there but it was very frustrating to end up in single digit profit on the morning after all that time, but its just one of those days where there doesnt seem to be any big news events so the market decided to drift along - it needs a swift kick to get going this afternoon.

My biggest "whinge" about this morning is that I was in the market far to long on the EU trades as of course time in the market equates to risk exposure, the only real salvation here was the fact that price didnt really exhibit much volatility.

Tread carefully this afternoon - regards,
Simon.

 

[NVP]

13.37pm..........the dollar is rising despite gold rising as well to (in theory) negate this ......boy o boy will usd fly in a minute if gold falls.....

n

 

[NVP]

usd has been ticking up nicely now hasnt it
(nice Yen correlation as well)

hopefully you have been trading it against E & G using whatever other indicators you prefer....

watch out though - as to be honest my 1m and 5m indexcorries show gold falling but USD is not pushing as far north as it shold be so perhaps usd consolidation is imminent


N

 

[NVP]

not much to report really in later trading.....yen kicked back up big time leaving usd in its wake....that was it really

hope the day went well for you all
N

 

[phreddyinbg]

Good morning all!
Chf is in the top and USD is in the bottom so looks like we buy the pair. Don't know what that 40 pip spike is. It is only on FXDD not on my other demo. Are they 'stop hunting'? or is it just a blip?

I notice that AUD/USD is closing yesterday's gap

 

[NVP]

My pc is going to die !!!

morning all

this message is from my work laptop...........my pc after eventually deeming to fire up (took 15 mins ???) has decided that it has lmited Broadband network access eek and will not fire up my charts.......jees is it in trouble

I gotta get the files off it using a dongle....just as soon as i can get out to buy one at pc world theres also a brand new laptop coming........

Phreddy thanks for comment last night......I cannot offer any thoughts at present !

N

 

[NVP]

Good morning all!
Chf is in the top and USD is in the bottom so looks like we buy the pair. Don't know what that 40 pip spike is. It is only on FXDD not on my other demo. Are they 'stop hunting'? or is it just a blip?
I notice that AUD/USD is closing yesterday's gap

Hey Phreddy !

just my thoughts here below..........

hmmmm........assuming that the H4 is on the left......sure Swissie is 2nd top dog but does tend to spike a lot vs other currencies ..........anyone know Why..... any one ? :?:

I would concentrate on finding 2 currencies that show the following (opposite) characteristics on the 4H :-

1) diverging away from the Zero (1 up 1 down)..........

2) still relatively close to the Zero (so we are hoping that they both have a lot more extension in them before they become oversold or overbought)

3) the last bar/signal is a downward/upward bias in direction we want it to go.... .

then move into the 1h TF and try to find the same situation for above (rare but take what you can)....then 5m !

you can try to play currencies turning agressively back towrds the zero....in anticipation of this continuing through zero and then into the rules above but that is in effect trading a convergence play and can be effective but a little more risky at times....in effect you are anticipating the move to come and getting in way before the true trend (above the Zero) begins for that particualr currency ....the further they were away from zero before this re-convergence the better..... up to you !

so I see above in your chart

Main rules
Above zero and upwards....swissie (but spikey and o/b in 1h) and NZD (but another bar up would be preferred)
Below Zero and downwards,,,,just GBP (but Euro is virtually below Zero as well)

convergence play rules
moving up......... tag team....and CAD
moving down........Euro (already discussed) and AUD (needs more fall really to confirm)

sooooooo bringing in the 1h (5m is really trigger and just use the currency crossover signal)

I would have been looking

Selling GBP (convergence on 1h and nice fall on 5m)..go in at chart postion as now
Selling Euro (let it retrace a little on the 5m first and go back in when it falls next time)
Buying CAD...exact same rules in reverse to Euro above
Buying TAG..

then its down to preference of pairs.........since this was an overnight play you could have checked S&P futures , Gold and live Nikkei correlation to see if any selling was assisting the tag bull move (negative correlation markets vs tag) and followed that in if it was continued and confirmed.....espec Yen that obviously loves the nightshift and far east action.....buy any G6 then that is opposite trend (GBP and or Euro is available).........Clearly if we chose TAG buy I would not buy CAD as those 3 dont tend to traditionally move together and if they did based on my predictions above its not worth trading them as pairs is it ! :smart:

sooo I would have backed buy yen/sell GBP/E..........when I can get into the damn system lets see if I was right.......

any questions phreddy please post them......you are doing fine and thanks for continuing to post.......

PS...........if you were looking for faster action that G/E play looks interesting as notice that GBP is (just) below the Euro in the 4h and 1h charts but the 5m it was above.....but that reversal signal on 5m looked like a nice bet to me re continuing down...... and remember we are saying that Europair will fall now so GBP's traditionally high volatility vs Euro should carry it down faster for some nice quick pippage.......again I have no idea what heppened yet !
N

 

[FX Pimp]

I am just popping in here. Haven´t read the whole thread, it´s very long but I will.
I didn´t see any reference to USDX yet. Do you not use the Dollar Index?
I have found that since I started using it back in the summer of last year I have added another winning trade each 10 I take, just trading the 6 main USD pairs GBPUSD EURUSD AUDUSD NZDUSD USDCHF USDCAD.
USDJPY is a bit of an outcast in my book so don´t bother with that.

Any thoughts?

 

[NVP]

I am just popping in here. Haven´t read the whole thread, it´s very long but I will.
I didn´t see any reference to USDX yet. Do you not use the Dollar Index?
I have found that since I started using it back in the summer of last year I have added another winning trade each 10 I take, just trading the 6 main USD pairs GBPUSD EURUSD AUDUSD NZDUSD USDCHF USDCAD.
USDJPY is a bit of an outcast in my book so don´t bother with that.

Any thoughts?

Hey FXpimp

happy to chew the cud on this site......firstly do you sell any forex products or services ?

are you part of the pimpology crew trading/training out of Gibraltar ?

if so muchos respect as I like those early threads

I have no issues.....just want to make sure my viewers know the players participating here......

and just to clear someting up - I do not currently sell any services or products but may do so in the future (and I will then declare it )

thanks
NVP

 

[NVP]

10.15am update

Hi all

my old pc is currently performing at speeds resembling paint drying so apologies

heres latest..........choppy to be honest.....euro and GBP not correlating and Tag have intermitent correaltion so far .......

big play was 8.30am this morning when the 5m corrieindex (second chart) sent gold flying down and propelling usd upwards......the play was Sell euro as GBP decided to follow Usd up.....:whistling

since 9.30ish gold was oversold and came back driving usd downwards as well (see second chart again).... europair have both generally responded to the turn so a few pips possibly there but big chop on GBP as you can see !!!.......still in motion this movement

N
PS - Looking at early hours I think my buy tag sell europair call for the 3 ducks would have notched a few pips before the tag collapsed after 2am......selling gbp into Euro was ok till 1.40am ....then all reversed with the Tag action !

 

[NVP]

I am just popping in here. Haven´t read the whole thread, it´s very long but I will.
I didn´t see any reference to USDX yet. Do you not use the Dollar Index?
I have found that since I started using it back in the summer of last year I have added another winning trade each 10 I take, just trading the 6 main USD pairs GBPUSD EURUSD AUDUSD NZDUSD USDCHF USDCAD.
USDJPY is a bit of an outcast in my book so don´t bother with that.

Any thoughts?

Hi Fxpimp

read the thread if you can....the main posts can be skimmed pretty quickly and a lot of posts are daily commentaries......I wil ltry to produce a summary thread soon but what I preach is pretty fundamental to be honest

in answer to above

1) I would look to use the US dollar indexes if they were intraday (??)....meanwhile the FXcorrelator set on 1000/1 (available free on page 64) is a close as it gets and suffices for me on all the currencies using that as an index ....any T/F..its always the core of my daily updates usually set in 5m and a 30m

2) i'm assuming the second comment is that you hedge the pairs above as a basket when usd index is trending in one direction (?)....

if so - sure that would be good and clearly as the Yen and USD (tag team) correlate strongly most of the time I agree that excluding the Usd/Jpy pair would be a good decision as it would not add to the basket's profitability usually and would indeed negate it if yen is flying ahead of the USD on a big tag move....if tag wasnt moving with USD I would not trade the basket anyway to be honest as this normally splits the whole G8 pack and you will get a real mixed results bag in your basket......

lots of threads out there on Forex Factory (and tsd-forex? ) re basket trading are worth a look ...although I suspect you have been there already !

regards and please contribute and stick around a little
N

 

[moe]

we should se 1.6231 before any drop

 

[jrplimited]

Hi N and the ghosts!

Snow here is now just about melted, bit like support for the current UK gorvenment - note to me; stop these detrimental political jibes! - so all must be well in the world, erm.... Onto today's morning session:-

GU; Took a bath on first trade as the 08:00 bar popped down so I opended short 08:05 at 60762 and enjoyed the brief ride down for one bar before price turned quite quickly around and marched back up the hill again! Initial SL taken out for 21 pip loss just about at the high of 08:20 bar. Second trade had buy stop filled during 09:30 bar at 61032 and price sank down from this (how many damn times am I going to write that!) but drove up again nicely on subsequent bar and then motored northwards. Carefully watched the 10:05 small retrace for two bars before price surged ahead again and set a TS at 61448 which was taken out by 10:30 bar for a tad under 40 pips profit. Third trade entered rather latish in morning session for me via way of buy stop at 61358 that was filled during 11:35 bar and price slowly rose upwards before taking out fairly tight TS (due to timing) during 12:20 bar for 17 pips profit.

EU; Short taken on opening 08:45 bar at 44884 and price rose slightly (ha!) before next bar started a small momentum run downwards. Taken out of TS during 09:35 bar for 7 pips profit. Second trade had 44956 sell stop filled during 11:00 bar and I moved initial SL down to TS of 44852 after fairly good push downwards and this got taken out during 11:40 bar for another small 8 pips profit.

EG; At last this pair has come to life! Nice and easy corrie assisted second trade here. First trade was a big flop as opened long at 90228 on 08:05 bar and then price turned quickly and took my SL out towards end of 08:25 bar for 16 pip loss. Second trade set sell stop at 90014 (oblivious to zero numbers I'm afraid!) which got filled during 08:40 bar, price staggered around for next two bars before a small push down followed by a gentle further down slide with small bars. Tightened trailing stop after 10:20 bar but decided to bail out after yet another shallow retrace on 10:45 bar for a 15 pip profit.

Bit of a yo-yo morning to start with until market finally found some direction and again momentum was rather lacking in places, although far better than yesterday for sure!

Trade well and regards,
Simon.

 

[NVP]

Hi JRP............pips there then and my earlier post showing the corrie index highligts nicely that the Europair mostly walked different paths this morning

apologies i am very tied up on the ole job front..........

N

 

[NVP]

we should se 1.6231 before any drop

Hi Moe

you are very welcome here my friend....much respect to your G/U thread and calls made there

Please feel free to post any time and if possible elaborate on any calls you make to help the newbies following this thread (and me of course )

cheers
N

 

[NVP]

Hi all......

choppy day for USD as you can see below.....and Yen has been on the rise mostly
with euro flattish and GBP ....well GBP mainly bullish as well

the tag has really settled into a push up now since gold and S&P started dumping from around 5ish (charts on picture) .......and the yen was even moving up well before this marlet signal so was a classic scream to "fill your boots" with Yen if you could find a decent foil currency.....and USD of course

seeing all this positive action on our "fantastic 4" immediately should flag to yuo that other currencies are falling .....as the G8 on the Corrie is a zero sum game and if some currencies are going up then some must be going down...:smart:

the second piccie is the more generic G8 corrie on a 5m 1000/1 setting........

yeouch !....... look at the battering CAD (Brown) and Aud(gold) took this afternoon....thats gotta hurt !

N

 

[phreddyinbg]

Good morning world, 0530, where I live. I see America is enjoying late afternoon and UK has late evening. Soon be time for bed.

Thanks Neil for the rundown. Today I am looking for a pair according to your rules:

1) diverging away from the Zero (1 up 1 down)..........
2) close-ish to the Zero (for a run before they become oversold or overbought)
3) the last bar/signal is a downward/upward bias in direction we want it to go.... .

Ignore the right hand charts, that is just where I park them while I look at the three Correlation charts.

Ha! Just look at that mess!! Everyone wants to be in the top lot except USD and CAD, even they are pointing up.

OK, I'm going back to bed for some more ZZzzzzs I'll be back in an hour perhaps see if they have sorted themselves out.

 

[phreddyinbg]

Back again at a more civilized time 9030. London is asleep and US is late evening.

So what looks good?

1) diverging away from the Zero (1 up 1 down)..........
2) close-ish to the Zero (for a run before they become oversold or overbought)
3) the last bar/signal is a downward/upward bias in direction we want it to go.... .
1) Would be Oz vs Yen but I don't have that on my set of charts. Perhaps I need a better broker?
How about the EUR/JPY? 4H has Yen high but looking to go higher, still high on the others as well while the Euro is doing what it should, coming away from the zero and continuing in the other tfs.

Chart shows the move with perhaps a resistance to overcome and then .... We will see...

MMmmm... Devil's Advocate here Neil.
I don't get posting privilages so had to invade this post. It all looks pretty but can I not get the same information just by reading the chart? Price has decended (my favourite word) and after a nice rest continues to HELL!
Sorry, got carried away....

What on earth???