Best Thread Correlation Trading - Basic Ideas and Strategies

[NVP]

hi everyone

my pc takes 15minutes to start (??)....i'll be tipping coffee in it soon !

phreddy i'll respond ASAP to above.......meanwhile i want to get some charts up...

ooo....
more snow overnight so will be working form home today......my car dosnt do winter and a 4X4 is deffinitely on my my wish list..........(alongside a laptop !)

N

 

[NVP]

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

So what looks good?

ould 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???

hey phreddy

nothing is trading is easy and the strategies/systems available are as plentiful as the fish in the sea (well except cod in the atlantic !).....some are cheap aquired through learning and experience and some cost $xxx to buy !!

at the end of the day you need to get comfortable with one and learn it with screentime untill you can see it in yuor sleep..............eventually patterns will leap out of the screen at you whilst others struggle to see what you are talking about....

the more scenarios yuo see thru screentime the more yuor armoury of experiance will lock in to the situation next time..........the human brain is very very good at pattern recognition (too good sometimes) so let it flow on the 3 ducks or perhaps someting else you chose to move to............

i dont understand your posting privelidge comment ?.......you are welcome to post here at any time my friend as a corrie musketeer !

ask me what you need to know.....Rome was not built in a day
(bad unions ?:cheesy..

N

 

[NVP]

doh......

getting killed on my trading pc.....its saying limited interet access yet my work laptop (this one) is happily wirelessing you this message....

aaaaaaaaaahhhhhhhhhhhhh

N

weekend looking milder finally so resolution on saturday...................

 

[NVP]

I'll respond to phreddy's questions above if |'cannot get on this time (5th reboot of everything)

then duty calls elsewhere.............

this never happeded to gordon Gekko (watched Wall street at the weekend.......superb)

N

 

[NVP]

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...

What on earth???

right phreddy I have nooo charts so lets talk about the corrie 3 ducks

1 more rule that will add to the confusion !

we are all aware of the cyclical nature of markets/forex pairs right ?.........they move up then down a bit then up a bit then down a bit.....(is this to technical for everyone (tee hee) :whistling?)

and in amongst this if a positive or negative bias is seen, then the trend direction thrusts will generally be stronger than the retraces to creat the overall price move with the trend...........

but no matter what prices/markets rarely move in straight lines

the trick in trading is :-

1) guess the direction correctly for the next x bars
2) get on the trade as it turns into that trend and the probability of a retrace is minimal

its like a see saw......if you want to experience the fun of flying upwards you dont get on the see saw in its highest position do you (?)....as guess what ....the only next thing you are going to get is a free fall experience !!

so thats the trick jump on as the see saw looks ready to shoot up again....unfortunately we all see day in day out on this thread how getting 1 right is only half the battle....stepping on the seesaw only to find the price retraces and stops you out.....welcome to trading !

hey....is everyone asleep yet ?

ok think of the corrie on any setting like a currency seesaw.....they go up and they go down....in fact on the lower moving averages (like the T60) this happens much more smoothly that the higher MA ones so its great to use....

ok the 4h T60 currencies will move up and down in a different (slower) cycle/speed to the 1 hour T60 corrie which will in turn move slower than the cycle of the much faster 5m T60 corrie......

if you were to analyse a change in currency trend (say from falling to rising) on the 3 corries the first you would see is that the 5m corrie for that currency would start to push upwards and get to the top of the pack...then it would fall a little as it inevitably retraces a little then push up again and so on......

whilst this generally upward cycle/bias is happening on the 5m.... the 1h would have to respond to this and the currency there would also start to push upwards through the pack as the trend turns.....but much slower cycles to the 5m which is the fastest chart (remember the 5m chart is 12X faster timeframe than the 1h chart)

as the 1h starts to cycle up guess what...... the 4h wakes up and follows the 'cycle up' routine ...a little closer in speed to the 1h as only 4X TF diff but still slower.......and miles slowere than the 5m (48X slower !)

so what the hell am I taking about here ? :whistling'

heres rule 4........

if you are seeing a nice establishing trend forming across the 3 charts (first 3 rules I preach)...try to step into your trade when the lowest (5m) cycle is retracing a little as you get the best entry point (assuming it doesnt decide to change trend direction !)

in other words get on the 5m chart at bottom of the seesaw to ensure you fly upwards !
(or vice versa)

I know we all talk a lot about trading what you see on these threads but a little anticipation is also recommended as above to get best price and entry point :smart:

enough...time for duty and work !

later dudes.... hopefully with some charts !

N

 

[NVP]

Hi Neil et al,

Well I haven't had the time to devote to this thread that I would have liked, but I like to keep in touch from time to time.

I mentioned once before Ashraf Laidi, and just thought it might be worth mentioning him again (www.ashraflaidi.com) .

He does talk about correlation, but maybe it's from a slightly different approach to yours. Actually I don't think anyone else is doing exactly what he is doing (at least not for free on the web). He calls it intermarket analysis, and it seems to be an interesting mix of fundamentals (news/data releases and similar), and technical analysis.

My own trading at the moment is quite heavily influenced by Ashraf' Laidi's approach and analysis, plus a bit of price action, gut instinct and seat-of-pants. I have also been influenced by www.thegestalt.com (Chris Matthews), and what he calls "Global Macro". (Having said that, CM was plugging The Correlation Code guys quite heavily at one time, which made me go "hmm....").

I used to be a pure "price action" person, but became a little disillusioned after seeing so many apparently random and unexpected (by me) moves, and thought to myself that there must be a bit more to it than the way particular price bars fall out together. The market moves for a reason or for many reasons, and I set out to try to learn about the way the markets fitted together.

Correlation comes into this, but in a way it's a bit like price action. It's all very well to know that pair A/B are correlating with pair X/Y and also with stock index Z, but wouldn't it be even better to know why? If one can do that, then maybe it's taking it to the next level.

Anyway, for what it's worth, and paraphrasing heavily, AL is currently bullish on USD, bearish on EUR/USD, bearish GBP/USD, bullish Oil, probably bullish Gold (maybe after a dip). This is medium term stuff, and there may still be some fallout in the other direction for a while, following NFP.

I personally trade 1H+ charts and try to hold for at least several days, but I also like to take money off the table, so I don't always manage to hold more than a day. I'm not afraid to use large stops. My views on risk:reward are probably a bit unorthodox. I'm also slightly influenced by "Bird Watching in Lion Country".


OK, time to watch Wallander, then it's nearly time for the markets to open

hey montmorency !

interesting indeed.....ive now registered with this site...........a lot to look at and learn as I do want to really refresh all my knowledge of what makes markets tick.....

I once bought a FT book on gloal market dynamics (mega cost) but it was to to dry.....

www.ashraflaidi.com

I think Chris Matthews was on some of those Correlation code seminars as Jason fielder had some trader sidekicks in on the party......could be wrong though so dont quote me

N

 

[montmorencyt2w]

hey montmorency !

interesting indeed.....ive now registered with this site...........a lot to look at and learn as I do want to really refresh all my knowledge of what makes markets tick.....

I once bought a FT book on gloal market dynamics (mega cost) but it was to to dry.....

www.ashraflaidi.com

I think Chris Matthews was on some of those Correlation code seminars as Jason fielder had some trader sidekicks in on the party......could be wrong though so dont quote me

N

I just saw your message on there. Hope you like it.

I have to say, the immediate post NFP scenario didn't seem to play out quite as Ashraf thought. I think he underestimated the market's negative reaction to the poor US figures - he thought they were bad but not that bad, sort of thing.

So in the short term at least some of his calls look a bit bad (e.g. long USD/JPY).
Medium term though I think he still stands by them. I think I mis-remembered what he said about gold. He is calling for it to go down to around 1070 before any subsequent rise. Also, now that oil is below 80, maybe his call for this is also revised. It's sometimes hard to interpret what he says into precise trades, so while I read everything he says and try to absorb it, I read other stuff, and finally, as we all must, form my own judgement.

I think some on his forum seem to depend on his calls a bit too much.
Also, I don't have quite as much faith in TA as he seems to.
I think his real value is not in the precise calls and TA, as pointing out the interworkings of the market, and e.g. pointing out when correlations/relationships seem to be failing or changing.

Happy trading, or at least correlating!

p.s. Ashraf's book is also a bit dry to be honest, but at least it's short and to the point!

 

[NVP]

I just saw your message on there. Hope you like it.

I have to say, the immediate post NFP scenario didn't seem to play out quite as Ashraf thought. I think he underestimated the market's negative reaction to the poor US figures - he thought they were bad but not that bad, sort of thing.

So in the short term at least some of his calls look a bit bad (e.g. long USD/JPY).
Medium term though I think he still stands by them. I think I mis-remembered what he said about gold. He is calling for it to go down to around 1070 before any subsequent rise. Also, now that oil is below 80, maybe his call for this is also revised. It's sometimes hard to interpret what he says into precise trades, so while I read everything he says and try to absorb it, I read other stuff, and finally, as we all must, form my own judgement.

I think some on his forum seem to depend on his calls a bit too much.
Also, I don't have quite as much faith in TA as he seems to.
I think his real value is not in the precise calls and TA, as pointing out the interworkings of the market, and e.g. pointing out when correlations/relationships seem to be failing or changing.

Happy trading, or at least correlating!

p.s. Ashraf's book is also a bit dry to be honest, but at least it's short and to the point!

Hi Mike

sure..........i'll take it all with a pinch of salt but plenty for me to ponder there....

Mike is highlighting a great message here to newbies......by all means take training, advice and information from wherever you feel is worthit......but ultimately make your own calls and take responsibility for your trading.......as its your money and no one else really cares if you win or lose...

thats why I love the world of trading.....theres no bullsh*t on the (truthful) outcomes....you either made money yesterday or you didnt.......if only life was that simple !

Best Regards
Neil

 

[NVP]

of course another nice thing to have is real time charts up and feeding from the internet......

game of cards anyone ?
N

 

[jrplimited]

Hi N and ?,

Straight into this morning's bun fight:-

GU; Thought I would tread a bit more cautiously this morning - ha! First trade entered short 08:10 and price saw me doing this so went mincing off in opposite direction and took out my SL for 21 pip loss. Decided that market bias was perhaps up after all so buy stop placed at 62242 for second trade which was filled towards end of 08:50 bar and following bar dropped back down to test the nerves, then price moved up again in a stagger and dropped sharply on the 09:35 bar after a bit of "red" news was digested and, similar to previous up bar, was only a few pips away from TS. Instead of taking the obviouis hint and bailing, I held on until eventually price drifted back down to TS and took me out during 10:00 bar for 11 pip profit. In hindsight (oh yeah?) I probably should have trailed that 09:30 up bar after it had recovered from the intial low print due to first losing trade, but hey-ho there I go! Price tempted me with third trade starting from 11:15 and, just like a pub situated outside the Betty Ford clinic's front door, in I went with a long trade made on 11:35 bar at 62736 but this time with a tight TS which got taken out during 12:10 bar for a quick 8 pips profit.

EU; Weird one for me here first thing. Couldnt find any setups on chart until after that largish 09:10 bar then buy stop placed at 45084 which got "tickled" and filled during 09:25 bar, headed down towards SL three bars later, rose up again then took me out during 10:00 bars for a nasty 19 pip loss. Second trade stuck with a buy stop at previous 45084 level and was filled with a small uplift during 10:25 bar, then of course price drifted down (!) but only by a small measure until it at last kicked into life and went trundling upwards on its merry way - merry being the operative word here as it was staggering around a bit. Came out of this second trade on close of that nice 12:05 up thrust bar for a 54 pip profit as I felt that might represent the end of this particular move.

EG; Very volatile movements here but that wasnt surprising given the directions of both GU and EU. Couldnt find any decent areas that represented a break of G or E so left this one alone this morning - should be worth following this afternoon perhaps?

Be a bit careful this afternoon as we seem to be in a "sticky" patch where something has to give one way or another - trade well and regards,
Simon.

 

[NVP]

a 54 pip profit on E/U !!

when is the party ? :drunk:

N

 

[NVP]

Hi all

Weather not tooo bad overnight and warmer temperatures are coming arnt they

my home pc is still warming up at present (its just fired up ) .....then we wil see if the internet connection is a happy bunny......not holding my breath

decided to buy a laptop on saturday and get the pc looked at as if its only a faulty internet port then thats hopefully a cheap solution and backup

yeserday I was told loads more work coming in day job due to non replacement of exiting staff... so happy days on that front as well ......jees its a pain and probably the same across the board for all you salaried viewers as well....the recession is a great excuse to reduce manpower (regardless) and screw the remaining staff......as tony soprano would say waddya gonna do ?

well I have a cunning plan but full time trading is a few more steps away yet.....

ok lets see what I can get up here later.........until then apologies

N

 

[NVP]

my god I have a connection........

got the Usd pairs loaded whilst it refreshes the bars.......like pulling teeth though....

later...
N

 

[NVP]

8.30am update.....

hi all

hmmm selling Yen into Euro was a nice play overnight wasnt it.....Nikkei rose consistently through the night so that was candy from a baby stuff (phreddy any luck on that ?)


ok 7am 15m bar was a fakeout play and E&G promptly reversed down.....

currently all currencies still seeking some more consistent bias so hopefully we will get something soon (watch for classic price action on corrie 1000/1).....GBP is generally falling with E & U neutral and Yen falling as well.......from this analysis you should deduce that other G8's must be doing ok .......and its Cad (Brown on the far left 15m 1000/1 corrie chart)....jees that is volatile at the moment !

Tag should be rising/consolidating now as the S&P30 futures and Gold both have a short term bearish bias.....so keep an eye on those charts for direction re Tag....(opposite correlation remember)

If I was a big G8 player I would watch AUD as well (gold colour on far left chart).........its taken its hits from early in week and is looking ready to keep pushing up with the commodities camp...retracing now but then...

ok later dudes got to do my day job
N

 

[NVP]

GBP in charge risign at present...yen falling

USD is consolidating.....gold is still trying everything to push it up though..........

hmmmm no real tag correlation at present .....

if gold starts to rise i'd back a tag fall and buy GBP into Usd (or CAD or AUD if you fancy a more non standard pair)

if USD finally gets the push up more and yen also starts to retrace up - i'd sell Euro into Usd

watch this space.......

N

 

[jrplimited]

Hi N,

Straight into this morning's bun fight:-

GU; That big 08:00 down bar was a good signal to keep wallet firmly closed and sure enough, price bounced around a bottom for a few bars then started to move up. Long trade opened on 08:45 bar at 62894 and, just for a refreshing change, only had a small MAE on this bar before price crawled upwards in a some what reluctant fashion (seen by long wicks on up candles). That nice big 09:10 up bar had me thinking that this might be a market thats made its mind up what to do, but following two down bars had long tails so I couldnt really gauge where to put TS and decided to simply just get out at close of 09:25 bar for 6 pip profit. Second trade entered short on 10:15 bar at 62756 having tracked price going down the hill and immediately found trade in a shallow retrace which didnt really challenge initial SL. Had to wait for nearly an hour (far to long there?) for 11:15 bar to spring into life and shoot downwards only to see it rise up again a few bars later. Didnt like the look of this trade even after the move back down again and as time (for me) was running out, decided to press ejector button and ditch on 11:50 bar close for a sweaty near 4 pip profit - should have held onto this for longer as price went much further south soon after my exit; typical!

EU; Entered short on 08:05 bar at 45192 and price immediately went into gentle consolidation range without any real threat to initial SL before eventually turning over some 90 odd minutes later (is the market still asleep this morning?) and allowing me to move TS to BE after 09:55 bar. After the biggish 11:15 down bar TS dragged dragged down and high of 11:30 bar took this out for a 14 pip profit - again, far to long waiting for price to show its hand.

EG; Entered short on 08:25 bar at 89184 in what turned out to be a very thin (price action wise) market. Left price to chug away southwards until [relatively] big 09:50 bar and exited at its close for under 5 pips profit. Waited to see if I could get another entry but price seemed to get itself into a tight consolidation range so couldnt find anything decent.

A case of wakey-wakey market this morning! See there is some "red" news on the horizon (think around 13:30) so watch out for that as the "fab" three seem to be in a real hesitant mood - trade well and regards,

Simon

 

[NVP]

Hi Jrp...everyone

wow.......a rocknroll morning alright with things really swinging in all directions for our Fab 4

muchos respect to JRP for (as usual) drilling net positive pips out during the morning action

are JPR's charts getting more colour on them...or is it just my eyes ?

ok heres the charts

Gold & S&P moving in opposite directions hence our Tag team divorce action today

(if) when they start correlating we will get a better signals for trading the Europair....

or you could be bold and just watch for those S/R levels and price action signals on the 5m 1000/1 corrie and trade the Europair against Usd and confirming signals from gold.....

(sorry my bloody cr@p system wont load the chart......later then)

later......
N

 

[NVP]

hey all

my pc has fired up so trying to coax an internet connection

soon.......

N

 

[NVP]

nope.....no luck...."limited or no connection it says".......???

sounds a bit like me sometimes......

N

 

[NVP]

heres colin twiggs take on daily activity.......and that gold/usd relationship

As you know we really watch this relationship and also the markets (S&P30) vs the yen here at corrie central...........and when the tag walk the same path its bingo time re trading the other G8 currencies....just wish we could get more handle on WHICH ones to trade more !!

Playing devils advocate here theres actually some great (even more profitable ?) trading signals available when these correlations described above are NOT happening.....

here they are :-

1) Gold not (negatively) correlating to USD ...ie same direction
2) S&P30 and also Eq markets generally not (neg) correlating to Yen
3) USD not correlating (same direction) to USD....ie they are moving in diff directions

watch this space.......

WIP....posting in progess...DOH....signal weal on internet....!!!

N