It’s been a while since I joined. I am so glad I finally had a time to post a thread. I would appreciate somebody could shed some light on Currency Correlations.
I think I understand the part wherein the values on the Currency Correlation show how much correlated Currency pairs are however, I am not really sure exactly about the time element showing on the same chart. I think it was stated as to how long currency can be correlated and then change after that stated time range but I am not really sure if I understand it, especially on how I will apply it with my trading.
To make my inquiry a bit clearer. I want to know how to determine when do prices STARTS and STOPS correlating, if it is ever possible.
THANKS!!! Appreciate all the info you can give on this.:51:
Currencies do correlate. Here is the page you can read more about it Forex Correlation | Myfxbook
I often use information there for trading. I don’t look for correlations actually, I try to catch moments when these correlations (always swinging in some range for example 80-85%) deviate from its “normal” values. It means that currency will soon return to its usual correlation percents and we have to bet in relevant direction.
Good luck!
Something tells me that somewhere within this idea is giving me a hint that some curreny pairs moves a bit later than others. In my view this could serve as price action indicator to trade currency pairs that move in late.
on 1 side I agree with the table of profitbaby, that link is a good source to see correlations. I also agree with Forex Verified, usually information comes late and you see the numbers late, when a correlation already exists or it does not there anymore.
What I do is, I have clear money management rules to reduce the correlation factor between pairs. For example you can have rules like this: “I am allowed to have a maximum of 3 JPY currency pair trades at the same time.” As the JPY (or any other currency) pairs have usually high correlation to each other, I do not want to take too much risk. Of course you have to make your own rules and investigation, but clear guidelines to follow will help you to reduce risk and you do not even have to follow any other sources (like correlation tables) when you open a trade.
Co relation, direct and inverse exist in forex market but you cannot use it each and every time you trade. It is safe to trade on pair at a time and don’t take co-relation into consideration on every trade you take.
I agree that currencies always co-relate to each other in one or another way. However, it can go from positive co-relation to a negative co-relation and you’d like to know this when your trade strategy is assuming a positive co-relation or vice versa.
When there is a switch is indeed not easily to be predicted based on price action only as small changes can be disregarded as noise. So the question is: where would you draw the line if it is noise or a sign of a real switch.
However a switch would involve significant changes in on or both of the economies or the traders opinions thereoff. Such a change will surely not happen in a couple of days. You will probably be asking yourself why your trade strategy is becoming less or (un)profitable before you notice that it is related to a switch in the correlation between the two currencies.
Glad that it helped you. usually deviations occur after important fundamental info, basically it means one currency becomes under- or overvalued against another where you should trade accordingly. Can’t say it is holy grail, take it with a grain of salt, but use this knowledge as supplemental when analyze the market.
There is no way to predict that.