Currency correlation

Trading Discussion
1

Hi everyone,

I just finished the lesson on currency correlations. At the end they suggest to create an Excel sheet with the pairs and calculate the coefficients to keep a track record.
I was wondering if there wasn’t a website or another tool (saw graphs) that can be used to track record. How is it done by retail forex traders? I think putting up your own Excel sheets is insightful, but time consumming.
If someone has experience in this?

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I think currency correlations is a great study and tool in your toolbox. I encourage you to Keep looking in to it and make that your edge for your trading system. I don’t think it’s necessary to keep a track record for every currency but only focus on the two or three that you trade. But now that I think about it what are you trying to record exactly?

3

Your enthusiasm is good but the edge in trading is knowing when to trade and the dissaplin to wait

4

Somebody out there with a real answer?

5

you already have fixed a strong mind , have a very good journey on there.

6

There’s a website where you can do something, but I’m not really sure what use it actually has because the correlation happens together, not lagged. If you want to use it to help trade, you’d really want one currency to lag another by some time period and then trade that to get a high probability move.

Unfortunately, I can’t remember which website it was. Probably myfxbook since they have a fair few tools, but you’d have to dig around since they rearranged the menus. If you’re really keen on this information, why not write a script or EA to post the values on your charts. Not difficult and then you don’t have to keep doing the work.

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1 Like
8

Never actually wrote a script :confused: for trading, though I had practice in C++ and Pascal this was long ago… No idea how to implement it Meta4 or 5 as well…
Interesting that you mentioned about the lagging, the lesson does not mention that…
Seems few people are looking at correlations so far.
Anyone out there with feedback experience using this as a sort of tool or confirmation for a trade setup?

9

Thanks Chester. This page is helpful. Though it must be leading not lagging as you mentioned

10

Hey Scheisser.

Currency correlations, in my opinion, is fascinating. That’s why I walked in here to see what was going on. Of course, I had to read up on what you were looking at, in the first place.

5 Reasons Why Factoring In Currency Correlations Help You Trade Better - BabyPips.com

I’ll just give you a real quick summary of what I found on the subject.

  • I use excel spreadsheets extensively for EOD currency results
  • I’ve traded a basket of trades for some years
  • I’ve traded complete currency dynamics
  • I haven’t directly used the coefficient analysis between the currency pairs, but I have compared macro currency dynamics to one another. And also compared the micro (individual currency pairs) currency dynamics to one another.
  • It doesn’t work. Or I should say it isn’t enough to give you a viable edge in the market.

It’s too difficult.
The reason is because when you end up trading more than one currency pair you are inherently adding way too many more variables into the problem.

To begin with, we are in effect trading two asset classes, at the same time.
And you won’t find that in any other market.
This is a very difficult game. And when you trade just 2 currency pairs you will be looking at 4 different assets. 2 complete currency assets, and 2 individual assets.

Trust me, it’s almost impossible.

That’s my opinion.

If you can make your bread and butter by trading only one pair, consistently and definitely, then you would be worthy of multiple pairs.

But… I’ll always find this subject so very interesting.

Good luck to you!
If you make any headway on this, please let me know.
Mike

11

Thanks for the comment Mike. Have you relied on them (even partially) for trading (as part of a trading plan or confirmation for a trade setup?)
I thought some people would use this as a tool for trading, but it seems that though many people know what is meant by correlation, they do not bother looking at them (due to the fact that it gets tricky as you mentioned).
Definitely agree that a pair is enough until you get the hang of it. But the question of how to incorporate them as a tool remains open! The lessons here encourage people to make their own spreadsheets (Excel), which I find time consuming. Especially if it is impractical to use! Thought maybe some people popped them up when they were switching to another pair in which they saw like an opportunity.

12

You can easily correlate various instruments in real time on TradingView. I’d done it with some funds while doing some intermarket analysis in this post here. You can also customize the correlation period, as demonstrated.

You can give it a go and see if it fits your requirements.

I haven’t heard of anyone using it for real time trading scalping or intraday. I’ve seen it used strictly for analysis on much larger time frames in 2 different books. They were used to determine market environments and the general direction certain instruments moved.