I see that right now AU y NU is not correlated on m5, but it is correlated on 1h and on 1d, so the pair is correlated, and right now could be good time to trade the spread, isn’t it?
Also EU and GU is about 50 correlation right now, not to good, but on 1h it is 98 and on 1d it is about 80, so it is good also, and maybe it is going to be a trade in the near time.
I found that on good correlated pairs the risk is only IF the pair’s prices move apart for too long. That shouldn’t happen, because they are correlated, but there is always a possibility to have a very big move that cause the pairs get heavy unrelated and to generate big loss. It is not so probable but it is possible.
Kelton, do you ever seen this happen? that two correlated pairs like EU and GU get very unrelated that a very big visual difference exists?
Eur and Gbp are closely related. The same as Usd and Cad. The same like Aud and Nzd. Pairs like EU and Guide have been correlated for some time. And you need them to go out of correlation to profit, just because for the moment they are out of correlation does not mean u should not trade, it is probably the perfect time to trade. Because if the correlation was 99.9 % all the time there would be no opportunity to profit. Does that make sense?
I have not seen anything that would worry me in the last 2 months especially in the 1 min frame. If you are worried about something like that I would lower my leverage or trade pairs that involved JPY. some jpy pairs are ridiculously correlated.
I see what you say of JPY pairs, above 90 % correlation on all time frames, that is almost perfect hedge!
I had seen this strategy with stock options and with stocks, but I only traded it with spreads with options on indexes. I had never thought that it could be possible on forex until now
And I’ve been researching this subject for months until I started trading. I did lose a few times but that was because my charts were off before I knew how to make everything right