The Most Profitable Trading Pattern You Will Ever Encounter

[prasadvissa]

@jw1981,Thats a good observation and very meaningful. this is a useful tip for all.

[doughayman]

So babypips was down over the weekend and I was checking the aspect of correlations into this strategy.

I noticed myfxbook has a neat little correlation section now with daily/weekly & 1 month.

My theory is as follows:

Say you come across a sell signal on EURJPY. Everything lines up.
Then, using the correlation tool, we find GBPJPY having a >90% correlation.
So the idea is to start looking for (or enter) sell signals on GBPJPY as well

This approach, I think will help traders to cut down on scanning multiple ccy’s and could in fact build up a basket of ccy’s to trade.

What do you guys think about this?

I dunno jw1981. I’m all for using a dashboard (or equivalent) to automate the process of scanning, to alert on potential future trades. Why go through that manual process?

[jw1981]

I dunno jw1981. I’m all for using a dashboard (or equivalent) to automate the process of scanning, to alert on potential future trades. Why go through that manual process?

Its actually quite simple when you take the 30 day correlation into account. Build your matrix start of the month and keep an eye on +ve and -ve pairs. The aim being to a) look for validation to the positions b) maximize the profits when things go your way.

I’m currently making a list of A+ set ups… (When all filters line up). Will share my results in a few weeks or in a month at most and also offer how correlations help in filling the coffers even more.

[PhilipPirrip]

I just exited the first post-FOMC trade; EURUSD short on the 1HR. I held it for four days for a profit of 180 pips. I’m currently in the process of funding my new account which I’ll share here. Once that is done I will post the trades I enter with charts. I will also share my fxbook account.

[Royalblood]

@phillippirip, i have been using MA crossover system since long time now and i had stumbled upon the same mistake of not trusting my system. This article was real good, i really thank you for sharing your experience. Now i am also aware of sticking to the trading system along with exit rules.

[Morim]

@jw1981

Waiting for 4hrs doesn’t help on a H1 chart. If you are using a 1hr candle, just use this method on H1 charts since you are demoing anyways. Only issue is that you might end up in a few choppy trades (but an easy way to avoid that is not to trade when EMA’s are flat). There are quite some nice trades that go on in H1 too. Or just use tradingview.com charting if you want to stick to H4.

H4 charts merely offer a balanced view of the markets in terms of prices, but that doesn’t mean H4 is insulated from sideways markets. Good example, GBPUSD H4 has had instances of flat EMA’s.

Yes, this method works on all markets.

Hope the above helps.

Thank you

[Myrmica]

I just exited the first post-FOMC trade; EURUSD short on the 1HR. I held it for four days for a profit of 180 pips. I’m currently in the process of funding my new account which I’ll share here. Once that is done I will post the trades I enter with charts. I will also share my fxbook account.

Already waiting with interest to see the trades you are executing.

[dubadat]

Hello Phillip,

How would you trade this one? We saw the 20/50ema cross ans stoch at the lows. We wait for the Stoch to reach overbought and wait for a cross below 80. But before that happens there is another Cross of the EMAs in the opposite direction.
What should we do?

I do not know how to upload chart but would you kindly have a look at the GBPAUD 4HR chart please.

The candle closed just a couple of miutes back.

DD

[PhilipPirrip]

Hello Phillip,

How would you trade this one? We saw the 20/50ema cross ans stoch at the lows. We wait for the Stoch to reach overbought and wait for a cross below 80. But before that happens there is another Cross of the EMAs in the opposite direction.
What should we do?

I do not know how to upload chart but would you kindly have a look at the GBPAUD 4HR chart please.

The candle closed just a couple of miutes back.

DD

We don’t enter the trade.

[dubadat]

We don’t enter the trade.

Appreciate your quick response .

DD

[PhilipPirrip]

So these are the two pairs I’m looking at currently.

It looks like I’m going to enter AUDNZD (the one on the right) very soon. EURUSD (the left picture.) will need sometime before I can short it.

You can track my account on myfxbook here

[jw1981]

So these are the two pairs I’m looking at currently.

You can track my account on myfxbook here

[B][I]Let the games begin!![/I][/B] :22:

[ItchyMojo]

@PhilipPirrip

So these are the two pairs I’m looking at currently.

It looks like I’m going to enter AUDNZD (the one on the right) very soon. EURUSD (the left picture.) will need sometime before I can short it.

You can track my account on myfxbook here

Philip, is “eyeballing” the overbought/oversold condition enough? In your AUD/NZD 60 minute trade I show the Stoch at 79.5745 which means it hasn’t broken 80.

Currently on 4-Hour charts I’m short EUR/AUD, EUR/NZD and long USD/NOK.

It looks like USD/CAD will soon trigger long on the 4-Hour chart.

[PhilipPirrip]

@ItchyMojo

Philip, is “eyeballing” the overbought/oversold condition enough? In your AUD/NZD 60 minute trade I show the Stoch at 79.5745 which means it hasn’t broken 80.

Currently on 4-Hour charts I’m short EUR/AUD, EUR/NZD and long USD/NOK.

It looks like USD/CAD will soon trigger long on the 4-Hour chart.

Yeah but you assumed my feed is the same is your feed. On my feed it closed at 81 so I’m eyeballing it enough.

[ItchyMojo]

Yeah but you assumed my feed is the same is your feed. On my feed it closed at 81 so I’m eyeballing it enough.

Actually I wasn’t assuming that.

I was wondering it it’s necessary to “nit pick” insisting it go over 80 (or under 20). In other words if you see it touch the line is that sufficient?

[PhilipPirrip]

Actually I wasn’t assuming that.

I was wondering it it’s necessary to “nit pick” insisting it go over 80 (or under 20). In other words if you see it touch the line is that sufficient?

It has to close above 80. I said it a million times and I’ll keep on saying it to the end of time. Thanks for keeping a good eye on the chart.

[molonist]

So babypips was down over the weekend and I was checking the aspect of correlations into this strategy.

I noticed myfxbook has a neat little correlation section now with daily/weekly & 1 month.

My theory is as follows:

Say you come across a sell signal on EURJPY. Everything lines up.
Then, using the correlation tool, we find GBPJPY having a >90% correlation.
So the idea is to start looking for (or enter) sell signals on GBPJPY as well

This approach, I think will help traders to cut down on scanning multiple ccy’s and could in fact build up a basket of ccy’s to trade.

What do you guys think about this?

In my view it seems correlation shows us some kind of statistical dependence. Now any currency pair is 100% correlated with itself so why look for others? If you are so confident of direction you could double down on the same currency pair. I think maybe we should look for independence or a correlation closer to 0%, this may increase the overall probability of occurances in the long run

In analogical terms would we rather flip a biased coin (51% chance of heads) once and place 4 bets (on heads) on that single event or flip our biased coin 4 times placing a bet on each individual flip?

[bestpickrus]

In my view it seems correlation shows us some kind of statistical dependence. Now any currency pair is 100% correlated with itself so why look for others? If you are so confident of direction you could double down on the same currency pair. I think maybe we should look for independence or a correlation closer to 0%, this may increase the overall probability of occurances in the long run

In analogical terms would we rather flip a biased coin (51% chance of heads) once and place 4 bets (on heads) on that single event or flip our biased coin 4 times placing a bet on each individual flip?

Very good way of looking at it. The reality is “correlation” typically is used to “confirm” the bias a trader has. The pit fall of such trading is once a pair “Stops” correlating then you are left wondering “what next”. I personally have used correlation in the past, but on the lower tf tick - 15m to get a slight edge right before break out occurs. My form of trading involves accuracy, so if a pair is highly correlated with another (even negative correlation) and you see that all of a sudden one stops moving, as the other breaks out, that is a clear sign of a pending reversals for the pair which has stopped correlating.

[jw1981]

I beg to differ.

You seem to be taking correlation in a different meaning.

1. its nothing to do with ‘confirming bias’
2. nothing to do with doubling down on just one
3. corr. doesn’t mean both the ccy’s move in the same direction. Momentum differs, which is where/why phil’s method fits in perfectly.
4. I refer to correlations as a way to reduce the chart scanning time and use it specifically for this method in question.
5. In my suggestion of correlation, [U]we don’t use intraday corr.[/U] but look to monthly correlation (where again, the H4 or even H1 aspect of using phil’s method fits in perfectly).

There are different ways correlation can be used with phil’s method. Here are two simple ways

1. Reduces chart scanning time
2. Failed entries on a particular CCY gives you a clear/better idea of what is happening on other correlated pairs

Example

GBPJPY - AUDNZD (-92% Corr)

GJ H1 gave long quite some candles ago (which means you start to put AUDNZD in your watch list)
AUDNZD therefore becomes a good candidate to check for signals (which it did)

USDCAD - AUDUSD (-93.3% Corr)

USDCAD late last week triggered a sell (which means you look to AUDUSD for possible long signals)
AUDUSD gave a buy few days ago

Hope this clarifies.

[Myrmica]

@PhilipPirrip

So these are the two pairs I’m looking at currently.

It looks like I’m going to enter AUDNZD (the one on the right) very soon. EURUSD (the left picture.) will need sometime before I can short it.

You can track my account on myfxbook here

That AUDNZD was a loser if you followed the rules exactly because it did not reach the 100 fib line, right? Did you set the trade to BE before or are so brave to lose all that pips gained before?