So the first trade was unfortunately a loser. The main reason though is the strong numbers of AUD employment. As you can see from the picture it was a loss of 68 pips or $52.48. It was as much as 100 pips+ at some point.
I’m getting ready to short EURUSD on the 4HR chart.
corr. doesn’t mean both the ccy’s move in the same direction.
Investopdepia gives a definition. Direction seems to be an essential part of the definition. Isn’t this the standard way its used?
DEFINITION of 'Correlation’
In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management.
INVESTOPEDIA EXPLAINS 'Correlation’
Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random.
In real life, perfectly correlated securities are rare, rather you will find securities with some degree of correlation.
Read more: Correlation Definition | Investopedia
Please post charts with failed set ups so we can see if this is worth pursuing or best left alone. Until then, your argument stands void.
With that said, my next post is a first visual guide to using the correlations.
AUDNZD – GBPJPY: -92.8% Correlation (Meaning, these pairs move in opposite direction)
Above chart shows the AUDNZD & GBPJPY correlation based on the daily chart. Notice how both the pairs are moving in opposite direction. From the above, when we get a long signal on GBPJPY, we look for and trade short signals on AUDNZD, or vice versa.
When there is a mismatch (ie: when you are short on GBPJPY, and you get a short on AUDNZD) you can either just follow phil’s method or exploit a failed set up (which is where the real power of Phil’s system comes into play and something i’ll cover at a later time)
GBPJPY Signals (First Quarter of 2015)
AUDNZD Signals (First Quarter of 2015)
Signal Comparison
Note: For this first example, I deliberately choose AUDNZD & GBPJPY. Correlations are a lot more easier for common currency such as EURUSD, AUDUSD as when USD is weaker, Aussie and Euro start to strengthen against the USD, although at a different pace.
Why would correlations help?
[ol]It reduces your chart scanning time. When a long signal is triggered (as in the above example of GJ), you start keeping your eye out for short signals on AUDNZD[/ol]
[LIST=2]For those who are very comfortable using Phil’s method, correlation mis-match can give you an early warning of a potential change in bias (meaning, you still trade by the rules, but manage your trades a bit more carefully).[/LIST]
Now here’s the fun bit.
[ul]
[li]GBPJPY – EURJPY: 94.5% corr (Meaning you look for long signals in EJ, when GJ is up)
[/li][li]EURJPY – AUDNZD: -85.2% corr (validates your position)
[/li][/ul]
Based on this, you know what to expect in correlated pairs.
You can scan the above pairs visually and if this is something that interests anyone, we could move on.
And if you want to dispute, please validate with a failed set up so it helps everyone.
Phil, looking at this trade:
I had a choppy experience with GBPUSD few weeks ago when H4 ema’s were flat, which is now a filter to bear in mind.
I think this trade still technically comes under ‘recovered trade’.
Isn’t it the nature of the system that we enter ideally at the peak of the retracement and consequently the EMAs are flat? Flat probably is even better than hooked because it could indicate a trend reversal in trend direction whereas not flat could indicate that it is not correction but a new trend.
Quote phillip:
"So the first trade was unfortunately a loser. The main reason though is the strong numbers of AUD employment. As you can see from the picture it was a loss of 68 pips or $52.48. It was as much as 100 pips at some point.
I’m getting ready to short EURUSD on the 4HR chart."
Philip have u shorted eurusd. I too was lookin to do that but missed and now i see that the MAs have crossed to the upside
No I haven’t done that yet. I usually average one trade a week/10 days so its pretty rare that you’d see me make two trades in one week.
I was hoping myfxbook would give everyone the opportunity to follow me live, but it hasn’t updated my trades so far which is weird.
Just saw this thread on the weekend. Anyone selling EURGBP? Looks a good setup to me.
Looks like a good setup to me
Guys I know this is not related even remotely to this thread’s topic but I am posting here due to a good collection of experienced traders following this thread.
I had doubled my account in about 2 months with lot of hard work and dedication only to see my broker (a friend) declare default. He has offered me to return my money in installments but I am very very disappointed to see my hard earned account vanish due to credit risk. Alas, all my focus was on market risk.
I have one simple query. Please suggest me a broker(s) with most sound financial health. Please please please :(((
afz,
I am not an FX trader (yet), but my broker (Interactive Brokers, known as IB) is a well-capitalized online broker that supports all type of trading: FX, options, stocks, bonds, ETF’s, Futures, etc. They charge small commissions on every FX trade, but the spreads are extremely tight. I plan on using them when I eventually begin trading FX. IB is a public company, and not going anywhere. They have a ton of tools - FX Trader and BookTrader to name a few. You can check them out at www.interactivebrokers.com. I’m sure others on this board will recommend other brokers that may specialize in FX trading only.
Sorry to hear about your aggravation. Pays to go with a reputable, well-capitalized brokerage, IMO, even if you sacrifice some cool tools.
Hi guys, been following this thread for a week. Really good article 
No. of setup noticed, correct me if I’m wrong:
GBP/USD - Long
AUD/USD - Long
USD/JPY - Short
Happy trading guys
I had to remove and re-add myfxbook account.
This is the exact same trading account, just a different fxbook portfolio that will hopefully update automatically like it should.
Philip, mind sharing which timeframe are you trading for AUDUSD? as my signal shows a Buy
That would be H1
Hey phillip, problem with ctrader. It doesn’t update automatically. When ever you open your ctrader platform click on the performance>myfxbook logo (login to myfxbook account). This refreshes the stats.
Its frustrating, but that’s the only option available for now.
I tried that it still doesn’t update.
EDIT: nevermind problem solved.
Hi,
my name is Vasilis ,congratulation for your strategy ,I strongly agree with you.
I am looking forward to see << the pattern fails>>.
I would like to exchange ideas about the trade.
Thanks
Hi There,
Anyone has techy89 email address?
Thank you.
