Most of the movement in Forex based off specualtion. What use is it to see a potential setup on EUR/USD and ignore all other currency pairs tied two EUR and USD!
I believe that you only have 1 piece of the puzzle when only looking at the technical analysis of one chart for each trade. By looking at them all with currency pair correlation I have observed and found that it can help you decide on good trades and keep you out of bad ones.
It’s all about strength of each currency and this makes all pairs interlinked.
Just imagine you see a buying opportunity on EUR/USD and you enter for price to turn against you straight through your support…
Well by looking at all the linked currency pairs and making sure that the majority of them agree, I am sure the odds can be drastically improved.
Since doing this I have seen multiple trading opportunities which tick all the boxes I need for a trade. However after seeing that other linked pairs are not in agreement I don’t take the trade. I see these trades go bad so I was right to stay out.
I think this is all common knowledge but most people just cannot be bothered to focus on many charts.
As you can see in the pic, pairs either need to be at a confluence point of support or no where near resistance. Or at a confluence level or resistance or no where near support. Depending on whether buying or selling the pair.
This is far better than a recent strength indicator as this takes into account support and resistance. Recent strength is just a generalization over time but does nothing to help when looking for a right time to enter a trade.
Wow, thanks for putting this all together and sharing with our forex community! Awesome work! Yep, keeping track of currency correlations is definitely one element of risk management that is often overlooked. Care to share a few examples on how you’ve been using this table in your recent trades?
Yea GBPUSD broken through resistance and pulled back. Now its lingering around waiting for news. I set Entry 10-15 pips below. I will only trade news when it has confluence with a trading setup that I follow anyway. So this is a perfect example. If news sens price higher my entry will not have been triggered and all is well.
The expectation was for positive news on GBP, thus no sells on GBP/USD even during Asia - it kicked off from the mid Asian which is quite usual.
The sentiment is that there will be an increased pressure for a hike in UK.
Now it is GBP buying as reflected in Eur/Gbp selling.
Update: Eur/Gbp has shown reluctance to get below 72.80 so I exit the long Gbp/Usd at 1.5420
If I leave more on the table then that is for the market and not for me.
Btw Asian mid was 1.5345
Depends. I’ve seen that myfxbook correlation tool but I think there is too much guess work with that. What % you will chose? how much is too much? How many days and hours does it take into account to conclude the correlation figures?
I prefer this method so I can see exactly what pairs can “potentially” correlate and then go check support and resistance on each of them and find out for my self.
As a beginner, a mentor of mine told me about this but I didn’t understand the logic. I just took his word for it. Now as I’ve become advanced, this definitely made sense to me.
To me, there are “key zones” (support and resistance zones) for currencies and key zones for pairs. Say a USDCAD has a key zone that also happens to be a key zone for CADJPY, AUDCAD, GBPCAD, EURCAD and NZDCAD, that’s a currency key zone and is very powerful. Means there was volume behind the move and it was prompted by a news from CAD. It’s a currency key zone. If it’s just USDCAD without confluence from other CAD pairs, it might be a USD key zone OR just that pairs’ key zone. It’s certainly not as strong as the CAD or USD key zone.
