The short answer is pretty simple really: you trade via a “linearized”, mono-currency model. More or less, what this means is that your trades are based upon, more than likely, incorrect and sketchy technical or fundamental analysis–successful analysis btw [I]can [/I]lower risk on a single order, but takes a very high degree of knowledge and skill to do–or gut feeling–speaks for itself. An example of this type of trading would be like this…You’ve done all the technical and fundamental analysis you think is required for reducing the risk of a trade enough that you can feel comfortable trading that pair and opening an order with that pair that you buy 1.3 lots of USDJPY–perfectly happy with yourself and your “analysis” of the pair. If you trade like this…you instantaneously open yourself up to an UNECESSARY level of risk–direction. In other words, you can do all the analysis you want, but the market can move in whichever direction it wants, when it wants, so that element of risk still exists–and is pretty strong. There is a way to minimize this risk drastically…I can’t give you a certain number, so don’t ask for one…but it’s lower, trust me. Using correlations you can do this–the primary concept of which has already been mentioned in this thread. Essentially what you do is analysis of the correlation…there are two things that influence correlation, one really if you take the other as a given; they are, direction and magnitude. If direction goes out of whack, the correlation falls–the same applies for magnitude. Assuming these currency pairs will move in the same direction however, the only thing left to trade is magnitude. Magnitude oscillates…Buy low, sell high…or sell high, buy low…you take your pick…either way. You make money. This is the method of trading I personally use and I can testify that it is very successful–or if you don’t believe me for whatever reason, you can try it out yourself. Why am I posting this? Really just because I’m quite sick of people trading negligently and…more or less…like a forex scrub. If you have any questions about this method of trading…feel free to post em and I’ll see what I can do about answering them. Happy trading. Oh and, I have no plan of entertaining useless questions about how this strategy works in relation to profit, expectancy, risk, etc, etc, etc…it works for me, that is all I care to share, and I have no interest in answering your questions about that….thanks
I only use charts so that my eas can function lol…so, i don’t really use/need charts for the strategy. You can enter/exit whenever you want provided some basic minimal parameters are met–these factors are in fact met like 99% of the time anyway. exit when you have a nice profit that you like. Buy one sell the other if positively correlated, or, buy buy if negatively correlated. only trade correlated pairs. position is dependent upon your interpretation of market volatility.
Yes rollover does. While most trades are only open for a few hours to a couple days max, in theory a trade could be opened until the swap is greater than your potential profit.
^bad news, but has not happened yet
So if I understand correctly, you trade based on Price Action but are ‘adding positions’ based on different pairs that are either positively or negatively correlated?
If that’s the case, basic understanding is still needed of price action analysis or candlestick analysis. Did you get these under your belt first? How did you arrive at where you are now?
Possibly a brief roadmap to your ‘success’?
Hooookay.
So your other thread states that you have traded this “system” for about a month, and on demo only. A little presumptuous to be telling the masses you know why they lose money don’t you think?
How long trading overall?
And ANY live accounts?
It’s easy to trade demo. I make prodigious amounts of money at will on demo.
In fact, I don’t lose on a demo account.
Caution tempers my gains on a live account. Tighter stop losses, and fewer trades.
This topic is long on ideals, and short on details.
What pairs?
What makes them correlate?
[B]Why MOST of you who trade lose money…[/B]
The short answer is pretty simple really: you trade via a “linearized”, mono-currency model.
Lack of deployed Trade Risk Strategy is the highly likely cause why most of the people who trade loose money.
Certainly more money is lost than neccessary if NO trade risk strategy covering all possible angles is utilized for EVERY trade taken.
If you trade like this…you instantaneously open yourself up to an UNECESSARY level of risk–[B]direction[/B].
[B]There is a way to minimize this risk drastically…[/B]
Trade from a single side ONLY.
Either from the SHORT side or LONG side ONLY.
In current FX environment the path of least resistance is trading the majors from the short side ONLY with the effect of being USD long.
Cross currencies are best avoided UNLESS you KNOW what currency in the pair you trade drives them.
Once big money steps in to drive the USD under the bus you trade from the LONG side ONLY with the effect of being USD short.
Problem solved. 
price action analysis yes…candlesticks/chart analysis i couldn’t care less about. this is just a concept that has been given a lot of thought for about the past 8 months. lots of testing, both in theory and in trading, have been put into this.
i suppose you could if you wanted to
Whatching the correlation between pairs is something every trader eventually discovers, if they are trading long enough. In fx, we are trading 2 currencies at once.
Let’s say you buy E/U. There are 5 ways to profit.
Once you enter:
-
The Euro is strong and the dollar is weak.
-
The Euro is strong and the dollar is stagnant.
-
The Euro and USD are strong, but the Euro is stronger.
-
The Euro is stagnant and the USD is weak.
-
They are both weak, but USD is weaker.
(Hope I didnt miss one)
Looking at correlation with, let’s say g/u, we will gain alot of info about the above.
Example:
If E/U is moving up and G/U is flat. We know we are seeing Euro strength, and not USD weakness. But with further comparison to other pairs, more knowlege may be gained.
To me, trading based on correlation in itself is not a trading method. There are too many other factors. I just wanted to share how I use it to help my trading, but if the thread starter doesnt want to reveal a complete method…that’s certainly is his prerogative.
If you do that, you leave yourself completely exposed to the EURGBP cross rate, and you pay the spread twice !
When the swap rates are favorable there are certainly games to be played trading baskets, but even they have directional exposure.
@brickman…ea for one month, tested for about 3. enter trades whenever they are highly correlated–a parameter that the user defines.
@ “master” tang…you can call it presumptuous if you want to, i don’t really care to be honest. This system is sound on ideals, and the details are my own. if it’s caution that tempers you, i would suggest that that is a flaw that could be minimized via an ea. what pairs? whichever ones are correlated as has been stated…fundamentals make them correlate…i would suggest googling correlation
you are right on a number of topics; however, this sytem does not trade the way the majority of people do. this system trades “magnitude” not price action or direction. That is all I will say on the topic as, you are right, it is my prerogrative =P
seeing as how i got about 5 replies in the past 20 seconds i decided taht i’ll be in the chat room to address questions in real time. (never used it before hopefully it works the way i think it will xD). feel free to keep posting though, i will answer your questions
These statements by [B]used [/B]are exactly correct.
This correlation trading stuff has been posted on this forum in great detail before.
I have been here long enough to have seen it all.
Simply said, correlation trading is a waste of time and really does not work.
Our resident master trader, [B]Rhodytrader, (Honorary FX Member), [/B]knows all about correlation trading.
Here are some hyperlinks…
http://forums.babypips.com/newbie-island/9093-hedging-forex-positions.html
@brickman - price action between highly correlated pairs.
@tymen - the link you posted has nothing to do with how i trade…correlation is not a waste of time if done correctly…seems to me you have’t seen it all
babypips’ chat room, next to the log out button
LOL an EA? Gimme a break.
And caution on a live account is a flaw?
Do you trade live?
Let’s see you put some cash on the line before you tell us why most lose.
I want to see proof of concept before I spend any time looking at a page full of google links to the correlation topic.
And yes, I know what correlation means.
A little insulting there.
You post a topic stating you know why most lose, and you back it up with your concept proven on a demo.
Yes, a bit presumptuous.
At least show us your demo results.
Is that too much to ask?
I have to agree. Correlation, as a stretgy within it’s self, is useless. Since the thread starter has already stated a couple of times, that he is not going to share his method, and there is so much info already out there, I’m not sure I see the point here.
…and I’m still not clear on why you think most traders lose as the title states. Because they dont look at correlation? That’s not why.
sigh here goes…
- “LOL an EA” – an ea is nothing more than a reflection of two things 1) YOUR STRATEGY and 2) coding stregnth. that it is. if your ea fails, it is either a flawed strategy…wouldn’t surprise me…or flawed code.
- caution isn’t a flaw, caution influecing your ability to make money is a flaw…which, again, can be minimized with an ea.
- no i do not trade live currently; however I have already received a great deal of money from a variety of investors who are ALL savvy in trading stocks–after illustrating the stregnth of this strategy to them
- i’m not going to give you proff. you personally, actually need to do some work, think about the idea, test it, before you bash it.
- i again, am not the one who acted in such a way suggesting i didn’t know what corelation was.
- i will post my demo results at the end of the trading week very soon.
- kthxbai
I have seen it all and it is a waste of time. 
I have been here long enough to have seen your schemes many times over.
And I strongly suspect that you are just a scammer. :mad:
What are you trying to sell? 
I might just report you to the Administration.
[B]Alert to new posters!![/B]
Don’t get involved in anything tradingliberation says.
Read my hyperlinks - one is a Babpips thread.