Correlation System
This system has a very high probability of working.
First you need to pick any two pairs that r highly correlated. High corrlation means that when one goes up the other pair follows. Pairs can also have a correlation that is negative but high. You can trade both negative and positive correlated pairs. Also keep in mind that try to pick pairs with low spreads coz you will not get much profit and those pairs might make you loose. One of the highly correlated pairs is EU and GU.
Now wait for these pairs to fall out of correlation. When this happens, buy underperforming currency and sell overperforming currency. Keep ur lot size same. Both currency pairs will eventually go back to their normal position. When that happens, close both trade and have your profit.
Stick to your rules
There is a strong logic behind this strategy. So how do you find correlation?![[blush]](/themes/default/images/smiles/blush.png)
This strat would have killed you recently with the moves on EURGBP. When the cross strongly trends or bounces away from support/resistance then there is a problem. This cross index/pair correlation can be seen on related equities as well and takes a lot more analysis than just buying the weaker currency, selling the stronger currency. In fact, a case can be made to do the opposite - why buy a weak currency that is weak intraday - why not sell the weaker one, and buy the stronger one?
Yes. It takes more than just buying weaker or selling stronger. But I think this is a very good starting idea to build a strategy. As u gain experience, you will modify and tweak strategy.
Stick to your rules
Yes. It takes more than just buying weaker or selling stronger. But I think this is a good starting idea to build a strategy. As u gain experience, you will modify and tweak strategy.
Stick to your rules
Duplication of posts. It looks like u tried to edit a post and it was duplicated. It may be a bug.
About ur post regarding correlation, it can only be successful if ur trading style is swing trading. In short run, I dun think market will fill weaker and stronger currency gaps quickly.
The good or ill of a man lies within his own will. – Epictetus
Well I have researched a little about this system. I dun think short term or long term style has anything to do with this system. Correlation exists both in short term and longterm. But I agree wtih uniquetrader and cfx signals that only correlation concept cannot make u a successful trader.
Originally posted by SashaWell I have researched a little about this system. I dun think short term or long term style has anything to do with this system. Correlation exists both in short term and longterm. But I agree wtih uniquetrader and cfx signals that only correlation concept cannot make u a successful trader.
Yes it exists in both trends but in short term trend there is less chance of pairs to go back to previous position bcoz of rapidy changings. I think there is a chance that it will hit SL before it hits ur TP. For short term, I only mean 10 to 20 pip trading. Moreover after paying spread, u may not be able to win at the end.
In long term the correlated pairs have good chance of coming back to positions where they were. Also spreads will have less affect.
The good or ill of a man lies within his own will. – Epictetus
I have read about correlation system in the past. It has mixed reviews. Some consider it an excellent system bcoz they think there r high chances of pairs will always come back to position if correlation is disturbed. Others think that correlation will always be present but "pips" do not necessarily come back to position where they were before correlation was disturbed. So there is always a chance of equilibrium at a new point and not the previous point where u think it will be back.
I havnt tried it myself so dont know how successful is it.
I have read about correlation system in the past. It has mixed reviews. Some consider it an excellent system bcoz they think there r high chances of pairs will always come back to position if correlation is disturbed. Others think that correlation will always be present but "pips" do not necessarily come back to position where they were before correlation was disturbed. So there is always a chance of equilibrium at a new point and not the previous point where u think it will be back.I havnt tried it myself so dont know how successful is it.
It is the truth that there is a high chance of pairs coming back to the point where they were before the equilibrium was disturbed. Sometimes it doesn't happen so sometimes u loose. If u r putting ur SL and TP wisely, you can make good profit out of this system.
Originally posted by ChampI have read about correlation system in the past. It has mixed reviews. Some consider it an excellent system bcoz they think there r high chances of pairs will always come back to position if correlation is disturbed. Others think that correlation will always be present but "pips" do not necessarily come back to position where they were before correlation was disturbed. So there is always a chance of equilibrium at a new point and not the previous point where u think it will be back.
I havnt tried it myself so dont know how successful is it.
It is the truth that there is a high chance of pairs coming back to the point where they were before the equilibrium was disturbed. Sometimes it doesn't happen so sometimes u loose. If u r putting ur SL and TP wisely, you can make good profit out of this system.
Just an addition to ur suggestion that there is higher chance of success if wel also use some indicators for confirmation purpose.
The good or ill of a man lies within his own will. – Epictetus