This is a discussion on Correlation Strategy within the Forex forums, part of the Markets category; Hello Everyone!! I have been trading for several years but have never posted in a forum until a couple months Community Links Members List. Correlation Strategy This is a discussion on Correlation Strategy within the Forex forums, part of the Markets category; Hello Everyone!!
Jul 20, , 9: I have been trading for several years but have never posted in a forum until a couple months ago when I posted some information on a correlation strategy I trade. The post originally started out as a search for help in developing an EA for position management not automated entries.
I received numerous requests for information on the strategy itself so I decided to share some of the information. It was very well received, so I thought I would continue sharing it in my free time.Handy Forex Correlation Trading Strategy
My correlation strategy is simply trading more than one pair at a time and viewing all the pairs being traded as one collective unit or trade. Each pair in the correlation trade plays an integral part as the trade utilizes correlations in a manner that allows you to profit no matter what direction the market moves. It is a way to profit from the random nature of Forex by capitalizing on the random swings and algorithms between correlating currencies.
The draw down is often extremely limited and little margin is required.
The strategy focuses on quantum, not pip collecting. The strategy is nothing new or exciting. Like most strategies out there this is just another person's version of something that has always been around. The strategy is common among commercial traders, financial institutes and some speculators. There are many variations of the strategy so it is great as a stand alone method and can also complement existing strategies due to its unique versatility.
This is just a very general overview of one of my main correlation strategies. It is not completely thorough nor does it speak to the subjective components such as set ups, entries, and points of caution. However, there should be enough information to satisfy traders seeking strategy information.
This particular version of my correlation strategy acts as a pseudo-hedge because the currencies are traded in a manner where the USD is usually hedged. There are several reasons for this but the primary reason they are traded in this manner is because the trades have the opportunity to be profitable regardless of the direction the market moves.
When I refer to trades I am referring to the collective balance of all open positions as one correlation trade involves multiple currency pairs usually 2 pairs.
The currencies I trade for this strategy are chosen from correlation triangles I create. There are multiple correlation triangles but the most common and frequent correlation triangle I use contains the EURUSD, GBPUSD, and USDCHF. I group these three together based on their correlation coefficients which is a statistical measure of how two securities move in relation to each other.
The other reasons include, but are not limited to liquidity of the pairs; and the fact that there are multiple correlation trade combinations that can act as a pseudo-hedge within the three pairs.
Once a correlation triangle is created it is important to recognize that although there are various trade combinations within the triangle, there are only a limited number of combinations that can be traded to satisfy the criteria of this correlation strategy. It is my intention to start posting information in this forum from the forum currently hosting the info but I trade full time and that is my priority.
This forum will be a side project for me when I have free time. For those who want more details before I can get them posted here, you can find them at their current location located here: I have no connection to this forum it just happens to be the location where I first started to share my strategy. If anyone has any questions please post, send me an IM, or email me at sparxfx yahoo.
Aug 8, , 9: Hi SparxFx, I have also contacted you privately Could you load some attachments, recent trades to illustrate your strategies? I have not got user access yet to Goldentree so cannot see attachments there Best Regards Neil.
Aug 8, , 1: Thank you for your response and interest NVP. I have emailed you two statements and will soon send you some screen shots of the actual trades as well. These are just two of many examples but should assist you.
The majority of the trades in both those statements are one standard lot per position as it makes it easier to show the profitability of the overall strategy. If the lot sizes were increased as the account equity grew the results would logically be substantially higher. The example of being long EURUSD and long USDCHF from GammaJammer is but one example of the collective strategy. It is a popular misconception and there is no shortage of opinions and documentation to support the opposing views on this topic but it has little or no relevance to my strategy.
It does not matter if it is true. It does not matter if it is false. And it does not matter if you believe 2 currency pairs form a synthetic version of a third currency pair.
The comparison or debate would be extremely multifaceted and the subsequent resolve would serve no benefit to the correlation strategy discussed here. The purpose of trading the two currency pairs simultaneously includes but is not limited to the benefit of the pseudo-hedge.
This is something that cannot be accomplished by trading one currency pair. The fundamentals, logic, and concepts behind the strategy can be as simple or as complicated as you choose to make them. Aug 8, , 5: Originally Posted by sparxfx. It is a popular misconception Aug 9, , 6: Originally Posted by GammaJammer. So am I right in saying you would, for example be long eurusd and long usdchf same size?
If so, you have just spent a page describing something I can summarise for you in two words. If you put on the positions I've described above, it's called being Long EURCHF. If there are only two pairs, and you knock out the dollar exposure you're trading a cross. Of course if you trade more than the two pairs simultaneously thats a little different, but from the sounds of things you're predominantly just trading crosses. Nothing wrong with that per se, it's just commonly described in somewhat simpler terms ikn the FX market Good luck GJ GJ.
Aug 9, , 9: Aug 9, , There are people on spot fx market making desks who do this, and people are now also trying to replicate this with machines harder than you think but you need to be lightning fast AND have access to customer flow typically in order to be able to close the deal i.
Forex Alerts, techniques, systems for live currency trading
More pairs are now traded on the other ECNs, but for ease of use, Reuters and EBS are still ahead imho, and that is a big factor when you have milliseconds to do the trade. And if you think I'm joking how fast you need to be, trust me - these guys are unreal. They look like they're playing track and field on their keypads.
How to Trade a Correlation Strategy - omotohu.web.fc2.com
Most retail traders don't have access to anything more recent than daily charts, but that's probably fine.
If you need intraday I suggest getting the formula and building a spreadsheet although wouldn't bother myself.
Thread Tools Show Printable Version. Search this Thread Advanced Search. LinkBack LinkBack URL About LinkBacks. Notices Join T2W today and enjoy a great package of benefits Page 1 of 4. Originally Posted by sparxfx The example of being long EURUSD and long USDCHF from GammaJammer is but one example of the collective strategy.
Originally Posted by GammaJammer So am I right in saying you would, for example be long eurusd and long usdchf same size? Wich data for correlation? Feb 5, Apr 1, 7: Mar 30, Apr 3, 5: Mar 12, 7: Currently Active Users Viewing This Thread: