Tonight we did a live stream on YouTube offering an in-depth explanation of correlation trading. You can watch the stream back in its entirety here https: Correlation trading is an amazing way to add diversification to your trading portfolio and in your trade plan.
You can continue your trading plan and strategy but take advantage of correlation trading opportunities as they arise to increase your ability to profit from the forex market. In correlation trading the objective is to find currency pairs that are highly correlated, meaning that when one pair moves in any given direction the other pair also moves in that same direction. This correlation can be confirmed by using the Oanda correlation chart: Once you have confirmed that you are looking at two pairs that are highly correlated to one another, you will want to then look into the charts and compare the price action over the past year.
TradingView makes this very convenient with the ability to overlay charts. It is during these times when the correlation cracks that provides us with the immensely profitable and essentially risk free trading opportunities.
If you notice on the chart throughout the past year you will see highlighted in yellow boxes all of the times when the correlation has cracked and a gap has formed. We can look at these moments and estimate the average maximum gap in correlation and use this information to gauge when to take a correlation trade on this pair. You will notice every time the correlation has cracked and a gap in price action has formed, price inevitably moved back in correlation narrowing and even closing the gap You will also notice if you look back at the widest portion of the gap from every time there was a crack in correlation that it has been roughly anywhere between pips.
If we look at the second to most recent gap in correlation that we have labeled on the chart you will notice that at its widest point the gap in price was roughly pips; the high being at If we were watching this occur as it was happening and we noticed the gap in correlation approaching pips and then pips and then pips, forming the widest gap in correlation all year, we could then look to take a correlation trade between these pairs.
This profit came with little to no direction risk because as one position goes against you the other statistically should go in your favor and if you are not netting a profit at any given moment your loss should be simnifically reduced as compared to what it would be if you were only holding the losing position. If I could edit the title to take out the word "no" I would.
The point is though that by taking advantage of correlation trading you can significantly minimize your directional risk and therefore subsequently minimize your overall risk in the market. The video goes into much greater detail. Correlation trading is an amazing way to minimize your risk. Can you please tell me how to connect two currency in the TV chart?
I cant find ant http: From the creators of MultiCharts. Select market data provided by ICE Data services.More...