Forex Correlation Theory - page 4

To add comments, please log in or register
Sergey Golubev
Moderator
106122
Sergey Golubev  

Correlation

The beginning

  1. Correlation indicators: very good thread with some systems, explanations and good usefull indicators.
  2. Chart Transposition Indicator: original thread.
  3. FINEXX Correlation System and EA - the thread 
  4. Currency corelation - the thread.
  5. trend corelation - discussion thread.
  6. Correlation Index - small thread with indicator
  7. complimentary pairs thread 
  8. Cross-Currency Strength: good thread with indicators.
  9. Pearson correlation thread
  10. Cluster Indicators thread.
  11. Correlation candles indicator (MT5) - the post. Two possible types of correlation used: Pearson correlation and Spearman correlation
  12. Rank correlations (Pearson and Spearman) indicator (MT5) - the post with original version, the post with fixed version. This indicator is using Pearson correlation and Spearman correlation, besides, it has an option to use some of the 22 price types as well as using floating levels

After

  1. Correlation system thread
  2. Currency Correlations, Part I - the video
  3. Currency Correlations, Part II - the video 
  4. MFCS Currency Correlation Chart - MT5 CodeBase indicator
  5. MT5 CodeBase on HowTo - post with the articles
  6. Multi currency EA ideas - the thread
  7. Forex Correlation Theory thread
Mohammad Zahirul Islam
254
Mohammad Zahirul Islam  

This system I think is a Basket Trading system.But few broker not allow this Trading style.What is the solution about this issue.

fxstrategist007
108
fxstrategist007  

Some brokers do allow all types of trading. It could be interesting to look more into it and see how it really works in live trading.

Sergey Golubev
Moderator
106122
Sergey Golubev  

Trade Oil with Currency Correlations (based on dailyfx article)

  • Correlations are useful to find direction for a variety of markets.
  • Oil and the USDCAD have a negative correlation.
  • Once direction is found, plan your trading strategy for another asset.

Understanding market correlations can allow traders to have an option on a commodity based off of the direction of their favorite currency pair. The idea is to take two seemingly different markets or assets and see how market price moves relative to each other. Today we will review using the USDCAD currency pair to determine the direction of USOIL (WTI) through the use of a correlation.

Oils Correlation

When someone mentions Oil, currency traders should immediately think of the USDCAD as a correlating currency pair. These assets are negatively correlated meaning they generally can be seen moving in opposing directions. This occurs because the USDCAD quotes the price of Canadian Dollars in terms of USDollars. USOil represents Oil per barrel priced in terms of US Dollars. With the USD being on opposing sides of each equation this means that the two assets will move in opposing directions when the USD strengthens or weakens.

Secondly, the CAD has a high correlation to Oil due to Canada’s extensive oil deposits. Most of this oil is purchased by the US causing a transfer of funds along the way. As oil prices fluctuate, this increases or decreases the amount of funds transferred from USD to make purchases of Canadian resourses. These transfers essentially change demand for the currency and can directly cause changes in the USDCAD currency pair as well.

Trading the Correlation

The key to trading negatively correlated assets is finding a direction or having a fundamental opinion from one of the underlying assets before making a trading decision. If traders are seeing the USDCAD push to higher highs, this could easily be the catalyst for a bearish bias on Oil. Conversely if Oil is trending upwards traders would have reasonable expectations of the USDCAD traveling towards lower lows.

As you can see, this information is very useful to traders that already have an opinion on either Oil or the USDCAD currency pair. Often traders that are bullish on Oil choose to trade the USDCAD instead of the metal itself. The Canadian Dollar carries a 1.00% banking rate, meaning traders can earn additional interest while trading a bullish bias on Oil. If a trader is bullish on the USDCAD currency pair, traders can in turn sell Oil to avoid accumulating interest on their trading balance.

Trade Oil with Currency Correlations
Trade Oil with Currency Correlations
  • Walker England
  • www.dailyfx.com
Understanding market correlations can allow traders to have an option on a commodity based off of the direction of their favorite currency pair. The idea is to take two seemingly different markets or assets and see how market price moves relative to each other. Today we will review using the USDCAD When someone mentions Oil, currency traders...
noorad sharafi
2155
noorad sharafi  
Sergey Golubev:

Trade Oil with Currency Correlations (based on dailyfx article)

  • Correlations are useful to find direction for a variety of markets.
  • Oil and the USDCAD have a negative correlation.
  • Once direction is found, plan your trading strategy for another asset.

Understanding market correlations can allow traders to have an option on a commodity based off of the direction of their favorite currency pair. The idea is to take two seemingly different markets or assets and see how market price moves relative to each other. Today we will review using the USDCAD currency pair to determine the direction of USOIL (WTI) through the use of a correlation.

Oils Correlation

When someone mentions Oil, currency traders should immediately think of the USDCAD as a correlating currency pair. These assets are negatively correlated meaning they generally can be seen moving in opposing directions. This occurs because the USDCAD quotes the price of Canadian Dollars in terms of USDollars. USOil represents Oil per barrel priced in terms of US Dollars. With the USD being on opposing sides of each equation this means that the two assets will move in opposing directions when the USD strengthens or weakens.

Secondly, the CAD has a high correlation to Oil due to Canada’s extensive oil deposits. Most of this oil is purchased by the US causing a transfer of funds along the way. As oil prices fluctuate, this increases or decreases the amount of funds transferred from USD to make purchases of Canadian resourses. These transfers essentially change demand for the currency and can directly cause changes in the USDCAD currency pair as well.

Trading the Correlation

The key to trading negatively correlated assets is finding a direction or having a fundamental opinion from one of the underlying assets before making a trading decision. If traders are seeing the USDCAD push to higher highs, this could easily be the catalyst for a bearish bias on Oil. Conversely if Oil is trending upwards traders would have reasonable expectations of the USDCAD traveling towards lower lows.

As you can see, this information is very useful to traders that already have an opinion on either Oil or the USDCAD currency pair. Often traders that are bullish on Oil choose to trade the USDCAD instead of the metal itself. The Canadian Dollar carries a 1.00% banking rate, meaning traders can earn additional interest while trading a bullish bias on Oil. If a trader is bullish on the USDCAD currency pair, traders can in turn sell Oil to avoid accumulating interest on their trading balance.

Thanks ُSergey, This article was very helpful
To add comments, please log in or register