The indicator shows an estimated price correlation between two symbols having one common currency in the names. The indicator shows currency correlation in the average price range. For example, EURUSD/EURJPY has EUR as a common currency. It means that the pairs are in inverse correlation to each other. Use the indicator values (or the arrows) to determine which symbol to buy and which one to sell. If the histogram value is below 0, then the first currency should be bought, while the second one should be sold and vice versa. The indicator is also useful as a filter.
The indicator buffers show the following values:
0 - correlation value as a histogram
1 - correlation value as a line
2 - estimated average value
3 - BUY arrow
4 - SELL arrow
5 - estimated correlation value
6 - correlation power
The indicator is displayed as a histogram (DRAWHISTOGRAM), line (DRAWLINE) or both (BOTH).
The indicator has two types of built-in signals: 1) for crossing a correlation zero line (_long) and 2) for crossing an estimated zero average (_scalper).
When trading by "_scalper" signals, it is reasonable to enter at the optimized correlation values (for example, higher than 1.0 at EURUSD/EURJPY М5) and exit no later than the opposite signal.
Please mind the following principles when working with the indicator:
- Select two currency symbols with a common currency, for example EUR, enter _symbol_1 and _symbol_2 in the field.
- Select the entry signal (for example, _scalper) to display entry arrows.
- Specify averaging period (period) and deviation factor (deviation_factor) for calculating the main line and estimated average deviation (deviation_average).
- Place the indicator, for example, on _symbol_1. If the signal is selected, buy _symbol_1 and sell _symbol_2 at the up arrow, also sell _symbol_1 and buy _symbol_2 at the down arrow (the same rule applies to all symbols the indicator is launched at).
- If "currency power" parameter is used (CorrelationPower=true), the power_mode parameter specifies direct and reverse correlations. The inverse parameter is used to define reverse correlation if, for example, EURUSD/EURJPY is used with common location of the common EUR currency, while the direct parameter is used to define direct correlation if, for example, GBPUSD/USDCHF is used with different location of the common USD currency.