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The Impact Of Currency Correlations On Profit Potential – Indicator information This indicator compares price correlations in up to 3 different instruments simultaneously. It’s designed to compare currency pair correlations, but it also works on stocks, commodities and cryptocurrencies (whatever your broker offers on MT4). The only requirement is that each instrument must be on the same exchange so that their trading times match. I designed this indicator to be very versatile. It can be traded with many different strategies from scalping to hedging to simple trend following based on the average trend direction of 2 or 3 currency pairs, or it can only signal when all 3 pairs are correlated on the same side of a certain moving average. The indicator automatically uses the same moving average settings for all three correlation pairs on the same time frame, so the correlations are always relative. Terms you should know… The term “IMA” stands for “Independent Moving Average”. IMAs are colored lines in the indicator field and each one represents a different pair of correlations. Since we refer to three pairs, there are IMA-1, IMA-2 and IMA-3 (TradePair). The term “CMA” stands for “combined moving average” and is a green or red line in the indicator field that represents the “average trend” of all correlation pairs included in the average (you can exclude TradePair (IMA3) from the average). The “histogram” is the red or green bars that span the CMA line, so the CMA and the histogram have the same value, but can be displayed separately. When “Require correlation for histogram” = true, the histogram is displayed only during correlation for all three currency pairs.
Here are just a few simple strategies you can use the indicator for. Follow Average Trend: This is the simplest use of this indicator. A histogram shows the average trend of 2 or 3 currency pairs. Simply open a trade on 1, 2, or all 3 pairs in the direction of the “average” trend following the histogram (buy during the green histogram, sell during the red histogram). It creates a trade arrow when the histogram changes from green to red or from red to green, and you can reverse the direction of the arrow if you want to trade against the color of the histogram (ie buy red, sell green). The example below uses the following moving average settings on a 30-minute chart: SMA 3, SMA 75, SMA 75. Create a mini EURO index against other major values. Here is the average trend between EUR/USD, EUR/CAD and EUR/AUD
The Impact Of Currency Correlations On Profit Potential
Trend riding on ups and downs: By following the average trend, you can set the minimum and maximum strength of the CMA/Histogram. When the histogram enters the window between the minimum and maximum strength of the CMA, it creates an input signal. When it exceeds the maximum strength (in the direction of profit), it produces an exit signal. When the price falls back below the maximum strength, it generates a new entry signal. For example, you can select a trading window from 10 to 50 points above the zero line, and it will generate a buy signal when the histogram enters this window, and an exit signal when the scale spikes above 50. For sell signals, set a window from -10 to -50, and it will generate sell signals when the histogram enters this strength window, and an exit signal when the histogram falls below the -50 scale, acting as a profit target that follows the trend. and exits the yield peaks. In this example, the histogram represents the average trend of EUR/USD, EUR/GBP and EUR/CHF. Trade only the strongest pair: You can reduce your exposure and maximize your ROI by only trading in the direction of the histogram (average trend) of the strongest pair. Using the chart above as an example, you would be long EUR/CHF (the white IMA line in the indicator field) until the 2nd buy arrow. Then you would switch to a long EURUSD position when the blue line (EUR/USD) crosses above the white IMA line (EUR/CHF) in the indicator field. IMAs are colored indicators that represent each pair of correlations. Trade the average trend only during correlation: If you are only interested in the biggest moves with the highest follow-through probability, you can only trade when 3 similar pairs are moving in correlation (all 3 pairs on the same side of the same moving average). By using the True/False switch, you can make the histogram and trade arrows appear only during correlation periods. The indicator generates a trading arrow and a pop-up warning when the correlation starts and ends. Continuous Hedging: Open 2 trades in the same direction by following the histogram with 2 pairs of reverse correlations such as EUR/USD and USD/CHF. The histogram shows the direction of the stronger trend pair. For example, if the histogram is green, open a BUY for both currency pairs to hedge against the USD. If the histogram is red, open a SELL for both pairs. The beauty of this strategy is that it’s hard to get big draws because when one pair loses, the other usually wins. Profit is created when one pair develops more than the other. If the two pairs you have chosen are correlated (such as EUR/USD and EUR/CAD), you can invert the IMA value in the other pair so that the histogram clearly shows the direction of the stronger trending pair. Multi-Pair EAs make this strategy very easy to implement on autopilot. Protect Correlation Pairs Using IMAs: Open opposite trades on two pairs that are normally correlated like EUR/USD & GBP/USD or two pairs with the same base currency like GBP/USD & GBP/AUD. By comparing their IMA strengths, open a BUY position for the pair with a stronger IMA and open a SELL position for the pair with a weaker IMA. When their IMAs cross in the indicator field, change the direction of the trade in each pair. You can set a profit target of “X” point distance between each IMA. For example, close both trades when their IMA points reach a distance of 75+ points between them. Open new trades the next time their IMA lines cross. You can hide the histogram and 3rd IMA to get an easy-to-read 2-pair display (as shown below). Here’s an example of hedging EUR/USD vs GBP/USD using IMAs… Trade non-correlated pairs for more profit potential: Open a trade with two pairs with inverse correlation, such as EUR/USD vs USD/CHF or GBP/USD vs USD /JPY. By comparing their IMA strengths, open a BUY on the more bullish pair and a SELL on the bearish pair. You are NOT protected in this scenario, but it offers more profit potential because they go in opposite directions. When their IMA indicators cross, reverse the direction of the trade in each pair. Trading this strategy on pairs with inverse correlation gives you more profit potential than hedging correlated pairs, because the more they go in opposite directions, the more you win, often on both pairs, but try to avoid this strategy in volatile market conditions. You can set a profit target of “X” point distance between each IMA, and the distance between them is basically your profit (plus whatever amounts they had before the target was reached). For example, close both trades when their IMAs reach a distance of 100 or 200 points between them and open new trades when their IMAs cross again. The moving average I like to use in this strategy is 2, 100, 100 on the 1 hour chart. Correlation Scaling: See below for examples of scalping EA live trade called “Trades Against the Histogram Following MA4″…
Pearson Correlation Coefficients Between Cryptocurrency Pairs For The…
Purely by accident, I discovered that this indicator is an excellent tool for identifying correlations that really shouldn’t be there. When these correlations occur, there is usually an exaggerated movement in the TradePair, followed by a quick correction in the other direction. Take advantage of these exaggerated moves in the direction of the current trend to gain an additional advantage. A preset file for each scalping strategy indicator is included with your purchase.
Scalping strategy: Trade against countertrend correlations of one or more bars in the direction of the underlying trend. Close the trade with short-term correlations in the direction of the underlying trend (direction of profit). Scalping EA (Trades Against Histogram Following MA4) is the easiest way to trade this strategy, but it can also be done manually with the indicator during peak periods.
GBP/JPY Scalping Strategy: This strategy can be executed on any time frame (larger time frames for larger moves), but in this example you open the GBP/JPY 15 minute chart at SMA 117 (to determine trend direction). Attach the correlation indicator and download the GBPJPY Scalping preset file (included with your purchase). The indicator looks for single candle correlations between GBP/USD and USD/JPY, leading to exaggerated movements in GBP/JPY.
Buy signals: Enter Buys on red histogram bar with CMA strength of -3 to -12 when price is above SMA 117 (enters buys with correlated buybacks). Close your buy with a green 7+ histogram bar
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