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Correlation

Forex Pairs Correlation: Avoiding Contradictory TradesHello, in this post I will be talking about Forex Pair Correlations. A problem new traders frequently find themselves in is opening/having positions that are contradictory. I will elaborate on that but for now, let's understand first what correlation is. A correlation is a statistical relationship which means that when A moves a certain way, B will move a certain way. The stronger the correlation, the more likely that the price will move along with each other/opposite of each other. There are 2 types of correlation; Positive correlation which is A and B will move together, and negative correlation which is A and B will move opposite of each other. Now that we understand what correlations are, I can address the problem that new traders have. Contradictory positions: For example, having a long position in GPBUSD and a short position in GBPJPY is contradictory since these 2 pair has a 87.5% correlation which means 87.5% of the time, it will move together. As you can see in the graph, when the GPBUSD (Blue) moves up, GBPJPY (Orange) moves up and vice versa. This applies to moving down as well. GBPUSD (Blue) and AUDNZD (Yellow) is an example of a negative correlation (-69.7%). My recommendation to avoid having these problems is if you do not yet have an understanding of which pairs will move up and down together, check this website: www.myfxbook.com This website will show you every pair and its correlation. Of course, there are some exceptions to when contradictory trades are fine like when hedging against each other or when 1 trade is short-term/intraday/scalping, looking at the smaller trends and the other one is swing trading/position trading looking at the bigger trend. However, I do not recommend new traders to hold/open contradictory trades until they have some confidence in what they are doing. Main points: 1. A correlation is a statistical relationship which means that when A moves a certain way, B will move a certain way. 2. Positive relationship = Pairs will move the same way. 3. Negative relationship = Pairs will move the opposite way. 4. New traders should avoid contradictory trades. 5. Website for checking correlations: www.myfxbook.com Please give a thumbs up if you agree with the educational post and if there are any questions, feel free to comment down below.
Education
by AresFx
2
Ascending Triangle breakout for GLXY?GLXY appears to have broken flush to the upside out of an Ascending Triangle, if there's a retracement in the near future it would be ideal if the horizontal blue line of the pattern turns into support. On the KST there's a noticeable bullish cross. Higher highs & higher lows on the RSI. GLXY is outperforming Bitcoin on a 1-year time frame by over 300%, but notice the close correlation on this chart between BTC & GLXY, BTC is the yellow line.
TSX:GLXY
by ScotianBot
AUDNZD SUPPORTS S&P500Hello traders! AUDNZD and S&P500 are in positive correlation, not tick by tick, but mostly they are moving together. Even when we see a deviation, they sooner or later somehow catch up each other. Well, after recent mess up and down on S&P500, seems like it remains bullish, it's just in consolidation mode before the uptrend resumes and it can be easily supportive by AUDNZD currency pair, where we see a quite clear three-wave corrective decline within uptrend. It's mainly because of strong Australian Dollar in risk-on sentiment. So, with current strong bounce on both, AUDNZD and S&P500, seems like we will probably see them back to highs in the upcoming days/weeks, especially if AUDNZD starts breaking above channel resistance line. Generally speaking, stocks remain bullish, so as Aussie in risk-on sentiment, we just have to be aware of short-term, intraday corrective pullback early next week. Trade smart! If you like what we do, then please like and share our idea. Disclosure: Please be informed that information we provide is NOT a trading recommendation or investment advice. All of our work is for educational purposes only.
by ew-forecast
Is Bitcoin Decoupling From Stocks?If we learned anything in March, it’s that Bitcoin can be susceptible to selloffs in the broader market. However it’s been bucking that tide recently. This chart compares BTCUSD with the S&P 500. Notice how it’s advanced since October 12, while SPX has skidded lower over the same period. This pushed the 10-day correlation down to -0.7. That’s the lowest since late August, but even that moment wasn’t very comparable because stocks were climbing and volatility was calm. The correlation ended simply because BTCUSD paused as the broader market rose. Most other correlation breakdowns historically are similar: BTCUSD fell or stalled as stocks rallied. The current price action is much less common: BTCUSD is actually going up as SPX goes down. It follows a potentially bullish supply/demand dynamic. Rising coronavirus cases and a lack of stimulus increase the odds of more central-bank easing. (Just this week the ECB took a dovish turn.) Meanwhile, institutional adoption has accelerated. BTCUSD continues to consolidate at its highest levels since the bear-market peak in June 2019. Interestingly, the current range closely matches the shooting-star tail from June 26, 2019. (The space between the high and close, shaded on this chart.) Unlike before, BTCUSD is holding this price range and apparently squeezing into a range, with an outside day on Wednesday and an inside candle yesterday. So far, it seems to indicate the leading crypto is holding up much better than the stock market. This might not remain the case for long, but it is now. TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
B
by TradeStation
3
Strange Correlation Between USD and African RandThe correlation between the African Rand and USD ( FX:USDZAR ) is super strange. During both the 2008 and 2016 crisis, we saw the African Rand pump an average of about 50%. Coming into 2020 we see the rand up about 35% with an expected 15-20% move up inbound. Do not trade this, this is my personal take on this and well... I definitely wouldn't take a 19 year old serious if I were you. Drop a comment and share your thoughts! Thanks DotcomJack
Long
by DotcomJack
1
Has ETH Allowed Us to Predict The Future of DOT?My Fellow Crypto Traders, Appreciate you taking the time to view my analysis in which I hope you may find it beneficial. Please be sure to “LIKE” if you indeed find my analysis useful and/or find my analysis intriguing. Also, I’m new to charting game and the crypto/stock space. So, if you have any constructive criticism or tips, please share. Cheers & Happy Trading! -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ANALYSIS: DOT appears to be developing an inverted "head & shoulders" formation in which we recently seen in ETH. During ETH "head & shoulders" formation (minor), ETH seen positive price action after a few support re-test at the neckline, which was right after the 9EMA cross. Therefore, as the 9EMA has recently crossed both the 20EMA and the 50EMA for DOT, we may see a 9EMA bounce off the 20EMA for further positive continuation to the upside.
Long
by AB_Trading-Intelligence
LET'S SHORT EURUSDWe are going to short EURUSD based on: 1) EMA 200 that works like a resistance 2) The price is in a critical area that used to be support and then resistance 3) Price action on lower timeframe (indecision candlesticks) 4)Correlation - DXY chart is gaining power, that mean USD is getting stronger, as a result EURUSD is going down ! ! ! ENTRY: 1.1750 STOP LOSS: 1.1800 (50 pips) TP1: 1.1700 (50 pips 1 : 1) TP2: 1.1675 (75 pips 1 : 1,5) TP3: 1.1650 (100 pips 1 : 2) *If the market breaks the area and go to test the higher high ( next critical area ) watch it for a re-entry. ** Watch for todays PMI's & tomorrow NFP HAPPY PROFITS ! ! !
Short
by CYPRUS_MAFIA
3
9/25/2020 BITCOIN POSSIBLE TRIANGULAR PATTERN FORMATIONBitcoin might be forming a triangle or possible double top pattern, huge breakout is coming by early october. But since it is very correlated with the stock market, we have to monitor closely on both market structure to identify the breakout direction, if bitcoin breaks and close below the 20 Week MA (140 Days) then it very likely could fill the CME Gap at 9.6k or even heading towards the 50 Week MA (350 Days). As election is coming and uncertainty arised, it's like a natural reaction from investors for being fearful during this period of mid phase pandemic.
BYBIT:BTCUSD.P
by JeremyLight
BTC been correlating with Gold more than SPX over past weeks!Just a quick thing to note. Presently the treat of government shutdown in the US and the looming election is creating uncertainty in the market, leading to mass liquidation back into USD -- as irrational as that may be considering the present debasement of the USD (and of other currencies around the world, including the Yuan, and the Pound, etc). See previous BTC analysis which considered the bearish case in an update just before the dump: Key thing to note, as posted in an update of the analysis above: "If 10400 USD VPVR level fails to hold, expecting price to drop to the white long-term resistance-turned-support level presently at 9600 USD to finally close the CME gap (yet again)."
BITSTAMP:BTCUSD
by cybernetwork
4