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Correlation trading / calculation
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Member Since Nov 15, 2011 61 posts
Jos (liquidityFX)
May 16 2012 at 09:45
Dear traders,
I was wondering how others look at correlation trading and calculation. If you use correlation in either your algorithms or your trading, what period do you use, and what method do you use to calculate correlation? Personally I use a same-timeframe period of 60 bars to calculate correlation percentages. This simply to avoid taking correlated entries in different pairs at the same time. For example, I don't want to go long on EURUSD and GBPUSD at the same time while their correlation is at 99%, because then I'm effectively doubling my exposure/risk. However, if I see an entry for a BUY on GBPUSD while I have a long open on EURUSD, and my correlation is negative, then I'd definitely enter as the negative correlation indicates they act as opposites. Interested in your thoughts and implementations, Jos. When you fall you learn, then you get up and you try again until you master it. |
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Member Since Feb 07, 2011 617 posts
PipGnostic (TheCyclist)
May 16 2012 at 23:18
http://www.forexticket.co.uk/en/tools/01-01-correlation
That formula I believe is this one: http://www.forexticket.co.uk/en/tools/01-01-correlation Show me your pips!! |
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Member Since Nov 15, 2011 61 posts
Jos (liquidityFX)
May 17 2012 at 02:35
hmm, I don't see a formula at the url you specified...could you be more specific PipGnostic? Thanks for the reply btw! :)
When you fall you learn, then you get up and you try again until you master it. |
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Member Since Feb 07, 2011 617 posts
PipGnostic (TheCyclist)
May 17 2012 at 23:37
Sorry liquidity,
Posted the same link twice by the looks of it. http://en.wikipedia.org/wiki/Correlation_and_dependence Show me your pips!! |
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Member Since May 17, 2012 108 posts
pt49
May 19 2012 at 07:01
[i] liquidityFX posted: However, if I see an entry for a BUY on GBPUSD while I have a long open on EURUSD, and my correlation is negative, then I'd definitely enter as the negative correlation indicates they act as opposites. Interested in your thoughts and implementations, Jos.[/i] I'm wondering if you really understand what trading correlated pairs involves? To have a true correlated setup involving the eur and usd you would include the eur/usd, gbpusd and eur/gbp... however to round it out nicely I'd include the jpy/usd, eur/jpy, gbp/jpy ... 6 pairs in which all 4 currency's are included a total of 3 times. Some others... aud/usd, usd/cad, aud/cad, cad/jpy, aud/jpy, usd/jpy Another... gbp/usd, aud/usd, gbp/aud, chf/usd, gbp/chf, aud/chf |
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Member Since Nov 15, 2011 61 posts
Jos (liquidityFX)
May 26 2012 at 15:09
hi pt49,
yes, I know one can also actually trade by correlation, that's also a very interesting and effective method. However, I currently only use it to avoid the additonal risk exposure...perhaps I can code a few correlation rules in at some point. Only issue with that is the inability to backtest it :( When you fall you learn, then you get up and you try again until you master it. |
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Member Since Dec 15, 2010 396 posts
www.Professor53.com (Professor53)
May 27 2012 at 02:01
Im looking for negative correlation tables. Any one know of one I can drop into my MT4 platform for live updates?
Click on my Name to see My Live Charts and Bio. |
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