Hi friends,
I'm a newbie here and I want to ask a question about correlation.
Before anything, I have to apologize for my poor English,
I have read too many pages and articles to find an answer to my question but nothing was found,
3 months ago a friend of mine told me about use correlation in trading.
I checked a correlation table and monitored the charts. Then I created an EA that used the correlation between GBPJPY and GBPAUD for trading.
THat was good, I earned about 10 percent of my balance a day. This went well for about two months. After this period the EA did not work. It opened two positions and did not close them for one day, one week and the last one for one months. After this long periods I took my profit. Buy in comparison to the days that experts opened and closed 10-15 positions a day with an average profit of 20 dollars, a one months position with 20 dollars is worthless.
I have to say that I used a bit of math to open the positions in the right place. I tried to calculate the moments that two pairs were out of correlation and then in according to the fact that which pair went up and which one went down the EA used the proper long and short position for each pair.
I looked at the charts for finding the why? I found that the experts worked well in a range market .
I surfed the web to find that what other factors I have to consider in the code so that it can be profitable in a trend market. I did not find anything but volatility . I can not understand how to analyse and use this factor in trading. Discuss on the relation between correlation and volatility if you can help me.
The second problem is that many people who worked with correlation in their trading told that using the pairs with opposite correlation is more profitable. And they recommend me for example EURUSD/USDCHF.
Implementing the opposite correlation in my EA needs changes in the core of the code.
Before coding I checked the market.
Here is my findings:
these two pairs are told to have a very high correlation. I have to go long for both pairs or go short for both pairs to take profit. But this is not helping . why? Because although the correlation of these two pairs is high. But this is only in the direction of movement not in the pips. In a 4 hours period in 1h timeframe, if EURUSD goes up 50 pips. The USDCHF goes up but not 50 pips, it goes up only 20 pips. in addition to this, these values are not always the same,the amount of pips varu in the different periods. And sometimes USDCHF goes more pips thanEURUSD in the same period of time.
In conditions like this, if I go long for both pairs. And the EURUSD go down 50 pip sin the opposite direction of my orders and USDCHF goes up 30 pips in the same direction of my positions, How can I take profit from this correlation? They have defferent pip values, I can neutralize the effect of different pip valuess. But I am confused about the differences in pips.
I'm a newbie here and I want to ask a question about correlation.
Before anything, I have to apologize for my poor English,
I have read too many pages and articles to find an answer to my question but nothing was found,
3 months ago a friend of mine told me about use correlation in trading.
I checked a correlation table and monitored the charts. Then I created an EA that used the correlation between GBPJPY and GBPAUD for trading.
THat was good, I earned about 10 percent of my balance a day. This went well for about two months. After this period the EA did not work. It opened two positions and did not close them for one day, one week and the last one for one months. After this long periods I took my profit. Buy in comparison to the days that experts opened and closed 10-15 positions a day with an average profit of 20 dollars, a one months position with 20 dollars is worthless.
I have to say that I used a bit of math to open the positions in the right place. I tried to calculate the moments that two pairs were out of correlation and then in according to the fact that which pair went up and which one went down the EA used the proper long and short position for each pair.
I looked at the charts for finding the why? I found that the experts worked well in a range market .
I surfed the web to find that what other factors I have to consider in the code so that it can be profitable in a trend market. I did not find anything but volatility . I can not understand how to analyse and use this factor in trading. Discuss on the relation between correlation and volatility if you can help me.
The second problem is that many people who worked with correlation in their trading told that using the pairs with opposite correlation is more profitable. And they recommend me for example EURUSD/USDCHF.
Implementing the opposite correlation in my EA needs changes in the core of the code.
Before coding I checked the market.
Here is my findings:
these two pairs are told to have a very high correlation. I have to go long for both pairs or go short for both pairs to take profit. But this is not helping . why? Because although the correlation of these two pairs is high. But this is only in the direction of movement not in the pips. In a 4 hours period in 1h timeframe, if EURUSD goes up 50 pips. The USDCHF goes up but not 50 pips, it goes up only 20 pips. in addition to this, these values are not always the same,the amount of pips varu in the different periods. And sometimes USDCHF goes more pips thanEURUSD in the same period of time.
In conditions like this, if I go long for both pairs. And the EURUSD go down 50 pip sin the opposite direction of my orders and USDCHF goes up 30 pips in the same direction of my positions, How can I take profit from this correlation? They have defferent pip values, I can neutralize the effect of different pip valuess. But I am confused about the differences in pips.
