What is Currency Correlation and How Do You Use It?

Metatrader correlation design

The indicator will then only use the price action up until the start time, without looking into the future at dseign subsequently happened, and will draw its support and resistance calculation correlatiion from the line. You can use this either to test the indicator, seeing how reliable it would have been in the past, or as a way of telling the indicator to ignore recent price activity which you may regard as abnormal and irrelevant. Add the strategy or the indicator. You can also check the visual mode. Renko Renko bricks are a chart type that only measure price movement.

The brick will only be displayed when the price makes a desired movement in pips in this case The blue bricks appear only if the price has moved up by ten pips. On the contrary, the red bricks will show only if the price has moved down by the same specified amount — ten pips.

The dotted cirrelation lines right side show where the price would have to move in order for the next bricks to show. Mini Chart Indicator This function enables multiple correlwtion to be viewed coreelation your current chart. You could do this to watch different timeframes of the same market. You can also analyse different charting techniques like Renko Metattrader. Symbol Metatradee Indicator Should you want to assess the market situation for a wider range of instruments, then you can improve trading decisions by seeing the daily change, range and multiple indicators on every timeframe using the symbol information indicator.

Magnifier The magnifier works by dragging and dropping the window in a selected area. It enables you to view a chart on a lower time frame. Chart-in-Chart indicator With this indicator you can display two different charts on the same timeframe. Additional functions will enable you to add indicators and analyse two different markets simultaneously. In situations when two sets of data are strongly moving together, then there is a high correlation. Pairs moving in the same direction have a positive correlation, whilst if moving in the opposite direction, then they have a negative correlation.

A perfect correlation occurs when pairs move in the same direction and at the same rate, which is extremely rare. There are also many shades in between perfect, negative, and positive correlations.

Crrelation in Correlation Changes in correlation occur regularly which is why the correlation calculation is important. Global economic factors are dynamic and changing regularly and therefore a short-term correlation might contrast to a long-term correlation projection. Get Free Month of ecs. When price dips back below the Maximum Strength, it will generate another entry signal. For example, you may choose a trading window of pips above the zero line and it will generate a buy signal when the histogram enters this window and exit signal when spikes above 50 on the scale. For sell signals, set a window of to and it will generate sell signals when the Histogram enters this strength window and an exit signal when the histogram drops below on the scale, acting like a profit target that follows the trend and exits on spikes of profit.

Trade Only the Strongest Pair: To reduce your exposure and maximize your ROI, you may choose to trade only the strongest pair in the direction of the histogram the average trend. IMAs are the colored indicators representing each correlation pair. If you are only interested in trading the biggest Metatrader correlation design strongest moves, you can trade only when all 3 pairs are moving in correlation MA1 is on the same side of MA2 and MA3 on all 3 pairs. Constant Hedge: The histogram will show the direction of the stronger trending pair.

If the histogram is red, open a SELL on both pairs. The beauty of this strategy is that it is difficult to get large draw-downs in choppy conditions because when one pair loses, the other usually wins. Your profit will result when one pair trends more than the other. The coming EA will make this strategy very easy to execute on auto-pilot. When their IMAs cross in the indicator field, change your trade direction on each pair. You may set a profit target of "X" pips distance between each of their IMAs. The nice thing about hedging correlating pairs using the IMAs is that the correlating IMAs tend to follow each other creating fewer cross-overs reversals and tends to hold the hedge longer than using the histogram, which would just show the average trend of the 2 pairs so both hedging strategies would produce very different results.

You will NOT be hedged in this scenario but it offers more profit potential as they trend in opposite directions. When their IMA indicators cross, change your trade direction on each pair. Trading this strategy on pairs with reverse correlation gives you wide spreads between each pair's IMA in the indicator field when they move in opposite directions. You may set a profit target of "X" pips distance between each of their IMAs and the spread between them is essentially your profit plus any amount they trended before hitting that target. For example, close both trades when their IMAs reach pips distance between them and open new trades when their IMAs cross again or come within pips of touching.

The Moving Average settings I like to use for this strategy is 7,on a min chart or go for larger profits using MAs 3,on a min chart or use a higher time frame to stay in trends longer. I will soon be releasing an EA that will automate this strategy.

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Correlation Scalping: See below for examples of live trading by the scalping EA soon to be released I will be adding examples of each strategy above so please check back soon! When these correlations do occur, there is usually an exaggerated move on the TradePair followed by a quick correction the other direction. Simply exploit these exaggerated moves in the direction of the current trend for an additional edge. The indicator preset file for each scalping strategy is included in your purchase. Scalping Strategy: Trade against singe-bar counter-trend correlations in the direction of the underlying trend.

Close the trade on short-term correlations in the direction of the underlying trend. The Scalping EA coming soon will be the easiest way to trade this strategy but it could also be done manually with the indicator during peak trading hours. Buy Signals: Sell signals: Sell on a green histogram bar with a strength of 3 to 12 Sells against a bullish correlation. Close the sell on a bearish correlation with a minimum CMA strength of -7 or a CMA drop of or greater on the CMA scale another chance to get out with a nice profit even without correlation.

Profit Target: Set a profit target of 30 - 60 pips, depending on current volatility. Stop Loss: Set a 30 pip hard stop. Trailing Stops: Usually, you will get an exit signal before your profit target is hit but sometimes a valid exit signal doesn't come in a timely manner when volatility drops so the trailing stops give you another chance to get out of the trade with a profit or a small loss. This strategy works best in strong trends and big moves following major economic announcements.

Alarm Manager

It has proved too inconsistent to use long term through choppy market conditions so it should only be activated when large moves or trends are anticipated. Here's some live trades using the EA on a test account Dec I encourage you to experiment with different settings and time frames and use the indicator to manually backtest different settings. How the Indicator Works Here's the primary parts that make up the indicator: The indicator automatically applies the same moving averages on the same time frame on each of the 3 correlation pairs or just 2 pairs if you choose then measures the distance between the moving averages to create an IMA Independent Moving Average for EACH of the 3 correlation pairs.

Having 3 points to measure from 3 moving averages gives you a lot of flexibility. In the indicator settings, these moving averages are named: For a simple trend-following strategy, I normally leave MA2 and MA3 as equal values so I can clearly see and understand the average trend direction and strength. Each of the 3 colored IMAs represent a different correlation pair and shows the trend strength and direction of that pair.

Each IMA is plotted as a separate line in the indicator field along Metaatrader bottom of chart of the pair correlatuon trading. With all 3 IMAs in one location, you can easily forrelation how each currency pair is moving relative to each other. You have the option to display the IMAs or hide them. The CMA is the green or red moving average in the indicator field and it is the average of all 3 currency pairs, or just 2 pairs if you choose to exclude the TradePair. The CMA is green above the zero line and turns red below the zero line during correlation.

The histogram will only appear when the CMA value is within these specified ranges on each side of the zero line. UpperLevel is the scale above zero and LowerLevel is the scale below zero and you must use negative numbers for the LowerLevel.

Research & Tools

The Minimum Strength helps filter out weak false signals during choppy low-volatility market conditions. When the Histogram appears, you ge an Entry Arrow on the chart. When the histogram stops or changes color, you get an Exit Arrow on the chart, but this would be the simplest use of this indicator. There are many more strategies it can be used for, as you will see in the coming EAs that auto-trade off of this indicator. The Histogram and CMA will always have the same value. The Histogram turns green above the zero line and red below the zero line.

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Trade Arrows: The Trade Entry arrows appear in the candlestick area of Metatradfr chart when the Histogram appears and Exit Stars appear when the Histogram stops. You have the option to reverse the trade arrow direction and also hide the arrows if you don't want them. Here are some more examples showing each part of the indicator described above This is the currency pair your indicator should be attached to.

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