Like synchronized swimmers, some currency pairs move in tandem with each other. And like magnets of the same poles that touch, other currency pairs move in opposite directions. When you are simultaneously trading multiple currency pairs in your trading account, the most important thing is to make sure you’re aware of your RISK EXPOSURE You might believe that…
As you’ve read, correlations will shift and change over time. So keeping on top of current coefficient strengths and direction becomes even more important. Lucky for you, currency correlations can be calculated in the comfort of your own home, just you and your most favorite spreadsheet application. For our explanation, we’re using Microsoft Excel, but any…
The forex market is like a schizophrenic patient suffering from bipolar disorder who constantly eats chocolates, experiences extreme sugar highs, and has volatile mood swings all day long. We’re not even exaggerating. Although currency correlations between currency pairs can be strong or weak for days, weeks, months, or even years, they do eventually change and can change when…
Currency correlation tells us whether two currency pairs move in the same, opposite, or totally random direction, over some period of time. When trading currencies, it’s important to remember that since currencies are traded in pairs, that no single currency pair is ever totally isolated. Correlation is computed into what is known as the correlation coefficient,…
When you are simultaneously trading multiple currency pairs in your trading account, always make sure you’re aware of your RISK EXPOSURE. For example, on most occasions, trading AUD/USD and NZD/USD are essentially like having two identical trades open because they usually have a positive correlation. You might believe that you’re spreading or diversifying your risk by trading in different pairs,…
Are you a visual learner? Do you like looking at sexy women or hunky men? If so, perfect! Take a look at the following tables. Each table shows the relationship between each main currency pair (in orange) and other currency pairs (in white) over various time frames. Remember, currency correlation is presented in decimal format by a…
Have you ever noticed that when a certain currency pair rises, another currency pair falls? Or how about when that same currency pair falls, another currency pair seems to copy it and falls also? If the answer is “yes,” you’ve just witnessed currency correlation in action! If you answered “no,” you need to stop doing less important…