Hey guys 
usually I don´t contribute to either forum and chat to share my opinions and ideas because I´m not so experienced trader like lot of You and I dont have much time due to my job. But I watch forum and chat almost every day and a market commentary on weekends. Thank You all, it really helps me get better and If I didn´t count last horrible month :-D...I´m making big progress and have more and more winning trades.
Anyway, broker named Admiral Markets have this CORRELATION MATRIX COMPARISON in their version of MT4.
I started this thread to share it with You. I have found it very useful to avoid entering heavy correlated positions. I have got two or three positions opened quite often and sometimes forgeted about correlation which ended of course in loss for all correlated positions if the trades went against me.
This matrix is really helpful to find how much is the new position correlated to already opened one...
Little guide to use it:
- in left column - find a pair in which U have already open position
- in top row - find pair where U are interested to open new position
- negative numbers - means that pairs are ussually going in opposite direction
- positive numbers - pairs are ussually going in the same direction
- range -100 - 0 - +100 means how strong correlation is (-+ 100 is the most correlated in the same/opposite direction)
Take for example EURUSD and USDCHF: -99 means that in last 300 bars on 4H chart (see top of table) these pairs made almost exactly the same moves, only in the opposite direction (minus sign) ...so it is pointless to open positions against each other (going long in both is nonsence), this is just an example...
LONG STORY SHORT: when opening new position, check if it is not too much correlated to already opened one...so you are looking for numbers closest to the "-+0" (green cells) ...this pairs are likely to move independently on each other.
It could be another lead to be better trading morale and to help eliminate going against ourselves.
Hope this helps and let me know what You think about it guys ;-)
Cheers
SCKforex
usually I don´t contribute to either forum and chat to share my opinions and ideas because I´m not so experienced trader like lot of You and I dont have much time due to my job. But I watch forum and chat almost every day and a market commentary on weekends. Thank You all, it really helps me get better and If I didn´t count last horrible month :-D...I´m making big progress and have more and more winning trades.Anyway, broker named Admiral Markets have this CORRELATION MATRIX COMPARISON in their version of MT4.
I started this thread to share it with You. I have found it very useful to avoid entering heavy correlated positions. I have got two or three positions opened quite often and sometimes forgeted about correlation which ended of course in loss for all correlated positions if the trades went against me.
This matrix is really helpful to find how much is the new position correlated to already opened one...
Little guide to use it:
- in left column - find a pair in which U have already open position
- in top row - find pair where U are interested to open new position
- negative numbers - means that pairs are ussually going in opposite direction
- positive numbers - pairs are ussually going in the same direction
- range -100 - 0 - +100 means how strong correlation is (-+ 100 is the most correlated in the same/opposite direction)
Take for example EURUSD and USDCHF: -99 means that in last 300 bars on 4H chart (see top of table) these pairs made almost exactly the same moves, only in the opposite direction (minus sign) ...so it is pointless to open positions against each other (going long in both is nonsence), this is just an example...
LONG STORY SHORT: when opening new position, check if it is not too much correlated to already opened one...so you are looking for numbers closest to the "-+0" (green cells) ...this pairs are likely to move independently on each other.
It could be another lead to be better trading morale and to help eliminate going against ourselves.
Hope this helps and let me know what You think about it guys ;-)
Cheers
SCKforex
