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Today I will talk about inter-currency-correlation.
We are only interested in trading GBPUSD EURUSD USDJPY GBPJPY & ERJPY with this strategy and there are certain reasons for this.
The main reason is that an added advantage of trading the Yen pairs for example is that we can get a pretty good idea of how powerful the moves will be.
On the other hand we can guage overall dollar strength/weakness by looking at the 3 USD pairs, gbpUSD eurUSD USDjpy.
Why do we need to look at USD pairs when trading Yen?
Well, USDJPY and GBPUSD are the driving force behind GBPJPY and USDJPY and EURUSD are the driving force behind EURJPY.
Imagine it like a game of football/soccer.
All these currencies are benchmarked against the dollar. Perhaps not the correct term but I like to see GBPUSD as a general benchmark of GBP strength. I like to see EURUSD as a general benchmark of EUR strength and so on.
So, back to footy, if pound can beat dollar (GBPUSD up) and if dollar can beat yen (USDJPY up) then on the form-book, what should pound do to yen??
Very simply, pound should annihilate yen (GBPJPY moves up aggressively)
Take a look at the screen shot below.
It clearly demonstrates exactly what I am saying, so the secret here when trading Yen pairs it to monitor the two pairs that make-up the particular yen pair.
If USDJPY is flatlining and GBPUSD moves up then can GBPJPY move up still?
Absolutely yes it can. Not as aggressively and more likely to be a sterling move than a yen move, but we'll come onto that later.
Can EURJPY move up if EURUSD is moving up aggressively and USDJPY is moving down aggressively?
Usually no, due to a tug of war beween euro strength and yen strength.
That gives you the foundations of how currency correlation works.
Learn it well, backtest it and remember it. It's one of the most valuable lesson you'll learn.
Next we'll cover the pairs to watch.
I will incorperate EURGBP into this too just so my charts tile nicely.
I will also give you an idea of what to loook out for before moving on to moving averages and how best to use these to your advantage.
__________________ I'm now sending trading notes out twice a day with videos too. Have a look HERE.
There's one set at 6:30 UK time for London and one at 12:00 for U.S session, plus I will send a summary video after each session
Hi Zak,
Thanks for all the great info!
I have been trying to teach myself your method and I really think it is necessary to put together a concise set of rules for each type of trade strategy - breakouts, reversals, box plays and continuations.
Then we can refer to the rules when we go through your examples and detailed explanations.
I think it will cause traders much stress if they have to read through pages while testing live trades, you need something concrete to work with.
I would be happy to help but I am struggling to work all the rules out myself.
I thought it could look something like this on a word or excel doc at the start of the new thread that can be updated:
TYPE OF TRADE Breakouts
Entry conditions
Trade Direction:
1) Determine which pair to trade by looking at the direction of the combination pair??
2) ?
Pivot Levels:
1) ?
2) ?
CCI's:
On 15 min chart
1) Trade with the direction of the 336cci trend
2) ?
Moving averages:
On 15 min chart
1) if 7ma is < 20ma is < 80ma < 320ma and are close together?
2) ?
Please put your indicators and templates in the first post of the thread.
Just to simplify things
Hi Joe,
Thanks for your contributions to the thread.
I have had problems in the past of some undesirables trying to sell my templates on Ebay (as mentioned in previous thread)
I have also had 3 laptops stolen in the past and have found the strategy popping up in other locations (again for sale)
I don't even keep it on my PC anymore.
Email me and I'll send you a link to a live trade room where you can pick it up
Cheers
__________________ I'm now sending trading notes out twice a day with videos too. Have a look HERE.
There's one set at 6:30 UK time for London and one at 12:00 for U.S session, plus I will send a summary video after each session
Todays lesson is all about moving averages and how best to get full potential of your moving averages.
However, I have some minor difficulies with my charts so cannot display nor take a snap shot at this time.
I will endeavour to get the lesson up today but if not then 1st thing tomorrow.
Sorry for the delay.
__________________ I'm now sending trading notes out twice a day with videos too. Have a look HERE.
There's one set at 6:30 UK time for London and one at 12:00 for U.S session, plus I will send a summary video after each session
Enjoying your new thread Zak. Much appreciated also. Requested your new template BUT is it the template in the Schools SHARED FOLDER. If so I am unable to open it - it saved to desktop with an 'Acrobat'/pdf logo but says Unable to open.
I have created a simple indicator that checks that all the moving averages are stacked up in the right order by indicating an arrow.Then we can easily see if there were any potential trades based on the ma setup as you scroll back in history for backtesting. You can attach it to the 5 min chart to check for the setup.
For long trades it checks if:
20ema is above 50sma
20ema is above 60ema
240ema is above 600sma
60ema is above 600sma
Let me know what you think and if the settings need to be changed.
Morning all. I hope you are well.
Thank you for your patience.
Here's the lesson about moving averages.
Moving averages are a very important part of my trading strategy.
In fact, they play a big part in most strategies and have done for many years.
Let's assume we are using a 20 moving average. The current plotted price of the 20 is the last 20 candles added up and divided by 20. SIMPLE ! hence the name, simple moving average.
We also use exponential which add more weight to the most recent candles and ignores - to a certain extent - the least recent of the period.
We use a 20 and 50 moving average and wait for crossovers and squeezes to guage the possible next direction of a move.
On a 60m chart we also use a 5ema which is our 15m 20ema and when all 3 are stacked in the correct way and in close proximity this indicates a good move could be round the corner.
Look at the two snapshots below.
The 1st is demonstrating the 5/20/50 stacked in correct order, one for long and one for short on a 60m chart. (please ignore trianglular chart patter)
The 2nd shows a crossover on a 5m chart, which usually indicates a reversal. Once again, we are looking for the correct order ma's stacked neatly, 4/20/60
Back test and look for these and you will become a better trader already if you didn't know about this before.
Always look for a minimum of 3 moving averages stacked neatly in correct order.
Whether this is 4/20/60 on 5m chart or 5/20/50 on the 60m chart. These will become your most reliable friends once you master how they work!
I will do some more work on this later but for now just try to identify these on your own charts so you get a deeper understanding.
Next I will introduce some more averages.
__________________ I'm now sending trading notes out twice a day with videos too. Have a look HERE.
There's one set at 6:30 UK time for London and one at 12:00 for U.S session, plus I will send a summary video after each session
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