Correlation Strategy for Forex Trading

What actually correlation strategy means. First we will have a look at what the great Jason Fielder says

“Discover the little known secret that powerful institutional traders use repeatedly to profit
from the fundamental connectivity of different currency pairs…”

I would like to tell you about this report with some rather SHOCKING observations. They may seem unrelated at first, but bear with me because I promise these observations have everything to do with YOU becoming a more confident and profitable Forex trader.

Ok, I hope you’re ready because here comes the first “Shocking Observation”…
Shocking Observation #1:
As temperatures Increase, sales of ice cream Increase as well.
Shocking Observation #2:
As temperatures Decrease, the volume of clothes that people wear Increases.

In real sense there is no shocking observation but a real common sense depicted from above observations. Based on these observations I would like to let you know which all currencies are truly correlated to each other. But before we get into the trading strategies themselves, we first need to take a closer look at correlated pairs so you can see how they work (and more importantly) how we use them to get an unfair advantage over just about every other trader.

1. Eur/Usd and Usd/Chf are mostly and 100% negatively correlated to each other. So when you know Eur/Usd is going to increase you can sell Usd/Chf at current price and count on the profits.

2. Gbp/Usd and Eur/Usd are not 100% but correlated to each other if Eur/Usd moves up it is quite easy to buy Gbp at current price since Gbp increases more than Eur. This is called Positive Correlation. (One case in which both can move in opposite direction is based on News if there is bad news on Gbp it will fall even if Eur is going up)

So all of you can try these strategies and let me know how well you made the profits. Happy Trading.