Forex Correlation Trading Strategies

USD/CHF and EUR/USD have a correlation coefficient of -0.975. This is pretty close to -1.  It means both these pairs move in the opposite direction almost all the time. To be precise 97.5% of the time if USD/CHF moves up, the pair EUR/USD will move down! Download these Forex Scalping and Correlation Trading Cheatsheets FREE. These forex scalping cheatsheets give you the best times for scalping plus five different methods of scalping. Also download the 10X Scalping System and the Hot Time Indicator FREE with these cheatsheets. Unlock the randomness in the forex market with these correlation trading cheatsheets. Master this highly profitable Magic Breakout Forex Strategy by Tim Trush and Julie Lavrine FREE!

If you win on USD/CHF, you will lose on EUR/USD and vice versa. The two trades would effectively cancel each other due to the negative correlation between the two pairs. A savvy investor would go long on USD/CHF and go short on EUR/USD. So you are shorting USD in both the trades and diversifying the USD bearish investment.

USD/CHF is not showing much volatility and moving down on the chart. USD/JPY is also not showing much volatility and not moving down on the chart. This means that the volatility in GBP/USD is solely GBP driven. The move is maybe related to some news in the British economy about Bank of England raising or lowering interest rates or some big companies merging.

Take another example. Suppose you have entered a short EUR/USD trade. You want to know whether the pair will either proceed down towards your profit target or go against you and cause you to exit the trade with a small loss.

Knowledge of currency correlations can tell you if EUR/GBP breaks through the S1 level, you are poised for a profitable trade in this type of a situation, However, you should watch the indicators and exit before taking a big loss if it reverses and heads back to the upside. You might consider trading a basket of all the major currencies as you mature in forex trading.