Complex Correlations individual currency
Relevance is something that has always interested me. Today I was talking to a friend who is much smarter than me. He trades stock correlations, with hundreds of tools to correlate and trade deviations. As I looked at his calculations, I couldn't stop myself from thinking that Forex must be relevant because all currencies flow like a river from one side of the world to the other. Buy commodities and invest in stocks 24 hours a day. Central banks must use some constraints to stabilize their currencies intraday. If not, the indicator would not appear so organized and all currency pairs would move like a sine wave.
In this indicator you can see the average of 4 currency pairs to show the index for each currency. In the attached image we see trade setups using the currency with the greatest deviation at a given time. (I watched this indicator and the setup of these trades in real time, as you can see here.)
On the first trade, we see that GBP is heavily oversold, almost the lowest of all pairs. Around the same time, we saw that the Japanese Yen was very overbought. The obvious observation is to assume that GBP/JPY will rise. Remember, each of these currencies is an index of 4 currency pairs. Therefore, we will not see the result of just one pair abandoning one currency. We see a near-real average for each currency, as well as its real-time value for other currencies. Think about this. When we look at a currency pair, one currency can move wildly and quickly. But if we average 4 currency pairs, we see that one currency requires more effort and volume to move and therefore requires more energy to reverse, which means the trend will be more sustainable. Once these indicators start to shift, there's nothing that can stop them. If we choose the indices that deviate the most from each other, we will be in our favor.
The second transaction is also represented as a red vertical line. Purple (Canadian Dollar) is the lowest index in red, while Japanese Yen (Japanese Yen) remains the highest index in pink. This means that the CADJPY will appreciate in order to remain in balance with other currency pairs.
The third trade is aquatic products. Green is dollars. Blue is the Swiss franc. The dollar should weaken and the Swiss franc should strengthen. USD/CHF should fall.
The fourth trade is USDJPY. We see the third blue line on the vertical chart overlapping the green USD and pink JPY. USD/JPY should rise.
In this indicator you can see the average of 4 currency pairs to show the index for each currency. In the attached image we see trade setups using the currency with the greatest deviation at a given time. (I watched this indicator and the setup of these trades in real time, as you can see here.)
On the first trade, we see that GBP is heavily oversold, almost the lowest of all pairs. Around the same time, we saw that the Japanese Yen was very overbought. The obvious observation is to assume that GBP/JPY will rise. Remember, each of these currencies is an index of 4 currency pairs. Therefore, we will not see the result of just one pair abandoning one currency. We see a near-real average for each currency, as well as its real-time value for other currencies. Think about this. When we look at a currency pair, one currency can move wildly and quickly. But if we average 4 currency pairs, we see that one currency requires more effort and volume to move and therefore requires more energy to reverse, which means the trend will be more sustainable. Once these indicators start to shift, there's nothing that can stop them. If we choose the indices that deviate the most from each other, we will be in our favor.
The second transaction is also represented as a red vertical line. Purple (Canadian Dollar) is the lowest index in red, while Japanese Yen (Japanese Yen) remains the highest index in pink. This means that the CADJPY will appreciate in order to remain in balance with other currency pairs.
The third trade is aquatic products. Green is dollars. Blue is the Swiss franc. The dollar should weaken and the Swiss franc should strengthen. USD/CHF should fall.
The fourth trade is USDJPY. We see the third blue line on the vertical chart overlapping the green USD and pink JPY. USD/JPY should rise.
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