CFD Trading: Correlation between Currency Pairs Part 2

In the post CFD Trading: Correlation between Currency Pairs is written about the correlation between the currency pairs.

In this post is illustrated the correlation between the EURUSD and the USDCHF; the correlation between the EURUSD and the USDJYP is also illustrated.

Correlation between EUR/USD and USD/CHF

The chart illustrates the EURUSD and the USDCHF; the EURUSD starts to fall around 3 o’clock and the USDCHF starts to rise around 3 o’clock; the 4, 9 and 18 period moving averages are also crossing each other around 3 o’clock; they are reverse; at the EURUSD chart are the 18 period line above the 4 and 9 period lines; at the USDCHF chart are the 18 period line below the 4 and 9 period lines.

Correlation between EUR/USD and USD/JYP

The chart illustrates the EURUSD and the USDJYP; the EURUSD starts to fall around 3 o’clock and the USDJYP starts to rise around 3 o’clock; the 4, 9 and 18 period moving averages are also crossing each other around 3 o’clock; they are reverse; at the EURUSD chart are the 18 period line above the 4 and 9 period lines; at the USDJYP chart are the 18 period line below the 4 and 9 period lines. 

The charts are illustrative but the print is from a real chart; the correlation between currency pairs is stronger or weaker over a time period. 

CFD Trading: Trading with the 4, 9 and 18 Period Simple Moving Average

The simple moving average is described in the post CFD Trading: The Simple Moving Average.

In this post is described how to trade with the 4, 9 and 18 period simple moving average and how to read the signals they provide.

The 4, 9 and 18 Period Simple Moving Average

The 4, 9 and 18 period moving average is a common used.

When the 4 and 9 period moving average crosses each other is the first signal given that a change is in the price development is started. The change is confirmed when the 4 and 9 moving average is above the 18 period moving average.

An example

In the image is the AUDUSD price chart; in the chart are the 3 simple moving averages; the 4 period is the blue line; the 9 period is the lime line and the 18 period is the red line.  

The example illustrates how the price line starts to change from and up going development to and down going development as the three simple moving averages is crossing each other as described in the beginning of this post.  

The same price line is in the image below illustrated with price bars.

Trading with the ADX/DMI, MACD/DMI, Bollinger Bands and Stochastic

In earlier posts is the ADX/DMI, MACD/DMI, Bollinger Bands and stochastic illustrated.

Purpose of this post

In this post is the purpose to analyzing the EUR/USD with the four indicators. The purpose is to illustrate the thought in using the indicators.

How to analysis with the ADX/DMI, MACD/DMI, Bollinger Bands and Stochastic?

The chart is the EUR/USD and illustrates the price chart in the morning: from 7:15 until 9:15 is the price falling; at 9:15 is the price starting to increase.

Bollinger Bands an the stochastic

Between 9:15 and 9:30 is an indication that the price is starting to move in an upper direction; the lower Bollinger band and the price line are crossing each other and the stochastic is indicating that the EUR/USD is oversold.

Between 10:30 and 10:45 is the upper band crossing the price line and the stochastic is indicating that the EUR/USD is overbought.

ADX/DMI: How strong is the trend?

Between 9:15 and 9:50 is the red line above the green line; it indicates that the trend is negative.

At 9:50 is the green line crossing the red line; it indicates that the trend is positive and the price is increasing.

MACD/DMI: How likely is the trend?

Between 9:15 and 9:50 is the blue line above the green line; it indicates that the trend is unlikely. The histogram confirms the indication.

At 9:50 is the green line crossing the blue line; it indicates that the trend is likely and the price is increasing. The histogram confirms the indication.

When to buy?

The Bollinger bands and the stochastic indicate that the buy signal is between 9:15 and 9:30 as the lower band cross the price line and the stochastic indicates that the EUR/USD is oversold.

The ADX/DMI and MACD/DMI indicates that the buy signal is at 9:50.

The entry in the market would be at 9:50 as the ADX/DMI and MACD/DMI indicate a likely trend.

At the same time period is the stochastic in an overbought zone; which would have been a signal that the price soon will start to fall. It would have been true if only the Bollinger Bands and the Stochastic was used as indicators.

In this analysis is also the ADX/DMI and MACD/DMI used; they confirm a likely up going trend.

When to sell?

At 10:00 are the upper band and the price line crossing each other; the price is still increasing and the trend is likely.

At 10:40 are the price line and the upper band again crossing each other and the trend is less likely. The stochastic is also indicating that the price is decreasing.

The analysis indicates that the sell signal is at 10:40.

Please note

Please note that this post is only illustrative and the purpose is to give insight into how to trade with indicators.  

CFD Trading: Correlation between Currency Pairs

One of the problems as a trader and as a new trader is to discover how the market works. In previous posts are illustrated some of the common chart patterns and some of the common indicators.

In this post is the mind on the currency pairs. The idea is to illustrate the correlation between the currency pairs. The posts are only illustrative and only the correlation between the currencies will be illustrated.

The idea is to get started as a trader or move forward in the thought as a trader. Please leave a comment about correlation between currency pairs if you want to share some of them.

Social investment network

Just before I write about the currency pairs I will place a link to the social trading platform called eToro Social Investment Network; it is a platform where traders socialize about trading CFD.

EUR/USD and USD/CHF

The EUR/USD and the USD/CHF are often a mirror; the currency pairs move in the opposite direction. Is the EUR/USD bullish is the USD/CHF bearish and vice versa.

It is a rule which means that they can move in the same direction as well.

EUR/USD and EUR/GPB

The EUR/USD and EUR/GBP move most of the trading time in the same direction but could also move in reverse direction.

USD/CHF and USD/JPY

USD/CHF and USD/JYP are also currency pairs that often move in the same direction most of the trading time.    

It is a rule which means that they can move in the opposite direction as well.

An example:  How to use the information about the correlation between the currency pairs?

Watch the EUR/USD chart pattern; is the pattern bearish or bullish? Is the pattern bearish? Watch the USD/CHF chart or the USD/JPY chart for an entry in the market.

Please note

This post has illustrated some common correlation between currency pairs and is only inspiration to get started as a trader or move forward in the thought as a trader.

The correlation between the currency pairs can be stronger or weaker over time.