CURRENCY CORRELATION EXPLAINED

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CURRENCY CORRELATIONEXPLAINED

• Reference
• https//www.platinumtradingacademy.com/

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Index

• Currency Correlation Explained
• What is Currency Correlation?

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Currency Correlation Explained

• Have you ever noticed that when a certain
  currency pair rises, another currency pair falls?
  Or how about when that same currency pair falls,
  another currency pair seems to copy it and fall
  also?
• If the answer is Yes you have just witnessed
  currency correlation in action!
•  

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Currency Correlation

• If you answered No, do not worry, because we
  are going to start with the basics and break it
  down.
• Currency Correlation Correlation a relationship
  between two things.

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What Is Currency Correlation?

• In the financial world, correlation is a
  statistical measure of how two securities move in
  relation to each other.
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• Currency Correlation then tells us whether two
  currency pairs move in the same, opposite, or
  totally random direction, over some period of
  time.
• When trading currencies, it is important to
  remember that since currencies are traded in
  pairs, that no single currency pair is ever
  totally isolated.

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• Unless you plan on trading just one pair at a
  time, it is crucial that you understand how
  different currency pairs move in relation to each
  other.
• Especially if you are not familiar with how
  currency correlations can affect the amount of
  risk you are exposing your trading account to.
• If you dont know what the heck you are doing
  when trading multiple pairs simultaneously in
  your trading account, you can get KILLED!
  Murdered! Destroyed! I cant stress this enough.

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• In this lesson, you will learn what Currency
  Correlation is and how to use it to help you
  become a smarter trader and make more responsible
  risk management decisions.
• Correlation is computed into what is known as the
  correlation coefficient, which ranges between -1
  and 1.

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• Perfect positive correlation (a correlation
  coefficient of 1) implies that the two currency
  pairs will move in the same direction 100 of the
  time.
• Perfect negative correlation (a correlation
  coefficient of -1) means that the two currency
  pairs will move in the opposite direction 100 of
  the time.
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• If the correlation is 0, the movements between
  two currency pairs is said to have ZERO or NO
  correlation, they are completely independent and
  random from each other.
• We have no idea how one pair will move in
  relation to the other.

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Thank You