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Correlation Trader

The Correlation Trader shows the correlation between two currency pairs over a configurable timeframe on a scale from -100 to +100. Strong positive correlation near +100 means the pairs move in the same direction, while strong negative correlation near -100 means they move in opposite directions. The tool helps traders identify pairs with strong or weak correlation to open positions that minimize correlation risk. Users can view paired price charts and correlation values colored by strength, change the symbol pair, and place new or closing positions from within the tool.

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Thato Aphane
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80 views

Correlation Trader

The Correlation Trader shows the correlation between two currency pairs over a configurable timeframe on a scale from -100 to +100. Strong positive correlation near +100 means the pairs move in the same direction, while strong negative correlation near -100 means they move in opposite directions. The tool helps traders identify pairs with strong or weak correlation to open positions that minimize correlation risk. Users can view paired price charts and correlation values colored by strength, change the symbol pair, and place new or closing positions from within the tool.

Uploaded by

Thato Aphane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 6

v

CORRELATION
TRADER

IC Markets
CORRELATION TRADER

1. About correlation ............................................................................................................... 2


2. Using the Correlation Trader ............................................................................................. 3
2.1 Price charts .................................................................................................................. 3
2.2 Correlation ................................................................................................................... 3
2.2.1 Correlation values ................................................................................................ 3
2.2.2 Correlation colors................................................................................................. 4
2.3 Changing the symbol selection ................................................................................... 4
2.4 Opening and closing positions .................................................................................... 4

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CORRELATION TRADER

1. About correlation
The Correlation Trader shows the correlation between symbols over a configurable
timeframe, e.g. recent H1 bars.

Correlation is measured on a scale from -100 to +100:

 +100 means that the price movements in symbol A and B have been identical
(“positive correlation”).
 -100 means that the price movements in symbol A and B have been exactly opposite:
A went up when B went down, and vice versa (“negative correlation”).
 0 means that the symbols have moved independently.

Correlation can have a major effect on your trading risk. For example the following charts
show H1 EURUSD and USDCHF over the same time period:

These symbols had very strong negative correlation (about -95). If you were long EURUSD
and short USDCHF over this period, or vice versa, then you would have seen very similar
profits on both positions. In effect, you did not have two positions: you only really had one
position. (If you were long both symbols, or short both symbols, then you probably had a
profit on one and a matching loss on the other.)

It is generally advisable to minimise the correlation between your open positions. Otherwise,
you are either trading the same price action twice over, or you have two positions which
cancel each other out.

The Correlation Trader helps you to identify symbols with strong or weak correlation, and to
trade emerging differences in the correlation.

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CORRELATION TRADER

2. Using the Correlation Trader


2.1 Price charts
The Correlation Trader shows recent price charts for two symbols side by side (and can be
used simply as a way of displaying two linked price charts):

2.2 Correlation
The bar in the middle lets you change the timeframe for the charts. It also shows the
following:

 Recent correlation between the two symbols over the selected timeframe.
 Any open position in each symbol, and its profitability

2.2.1 Correlation values

The gauge shows the correlation on scale of 0 to ± 100. It makes little difference whether
values are positive or negative (e.g. +90 or -90), and the meaning depends on whether you are
long or short each symbol. For example:

 +90. If you are long both symbols, or short both symbols, then you will tend to see
identical profits or losses on both positions. If you are long one symbol and short the
other, then you will tend to have a matching profit and loss.

Page 3 of 5
CORRELATION TRADER
 -90. If you are long both symbols, or short both symbols, then you will tend to have a
matching profit and loss. If you are long one symbol and short the other, then you will
tend to see identical profits or losses on both positions.

2.2.2 Correlation colors

The color of the gauge depends on the strength of the correlation:

Green. No correlation (0 to ± 25)

Blue. Weak correlation. (±25 to ±50)

Orange. Medium correlation. (±50 to ±75)

Red. Strong correlation. (±75 to ±100)

2.3 Changing the symbol selection


You can change a symbols by clicking on its name. The label is replaced with an editable box
where you can type in a new symbol name, with auto-complete.

2.4 Opening and closing positions


[Please note: the order tab is not available on the tradable platform]

You can use the New Order to carry out simple trading actions such as closing an open
position or opening a new one.

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CORRELATION TRADER

The top of the trading form shows any open position in the selected symbol, with a button for
closing the position. Below that is a simple form for placing a new buy or sell market order.

Page 5 of 5

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