1. Form of basic of a statically high probability Forex trading strategy. 2. taken illustrate the amount of risk you are exposed through with in your Forex trading account. For example, if you have bough several currency pairs with a strong positive correlation, then you are exposed to higher directional risk. 3. you can avoid positions that effectively cancel Each Other out. EUR/USD AND USD/CHF will counteract the moves in each pair. 4. understanding correlations can allow you to hedge or diversify your exposure to the Forex market. 5. if you have a directional bias for a given currency, you can separate your risk using two strongly positive correlated pairs, antonyms of diversification. 6. if you are looking to has a position you can take a position in a negatively correlated pair. If you were to initiate a long buy for EUR/USD, and it begins to move in an unfavourable direction, you can then hedge your position by purchasing a currency pair that has a negative correlation to EUR/USD, like USD/CHF. Forex trading strategies based on correlation: 1. when two pair are highly correlated , one can serves as a loading indicator of the price movement of the other. If you see a sharp movie in one of the two positively correlated pairs, you can anticipate a probable movie in the other. 2. correlation can be even a more powerful Forex tool for analysis in education with other Forex indicators. For instance, if one pair breaks out above or below a significant technical level of support or resistance, the closely positively correlated pair has a high probability of the following risk. 3. if you notice two negatively correlated currency pairs and a significant upward price reversal in one pair takes place , then you anticipate of potential download reversal in the other pair. This is a price reversal. 4. wait for an abnormal divergence between two highly correlated currency pairs and buy one and sell the other, with the expectation that they will converge in price movement again. This you are non directional arbitrage exploring currency correlations.
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