Any currency evaluated in pairs.This is not surprising, because it is obvious that independent currency does not exist, as there is no independent currency pairs.Any impact on the market in some extent affects all market participants in relationships.
Correlation - this is the relationship of one value from another.Knowing the correlation coefficient can be easy to predict the movement of the currency pair (depending on the movement of the other).For example, consider two currency pairs "A" and "B", which are defined directly dependent from each other.This means that the correlation function may show how to increase the price of the first pair (in the case of a second price increase).When inverse relationship is the opposite: we will know just how to fall in the price of the currency pair (depending on the increase in the price of the second pair).
by calculating the values of the correlation function can easily predict the future value of the price in trading on the basis of data on other currency pairs, for which there is no bidding.In such cases, the main task is the correct calculation of the correlation coefficient.
Correlation - a reliable assistant in trade in the Forex market.With it you can easily control the risks.
to successfully use this knowledge in practice, it is necessary to know certain basics.Correlation - either positive or negative quantity.Positive - when the correlation coefficient is greater than zero and less than (or equal to) 1.The closer to 1 the value, the greater the likelihood that pairs will move in the same direction.When the value of the coefficient of 0 means that the movement of pairs absolutely interconnected.The negative correlation - when the correlation coefficient is less than zero and greater than (or equal to) 1.The closer the value to 1, the greater the likelihood that pairs will move in different directions.
There are several ways to calculate the correlation coefficient.One of the simplest and most effective is the correlation of Spearman.
It is a method that allows us to compute the correlation coefficient on the basis of statistics.To do this, you must calculate the actual degree of parallelism, which is calculated between two related series of numbers-values.
The calculation takes approximately the following plan:
1) Each feature is assigned a sequential number (ascending or descending).
2) determines the difference of ranks for each pair of values that are mapped.
3) squaring the received difference.
4) sums derived difference.
5) Calculate the correlation coefficient (the well-known formula).
knowledge of the interaction between the currency pairs can greatly simplify your work in the Forex market.You will also be able to increase their profits, thus reducing the risks to a minimum.All of your purchases and sales will be based only on the real mathematical and probabilistic calculations.
now for you the correlation - is not just a vague term.Such knowledge will allow you to call yourself a professional trade in the currency markets (and not only for them!).And it will agree, will not be superfluous!
