Introduction to Forex Correlation
Have you ever wondered why some couples or commodities are moving in the same way. Or why does a second reinforcement respond to the sale of one pair. Of course, this is not a coincidence, but this is think called correlation of currency pairs. Correlations explain clever books as the interrelationship between two processes or variables. If there is a correlation between the two processes, it is likely that they depend on one another, but it can not be concluded that one of them has to be the cause and the second consequence. There is no need to know the definition, just know that certain currency pairs have a certain dependence. They move hand in hand or contradictory.
We measure the correlation with percentages or coefficients from one to -one, which is the same as percentage. Correlation on forex may be positive, negative, or zero. Positive correlation can be seen, for example, in EUR/JPY and USD/JPY pairs. These two currency pairs thus move almost identically. Zero correlation, or completely independent movements, can now be seen, for example, in GBP/USD and USD/CHF. Of course, we have to remember that the correlation changes over time. Couples that correlate for a long time can break away for a while. Everything depends on the composition of the forex instrument, whether it contains a dollar, how the economies are interconnected,
The aim of thiss article was to introduce a correlation and correlation relationship to a complete beginner who hears this term first. In one of nexts posts, I will show to you, how to make the most of trading correlations.