Wednesday, November 12, 2014

A Surprising Correlation to Add To Your Trading Strategy

Turd Ferguson is a very astute metals trader, his trading strategies are in his blog posts as are his comments about the markets and economy.

He posted a couple charts demonstrating the relationship between the Japanese Yen and Gold and Silver.

New to me was that these are  correlated, in fact he posted a 30 minute chart and it was hard to see any variations.

Recently the Bank of Japan entered the market in a big way and sure enough Gold and Silver tracked the Yen as it moved.

I am not necessarily a believer in correlations long term, but this one is very interesting at this time.

Here is the 30 minute chart;

Many people attempt to understand the markets by incorporating correlations into their trading strategy, I am unconvinced. I have seen correlations go along nicely for many days and months and all of a sudden the correlation disappears. For that reason I stay away, however, there are many pairs traders that make a fortune using correlations.

Enjoy your day..!!

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