Currency Correlation and Stop Hunts (part 2)

In the next example, we’re looking at another set of highly correlated pairs, and this is the sterling-yen vs the euro-yen, so we’re looking for the same process as we did in any last example. We’re simply going to be looking for the manipulation of retail orders at an identified level within a relatively narrow timeframe.

In this example, I’ve marked off the Asian lows as our potential manipulation area, and in the Sterling- Yen, we see 7:30 we get an aggressive candle to the downside which penetrates our zone by three points. This becomes our Stockman candle and then immediately afterwards we get a candle which closes above the body of our stock one candle and gives us confirmation of manipulation. Now in the euro-yen, we have no manipulation of the Asian lows.

So if we have no manipulation of the Asian lows does this necessarily mean that we don’t take a trade. Well of course not, we always keep in line with these smart money cycle. This is a process that you can use to reinforce and confirm a trade entry decision. Okay so in this example we have no stock run at Euro-Yen at 730, but we have an apparent stock hunt and confirmation in the Sterling-Yen.

There is another currency pair that we can use when we’re trading the sterling yen and euro yen, and we can use this other currency pair also for correlation and confirmation, and this currency pair is the Dollar-Yen.

So far probably Dollar Yen, immediately we can see that we have an identical stock run to our sterling, at 7:30 we have a stock one of the lows with an aggressive candle which penetrates our level by more than three points. We then have a failure to confirm, but we have a low a high. We then get our confirmation candle which closes within its higher one for the region and then we receive our pull back candle. So within two currency pairs which are highly correlated the Sterling yen and also the Dollar-Yen we have stopped runs of the Asian lows.

Now what’s interesting is as we enter into the U.S. session and if we mark off zones at 1:30 as the U.S. session opens we have a stop run of a previous level of support of resistance, and we get the same process takes place within the dollar yet. Okay, so this could also be used to assist you when trading the New York reversal. At 1:30 as we enter into the U.S. session we have a stop run on both of the highly correlated pairs and we get confirmation down on the next bar. Here would give you more than enough reinforcement and confirmation that stock hunt had taken place and allow you to pull the trigger and enter the New York river comfortably. So it is also true with the previous two pair we looked at during the midweek reversal if you see a correlation of stock hunts to the up or downside take place within a relatively narrow time frame you can pull the trigger with that added confirmation that the highly correlated pairs are also doing the same thing.

In this final example, we’re going to take a look at two currency pairs which have a high degree of negative correlation and in the cases where you’re dealing with two currency pairs that do have a negative correlation you simply want to look for the same process. But on the other end of the trend so, for example, we’re looking at the Dollar-Swiss against the Euro-Dollar, and they are profoundly negative in their correlation. So if we’re in a bear trend on the Dollar-Swiss and we see manipulation, and we also see the same manipulation taken place in a board trained on the Euro-Dollar then the stop hunts will be correlated.

So in this example, we’re looking at the first the September 2014, and we can see that the Dollar-Swiss is in an apparent move to the downside. We have a previous level of support resistance have marked out, and we can see through the candlesticks that we have that aggressive move through our identified zone. Our next candle gives us a low a high which creates our new stock one candle.

We then get no confirmation and our second our third but on our fourth bar we get an aggressive move to the upside, and we have the body of the candle close to its high up one-third region. Now once we get these aggressive candles, we’re going to look for a pullback which we receive which could then allow us to enter into a trade. Now, the stop Hunt of our prior level support resistance occurred at 9:45, so a couple of hours into the London session and if we go over to the Euro-Dollar which is negatively correlated to the Dollar-Swiss we get the same process take place at the same time. So we have a previous level of manipulation which is a potential area of the equality and the 9:45 we get an aggressive candle through our identified area. Our next candle gives us a low-high then get another low-high. So we have a new stock one candle we fail to confirm on the next candle down even though it closes below the body of Stockman candle is not within its low 1-foot region.

And then finally get an aggressive move down and our confirmation, so we’ve negatively correlated pairs were simply looking for the correlation of stock hunts but at the other end of the trade. If we see a bull trend in one manipulation going to be looking for a better trend and manipulation in the other.

The identification of stock hunts within a relatively narrow timeframe in highly correlated pairs can help you to reinforce and confirm a trade before you pull the trigger. Now when we looked at our section on identifying the phases and trading in line with the smart money trend, we determined that phase 3 and Phase 1 are the most difficult to trade. When we’re in phase 3 which was level 3 accumulation you learnt that we would trade both sides of the market. And this is because there was no identifiable trend to the up or downside and the market stayed within a relatively tight range until the breakout and the formation of Phase 1. Now because this is the most challenging phase of the smart money cycle correlation and the identification of stock once is a great tool to assist you when the market is within these ranges. Because if we’re trading both sides of a market, we have a disadvantage because there is no cycle so if we identify at high probability area that the stock hunts are taking place within two correlated pairs and we’re in phase 3 or level 3 accumulation. This can add further confirmation and also a reinforcement that the probability of your trade will be a success so currency correlation can help with the daily intraday trading.

As long as we’re apparently in line with the smart money trend but for those more difficult phases such as a level 3 accumulation and the identification of phase 1, it’s a great tool to assist you in your analysis and your trade entry decisions.


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