What is Correlation Indicator MT4?
In financial markets, the instruments correlate to each other. That means if one of them changes, the other changes in too in the same direction. For example, if we say that EURUSD and GBPUSD correlate, If EURUSD goes down, GBPUSD will also go in a bearish trend. This is called a positive correlation between EURUSD and GBPUSD.
Three types of correlations exist between currency pairs.
- Positive: If both currency pairs follow the same trend, then they are positively correlated.
- Negative: If both currency pairs follow the opposite direction, then they are negatively correlated.
- Zero: When currency pairs have no relationship with each other, then they have zero correlation.
The forex indicator used to find the correlation between two currencies is the currency correlation indicator for mt4.
Why should you use currency correlation indicator mt4?
Knowing the correlation between two currency pairs can help you decide your lot sizes for your trades. For example, if you take trade-in currency pairs that have a negative correlation, the other trade will cancel out the profits even if you win in one trade. And same is the case with positive correlation, where you will be doubling your risk trading in currency pairs that have a positive correlation.
Settings of correlation Indicator MT4:
In the settings of this indicator, we have the following options
Simbol_Name: The currency pair to which we want to correlate.
Bars_of_autoscale: How many bars to autoscale
Inverse: If set true, it will flip the chart horizontally
MA: If true, it will display the moving averages for overlaying pair
MAperiod: The period of moving average that you want to use
MA_Only: If true, it will only display the moving average
Working of currency correlation indicator for mt4.
When you apply the correlation indicator to your mt4 charts, you can see the correlated price movement of currency pairs. By seeing the relation between two pairs, you can make more informed decisions for your trading strategies.
The correlation indicator itself does not produce BUY and Sell signals. Instead, it shows the correlated pair’s price chart along with the currency pair you apply the indicator to. You will be able to see the price movement of both correlated pairs. After observing the price movement for each pair, you can see if the currency pairs positively correlate or negatively correlated to each other.
A working example of a correlation indicator:
The picture below shows that the USDJPY pair inversely correlates to the GBPUSD pair.
That means when USDPJPY price goes up the GBPUSD price goes down.
Currency correlation is a very good indicator and can give you a chance to find very good opportunities in the market. But you can increase the chances of your winning if you use it in combination with the Signal Bars indicator.
To download the currency correlation indicator mt4 for free click the link below.Download indicator