WickCheck / Trading school / Correlation
CorrelationIntermediate
How closely two markets move together, from +1 (same way) to −1 (opposite).
What it means
EUR/USD and GBP/USD are positively correlated; EUR/USD and USD/CHF negatively. Two correlated trades are close to one double-size trade.
How to spot it
- Compare the two charts over the same period.
Common mistakes
- Taking the same idea on three USD pairs and calling it diversification.
Related terms
Dollar indexA measure of the US dollar against six major currencies, mostly the euro.…SMT divergenceWhen two related markets disagree: one makes a new high (or low) and the other d…Position sizingChoosing the trade size so a stop-out costs a fixed amount, usually a small % of…
Why most strategies need a human behind the screen
Read the lessonWhat a mechanical test can and cannot tell you about smart money concepts.
Education only, not financial advice. Definitions vary between teachers; these are ours, written for clarity.