What is Forex Correlation? How to Read the Table & Manage Risk | Ashiran
Forex Correlation Table
*Data updates automatically every 1 hour.
| Currency | AUDUSD | EURUSD | GBPUSD | NZDUSD | USDCAD | USDCHF | USDJPY |
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How to Read the Forex Correlation Table in 5 Easy Steps
The Forex Correlation Table is a powerful tool that helps you analyze how currency pairs relate to one another. Do they move in the same direction or opposite directions? Knowing this helps you effectively manage risk and avoid unintentional overtrading.
1. Check Currency Pairs
The table displays currency pairs on both vertical and horizontal axes (e.g., EUR/USD, GBP/USD). Look for the intersection point of the two pairs you are interested in comparing.
2. Understand the Correlation Coefficient
- +1 (Positive): Perfect Positive Correlation (Prices move in the SAME direction 100% of the time).
- -1 (Negative): Perfect Negative Correlation (Prices move in the OPPOSITE direction 100% of the time).
- 0 (No Correlation): No Correlation (Prices move independently of each other).
3. Focus on High and Low Values (Strong Correlation)
Pay close attention to numbers approaching +1 or -1 (e.g., > 0.80 or < -0.80). These indicate a strong relationship, providing high-probability signals for your trading decisions.
4. Color Indicators
- Green Color: Positive values. Darker green indicates a stronger positive correlation (moving together).
- Red Color: Negative values. Darker red indicates a stronger negative correlation (moving apart).
5. Choose Based on Your Trading Strategy (Timeframe)
- Day Trader: Focus on short-term correlation data (e.g., Daily or hourly).
- Swing Trader: Focus on long-term data (e.g., 50-100 periods) to confirm major trends.
💡 Practical Example:
If EUR/USD and GBP/USD have a correlation of 0.90 (Very High), it means they almost always move up and down together.
Tip: Avoid opening BUY positions on both pairs simultaneously. If the market turns against you, you will face double the risk (Overtrading). Choose only one pair to trade.
Read the full in-depth guide on Forex Correlation
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