Salve a tutti,
one of the questions we’ve been asked more frequently about the DuettoFX strategy is how do we find the “duettos”, the couples of pairs to be used for trading manually or automatically with the DuettoFX indicators/EAs.
Well, the answer is that we look at the correlation between the two pairs. We look for strong negative correlations meaning that we look for pairs that move in opposite directions.
We have a tool (an indicator) that I developed to spot them easily and that’s been private since now.
Here’s how it looks like… it’s the DuettoFX Matrix:
It is a big matrix of the 28 major currencies with the correlation score between each of them. It’s 756 crosses (28*28-28). In reality they are half that number (378) as the correlation between EURUSD and USDCHF is the same as USDCHF and EURUSD 😉
This indicator can calculate all of them, in real time or every new bar. You apply it to a timeframe (in this case a 1H chart), decide the period (120 bars as for DuettoFX strategy) and look for big numbers between square brackets “”. Those are the values below -80. You can set the score level for the indicator to put the value in evidence.
It also shows you the positive correlations: green values always between “”.
You can choose the number of crosses (up to 28) and each single cross. So if you don’t want to monitor the correlation value between 28 pairs but only between 10 pairs for example it’s very easy to do.
Looking at the picture above we can see that, at the moment I’m writing this post, there are 28 crosses that show a good (score below -80) negative correlation score:
A lot! That doesn’t mean that we have to trade them all with DuettoFX. What I do usually is to look at higher timeframes (4H and/or 1D) and see if the negative correlation is confirmed there as well. If so then we have a “reliable” candidate for trading with the DuettoFX.
The DuettoFX Matrix indicator will be released within very few days. I’m also working on a single currency correlation matrix like the one that is embedded in the PotenzaFX Powerlines indicator but a little more powerful and easy to read and use.
They’ll probably be the first ones to use our new “dll” protection system. So we hope to get rid of Guardian very soon for all the indicators/EAs we already published.