Ok, I tried to make some example screenshot. Now, how do you work with it.. You have to open chart windows in pairs like it's shown on the screenshot and to make sure they're all same tf and same size. You have to check only the right side of the chart to see if there's any divergence. That happens when one of the pair is clearly higher than another. Note, that the charts do redraw with time (particularly when price is making new lows or highs), so then you have to look at higher tf to see a better picture. When you see a divergence, you check 15min, 30min, 1hr and so on. You probably don't want to go further than 4hr tf though. If they all agree or atleast don't strongly disagree with what you saw on smaller tf, it is a signal to make an entry. The bigger the divergence, the stronger the signal. If two pairs actually go in opposite direction instead of just one being somewhat behind, it's an absolutely best signal. You also want to look for SR levels. If they happen to reinforce your entry, good. If they're in the way, you might wait for price to get through them. You always have to use discretion when making an entry. You have to measure the quantity to buy/sell for each pair. This part is absolutely essential, since one pip on EURJPY is not the same as one pip on USDJPY. And they're constantly changing. You always need to make each pip as close as you can to each other. Find out the average ratio pairs have been traded on some reasonable tf and use it. Now you will almost always face drawdown before the price settles somewhere and turns to "repair" the difference. I'm used to averaging to squeeze the maximum from big divergences, but you don't have to do so. Note, that this method requires you to use bigger margin, since you always make two entries and you always have to leave enough place for drawdowns, so you won't be forced out at the worst place. Fell free to give it a try if you want. I will also answer questions if you have any.
Soseki, Thanks this is very interesting. This might be a basic question but how do you decide what pairs are correlated and what pairs are not. also There is no need to post during the day but please post after the close with your time of entry so we can learn from the examples if you don't mind.
When you look through the charts of something which could be easily correlated, like pairs which both have same component in them, like JPY or USD in the screenshot I posted, you will notice they both actually move the same way, making exactly same patterns. Only difference is that some pair goes up more strongly, other moves up with a slower pace, but likes down movements... However, they change roles every few days or even hours. It's quite rare for them to move into opposite directions. Strangely enough you can find such similarities even in pairs where you wouldn't expect them. I like the AUDUSD / GBPJPY, since AUDUSD is usually calm while GBPJPY jumps around it. Despite of being completely different pairs, they still move in same general direction in the short-term. I'm content with the three combinations from the screenshot for now. But I'm sure anyone who is looking can find more. As for hours, I trade anytime, but you might be careful around opening hours depending on what you trade. For example, it would be wise not to make new trades two hours after the US opening if you trade USD, since it's best to enter when the price is settled somewhere. I made this mistake yesterday. As a result, you end up with a far worse position than you could take if you waited for bigger divergence. ---- On the other note, I'm still in yesterday's positions and it looks like it will take quite a while this time. So no new trades for me today.