CORRELATION in the PRESENCE of VOLATILITY

To be effectively trading in the presence of market volatility, knowing how important it is in calculating or having a "Correlation Table" for each currency pairs being traded is a must have. Because currencies are priced in pairs, so no single pair trades completely independent of the other. However, not merely knowing how positive a high or negative low value is between the currency pairs but by going through the extra mile of selecting an alternative pair either a major pair or equivalent cross rate that can best be suited for certain market conditions is indeed a process.

That is also why, the first step in the process of trading the currency market, traders do require to have two or more currency related pairs to have an effective and successful trade during a volatile market. As the process only begins with one and are subjected to alternatives and ensure a layer of cushion in the event that such trades are not timely executed. These correlations do change over a period of time, which can be used to properly manage the overall portfolio amount of exposure in the market.

Thus, providing significant advantages for a tactical investor / trader that uses these information while trading related currency pairs that would move in a similar direction or counter trend direction. When such pairs do move in opposite direction, it can mean that certain external forces, normally fundamental factors and risk events may be driving these movements. And the increase in market volatility exists whenever price swings in both directions occur more often even within a near to short term sessions.

On the currency side whenever these conditions occur especially with a dramatic price change on the USDJPY and its correlated Yen crosses like the GBPJPY. And similar price action relative with the EURO, CABLE and the USD direction changed after reports from certain FED comments came unexpectedly. Thus moving the USD lower @96.20 low during the US trading session