How to use currency correlations that AI can't teach you
Dollar-yen is rising, so gold, which is negatively correlated, should be sold!
I entered thinking that,
for some reason gold also climbs along, and I quickly hit a stop loss….
Have you ever experienced that kind of “betrayal of correlation” too?
If you read online articles or AI about “FX correlations,”
you get clean textbook answers like “Dollar and gold move inversely,”
“Euro-dollar and dollar-yen tend to move oppositely.”
However,
if you trade by believing those words exactly as they are,
your funds will melt away in a surprisingly short time.
This time, I will talk about a way to view currency correlations that AI and textbooks never teach you
that is truly usable on the ground.
First, please take a look at the “three iron rules” to avoid failure in correlations.