Not too long ago, there were correlations that you could count on in
Forex. Some of them, like the EUR/USD vs USD/CHF were almost mirror
images due to almost perfect negative correlation. That way, you could
use the pairs to hedge against one another.
Today, however one can no longer rely on perfect correlation because it
does not happen anymore. In fact, one of the more important
correlations, the AUD/USD vis s vis SP500 is not that reliable either.
In fact, just last month, there was an unusual divergence between the
two which many analysts thought to be indicative of dire events brewing
in the market.
Thankfully, those dire events have not come to pass (yet?) but the point
I am making is that trading has taken on a different tone today where
one can really be caught off guard by a sudden move that can lead to
closeouts for positions that had no stops or sufficient margin.
I have been reading several articles that are quite informative about
the new market trends and as soon as I figure out how to best format
them on the blog, I will post them here.
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