Correlation EA: An In-Depth Review
The Correlation EA is an expert advisor for the popular MetaTrader 4 and MetaTrader 5 trading platforms. It analyzes the correlations between forex pairs and looks to trade correlated pairs that diverge from their normal correlation range. The EA aims to capitalize on the eventual reversion back to the mean correlation.
How the Correlation EA Works
The Correlation EA is based on the principle that certain currency pairs exhibit a predictable correlation with one another in the forex market. For example, EUR/USD and GBP/USD may tend to move in the same direction most of the time. The EA tracks when correlations between pairs deviate from their normal relationship and bets that they will eventually revert back.
Here is a step-by-step overview of how the trading system functions:
- Analyzes Correlations: The EA calculates the correlation coefficients between multiple currency pairs using historical price data. It identifies pairs that typically move together.
- Monitors Deviations: When correlated pairs diverge from their normal correlation range, the EA takes notice. For example, if EUR/USD rises but GBP/USD falls.
- Opens Hedged Trades: The EA will open opposite trades on the divergent pairs, betting that the correlation will converge back to normal. The trades are hedged to reduce risk.
- Closes Trades: Finally, when the pairs revert back towards their statistical correlation, the EA closes the trades for a potential profit. It aims to systematically profit over many trades.
The EA handles the entire process automatically, requiring no input from the trader after the initial configuration.
Key Features
The Correlation EA packs some useful features under the hood. These settings give traders flexibility in how they use the system:
- Correlation Analysis – Runs statistical analysis to find correlated pairs
- News Filter – Avoids placing trades around major news events
- Money Management – Options to manage risk and position sizing
- Multiple Timeframes – Can trade correlation strategies across timeframes (M5, M15, H1 etc.)
- Trailing Stops – Trades can be protected with automatic trailing stops
- No Martingale – Does not use risky martingale lot sizing techniques
Performance Statistics
It is crucial to review the verified backtest and live trading results before purchasing any EA. Here are some of the published statistics:
- 15 Years Backtested – Tested on EURUSD and GBPUSD over 15 years
- 5,000% Return – Turned $1,000 into over $50,000 in backtest
- Low Drawdown – Maximum drawdown of 27%
The EA has also earned positive reviews from users trading it live. However, past performance does not guarantee future results.
Pros of the Correlation EA
- Long Track Record: Over 15 years backtested and 3 years live traded
- Innovative Logic: Unique correlation trading algorithm
- Risk Management: Built-in features to limit losses per trade
- Ease of Use: Fully automated system with default settings
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Cons of the Correlation EA
- Data Overfit: High returns in backtest but unproven in live trading
- Potential Losses: No guarantee it will be profitable long term
- Locks Up Margin: Trades may be open for extended periods
- Price: $200 for a single license which seems expensive
| Pros | Cons |
|---|---|
| Long Backtest | Data Overfit |
| Innovative Logic | Losses Possible |
| Risk Management | Locks Up Margin |
| Easy to Use | Expensive Price |
Who is the Correlation EA Best For?
The Correlation EA is best suited for traders looking to “set and forget” an automated system with innovative logic. The biggest benefit is the hands-off approach requiring no input after the initial configuration. It may interest forex traders wanting to try a new strategy with potential long-term profitability.
However, traders should be prepared to withstand open trades lasting days or weeks at a time. And be willing to give the system time to realize steady gains over a series of trades, rather than seeking home runs on each trade. Realistic expectations are key.
Final Verdict
The Correlation EA offers traders a professionally-coded automated trading system with an intriguing strategy based on forex correlations. The biggest draw is the completely hands-off approach after setting it up on a chart. It has earned positive reviews from users profiting with it on their accounts.
However, as with any EA, long term profitability is never guaranteed. While the backtest results boast fantastic returns, live trading results may differ. There is always the risk of losses when real money is traded on the unpredictable currency markets. Use proper risk management no matter which EA you trade.
Overall, for traders seeking a unique trading algorithm to test, the Correlation EA is worth considering. But do so knowing that losses are possible, and manage risk accordingly by using reasonable lot sizes for the account balance traded.