Like all correlation trades, “Follow the Leader” waits until two correlated pairs go “out

of whack”, and then quickly capitalizes on the opportunity to scalp some quick pips out

of the market.

Here’s how it works…

For this system I like to trade the EUR/USD along with the GBP/USD. These pairs are

positively correlated, so as expected they are more or less moving parallel to one another

(as you can see in the screenshot on the next page).

But when we’re trading with correlation, we’re not only looking at direction…we’re

also looking at the RANGE.

“Range”: The difference between the high and the low prices

during a specified period of time.

We know, for example, that the GBP/USD normally has a much larger range than

the EUR/USD. (NOTE: I don’t have the time right now to go into why the range of the

GBP/USD is larger, but if you look at the two charts side-by-side you’ll be able to see

with the naked eye what I’m talking about.)

In other words, while these correlated pairs will generally move in the same direction,

the GBP/USD should have lower valleys and higher peaks than the EUR/USD. So, when

we see that the range of the GBP/USD is lagging behind the range of the EUR/USD for

one bar (see screenshot below), we have a potential trade setup.

Once the “range lag” is 20 pips or greater, we take the trade with the expectation that

the GBP/USD will make up the “gap”, and overtake the range of the EUR/USD within a

few bars.

Remember, we know this is an extremely high probability trade, because “Fundamental

Law” dictates that the pairs MUST remain in correlation, so therefore we know that they

will eventually “snap back”.

Like I said, it’s a simple strategy, but because it’s backed by market fundamentals it’s

one of the most accurate (and profitable) intra-day strategies I've ever traded.

Ok, so let’s go back and take a look at the chart

Right now the range of the GBP/USD is lagging the EUR/USD by 8 pips. That’s enough

of a lag to take notice, but it’s not enough to take the trade yet.

Remember, I like to see at least a 20 pip lag before I take the trade, so I’ll watch it for

another bar and see what happens…

When the second bar closes, the range is now lagging by 15 pips. It’s still not enough for

me to take the trade yet, but the fact that the range lag still hasn’t corrected itself (and is

actually growing wider) has me very excited.

I’ll wait and watch it for one more bar and see if the “range lag” or “crack” widens

enough for me to take the trade…

The third bar has closed, and the “range lag” has now widened to 24 pips. That’s greater

than the 20 pip minimum I need, so I’m going to take this trade and go long on the

GBP/USD.

My expectation is that the GBP/USD will at a bare minimum make up the 24 pip

“range lag” or “crack”…and possibly even go beyond that since historically the range

of the GBP/USD is supposed to be LARGER than the EUR/USD

And again, when we’re trading with correlation and something goes “wrong” (as is the

case with this “range lag”), that usually means there’s a profit opportunity just around

the corner.

Now that we’re in this trade, let’s watch it and see what happens next…

As you can see, the very next bar the GBP/USD made up the “range lag” and returned to

“normal” just as we expected it to. We then exit the trade at the end of the bar and

pocket the 24 pips.

So there you have it…the “Follow the Leader” strategy!

So to recap, all you need to do is:

1) Watch these 2 pairs simultaneously.

2) Track the movement of both pairs at the close of each bar.

3) Once you see one of the pairs begin to pull away, pay attention because you are

now looking at a potential trade setup.

4) Calculate the “range lag” or “crack” and when it exceeds 20 pips, you’re ready to

pull the trigger, and you know what your target will be, as it will be always be

about equal to the “range-lag”!

I’m confident that this one strategy alone will make you a more confident, accurate and

profitable trader, as these trades are ultra high probability trades to take, and I LOVE

when they set up...

of whack”, and then quickly capitalizes on the opportunity to scalp some quick pips out

of the market.

Here’s how it works…

For this system I like to trade the EUR/USD along with the GBP/USD. These pairs are

positively correlated, so as expected they are more or less moving parallel to one another

(as you can see in the screenshot on the next page).

But when we’re trading with correlation, we’re not only looking at direction…we’re

also looking at the RANGE.

“Range”: The difference between the high and the low prices

during a specified period of time.

We know, for example, that the GBP/USD normally has a much larger range than

the EUR/USD. (NOTE: I don’t have the time right now to go into why the range of the

GBP/USD is larger, but if you look at the two charts side-by-side you’ll be able to see

with the naked eye what I’m talking about.)

In other words, while these correlated pairs will generally move in the same direction,

the GBP/USD should have lower valleys and higher peaks than the EUR/USD. So, when

we see that the range of the GBP/USD is lagging behind the range of the EUR/USD for

one bar (see screenshot below), we have a potential trade setup.

Once the “range lag” is 20 pips or greater, we take the trade with the expectation that

the GBP/USD will make up the “gap”, and overtake the range of the EUR/USD within a

few bars.

Remember, we know this is an extremely high probability trade, because “Fundamental

Law” dictates that the pairs MUST remain in correlation, so therefore we know that they

will eventually “snap back”.

Like I said, it’s a simple strategy, but because it’s backed by market fundamentals it’s

one of the most accurate (and profitable) intra-day strategies I've ever traded.

Ok, so let’s go back and take a look at the chart

Right now the range of the GBP/USD is lagging the EUR/USD by 8 pips. That’s enough

of a lag to take notice, but it’s not enough to take the trade yet.

Remember, I like to see at least a 20 pip lag before I take the trade, so I’ll watch it for

another bar and see what happens…

When the second bar closes, the range is now lagging by 15 pips. It’s still not enough for

me to take the trade yet, but the fact that the range lag still hasn’t corrected itself (and is

actually growing wider) has me very excited.

I’ll wait and watch it for one more bar and see if the “range lag” or “crack” widens

enough for me to take the trade…

The third bar has closed, and the “range lag” has now widened to 24 pips. That’s greater

than the 20 pip minimum I need, so I’m going to take this trade and go long on the

GBP/USD.

My expectation is that the GBP/USD will at a bare minimum make up the 24 pip

“range lag” or “crack”…and possibly even go beyond that since historically the range

of the GBP/USD is supposed to be LARGER than the EUR/USD

And again, when we’re trading with correlation and something goes “wrong” (as is the

case with this “range lag”), that usually means there’s a profit opportunity just around

the corner.

Now that we’re in this trade, let’s watch it and see what happens next…

As you can see, the very next bar the GBP/USD made up the “range lag” and returned to

“normal” just as we expected it to. We then exit the trade at the end of the bar and

pocket the 24 pips.

So there you have it…the “Follow the Leader” strategy!

So to recap, all you need to do is:

1) Watch these 2 pairs simultaneously.

2) Track the movement of both pairs at the close of each bar.

3) Once you see one of the pairs begin to pull away, pay attention because you are

now looking at a potential trade setup.

4) Calculate the “range lag” or “crack” and when it exceeds 20 pips, you’re ready to

pull the trigger, and you know what your target will be, as it will be always be

about equal to the “range-lag”!

I’m confident that this one strategy alone will make you a more confident, accurate and

profitable trader, as these trades are ultra high probability trades to take, and I LOVE

when they set up...

Follow The Leader Correlation Forex System
Reviewed by Yonif
on
July 22, 2018
Rating:

So I am wondering if what I am doing with the FTL v twin EA is fine? I installed it for only 1 correlation pair, so I installed it on the EUR/USD 1 hour chart and I set the Gap to 40 pips instead of the defaulted 100, and using .10 contract size it has made 164 dollars on a 1500 dollar demo account, will this work the same on a real account or will it fail once on a real live account?

ReplyDeleteThe reason I ask is because that is awesome, that is like 16% in a full day, here is a screen shot for you guys to examine, please let me know what you think.

So I am wondering if what I am doing with the v twin EA is fine? I installed it for only 1 correlation pair, so I installed it on the EUR/USD 1 hour chart and I set the Gap to 40 pips instead of the defaulted 100, and using .10 contract size it has made 164 dollars on a 1500 dollar demo account, will this work the same on a real account or will it fail once on a real live account?

The reason I ask is because that is awesome, that is like 16% in a full day.