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To: ExCane who wrote (2478)	1/15/1998 9:04:00 PM
From: Richard Estes	Read Replies (1) \| Respond to of 12617

yes, but not sure what use it would be. I use it to compare an indicator to price. It confirms that they move together. Is it hard to use and understand? yes and no. A number of us have word processing programs like word, Can you turn out a quick letter on it? but what about a book or newsletter, maintain a mailing list? You get out of a software what you put into it. equis says: The Correlation indicator can be used in two ways: ú Correlation of a security's price to an indicator You can measure the relationship between an indicator and a security's price. A high positive correlation coefficient means that a change in the indicator usually predicts a change in the security's price. A high negative correlation (e.g., -0.70) means that when the indicator's value changes, the security's price will usually move in the opposite direction. Remember, a low (e.g., 0.10) correlation coefficient indicates that the relationship between the security's price and the indicator is not significant. ú Correlation of one security to another Another use of correlation analysis is to measure the strength of a relationship between two securities. Often, one security's price "leads" or predicts the price of another security. This is especially noticeable with commodities. For example, the correlation coefficient of gold versus the dollar shows a strong negative relationship. In other words, an increase in the dollar usually predicts a decrease in the price of gold. ú Correlation of one indicator to another Another use of correlation analysis is to measure the strength of a relationship between two indicators. Often, one indicator's movement "leads" or predicts the movement of another indicator. For example, a volume-based indicator (i.e., Chaikin Oscillator, Money Flow Index, etc.) may be found to lead a momentum based indicator (i.e., RSI, Stochastic, etc.). Before attempting to plot the Correlation indicator, you must first select two plots. This could be two price plots, an indicator and a price plot, or two indicators. The first plot selected will be the independent variable and the second, the dependent variable. To plot the Correlation indicator: _ Select the two plots that you want to correlate (i.e., two indicators, a price plot and an indicator, or two price plots). Select the first plot (the independent variable) by simply clicking on it. Select the second plot (the dependent variable) by holding down the SHIFT key and clicking on it. Small square handles will appear on the plots indicating that they are selected. _ Drag the Correlation indicator from the Indicator QuickList and drop it on the chart. The parameters for the Correlation indicator are shown below. These parameters are specified at the time the indicator is plotted. You can edit the parameters of an existing plot by right-clicking on the indicator and choosing Properties from the shortcut menu. Time Periods. This parameter specifies the number of time periods that are used to "smooth" the dependent and independent variables when determining their correlation. Forward Shift. This parameter specifies the number of time periods to shift the independent variable's data forward. This can be used to determine whether a change in an indicator (the independent variable) "leads" a change in prices (the dependent variable). For example, if you find that an indicator has a high positive correlation to the security's price when shifted forward three periods, you may assume that a change in the indicator today will predict a change in the security's price three periods from now. But daytraders might not use TA.