The Liquidity Rolling Correlation indicator measures how assets correlate with the Global Liquidity Index over time. By highlighting assets with the highest correlation, it helps traders anticipate market movements based on liquidity shifts.
Understanding these correlations can provide an edge in aligning trades with prevailing liquidity conditions.
The indicator identifies three zones:
- Overbought (> 0.5): High positive correlation; potential pullbacks if liquidity falls.
- Oversold (< -0.5): High negative correlation; potential upside if liquidity improves.
- Neutral (-0.1 to 0.1): Weak or no correlation to liquidity.
Traders can use these thresholds to align positions with liquidity trends and improve timing for entries and exits.