Correlation between Forex and other Markets.
Speaking on Investing or trading in other markets beside Forex, there was one important point I missed out covering in my previous email to people on my list.
There is strong correlation between Forex and other markets. What this means is that if GBP/USD corrency pair is going down,then stock market reacts accordingly.
Similarly if USD becomes strong, so do the Gold prices.
So if you are trading in forex market, you already carry certain level of advantage when you trade in other form of markets.
And this advantage is two fold -
1. You are already aware of correlations between market and that allows you to react in much quicker way than other traders.
2. In most occaisions the strategy you are using in Forex market can be used and customized to be used in other market like stock
or options!
But, then comes the important question.
"Which Market should you go trade in"?
Should it be Stock or Options or Commodites? Which one?
Stock & Options markets are good to try, the only issue being it requires heavy investment.
For example, just 10 shares of Apple will cost you around $3000+
Same goes with Commodities market.
Mutual Funds are good place to go - Reason being the investment required is not huge, returns are good and it is not risky.
The only cavet of Mutual Funds is that you don't have much control, since the portfolio manager of mutual funds has all the control and decides which individal stock to buy or sell.
I am doing some analysis to identify a good market which is -
a. Ofcourse Profitable..
b. Where Traders have high control on where to trade, when to buy, when to sell and also when to stay away.
c. Requires low investment
d. And has good systems in place to allow traders to trade profitable.
As part of reserach I am reviewing something. I am expecting my research to get over by tonight. If so, I'll share the details with you by tomorrow
Stay Tuned..
3 Comments on Correlation between Forex and other Markets. »
March 20, 2011
iman @ 5:55 pm:
Thanks for your valuable suggestion for trading.
God bless you.
Demetrick Knight @ 10:03 pm:
Options are a good way to make fast money. The investment is less than buying the stock and usually runs at a 100:1 leverage which is a familiar trade to Forex traders.
The best way to trade options is to use the Investools search engine. If you do not have access to it, you will need to attend one of their seminars to get it. When I attended it cost $1000, but that was several years ago. I highly recommend investing the money to gain access to it though. What it does is search the ENTIRE stock market for stocks meeting whatever criteria you are looking for and then ranking them according to their fundamentals.
To make easy money trading options, use the search engine to identify Insider Buying for the 3 months. Choose one of the stocks with the best fundamentals and alignment to the technical analysis. Technical analysis of a stock option is very simple. You use a yearly chart and enter when the price of the "stock", not the option, is above the 21 period moving average, the 12/26/9 Macd is above 0, and the 12 period stochastics is above 20. When any one, or if you decide…two of these indicators reverse, you close the option.
Using this simple strategy I never lost a trade with stock options. I believe the search engine was the greatest tool, and using a yearly chart to identify entries and exits was likely the second best tool. The indicators for trading stock options do not work so well in Forex, but believe me, they are really great for stock options. Most likely because of the yearly analysis and slower volatility in the stock market.
If you have the search engine, you can do many, many, many other types of analysis. Additionally, all the news about each stock is included with the fundamentals. When you access any particular stock you get all the data concerning it. For instance, all news, all income statements, all company officer buying/selling, all fundamentals to include PE and floats. Everything is available for your review. It is the greatest stock market analysis tool I have ever seen.
Investools is sponsored by Success Magazine and they have seminars they put on around the United States. Again, I am not sure of the current costs, but in order to have access to the search engine it is required to first attend a seminar. Afterwards there is a subscription fee to continue accessing the search engine. It is the BEST way. Believe me!!
March 21, 2011
Peter @ 2:18 am:
Your helpful suggestions are always appreciated , Rahul.
Please keep them coming.