Market correlation

Dear traders, with this brief article, I will try to give you some guidance to better understand the market dynamics and improve as a result, operating trading.

The purpose is to give, in a few lines, a key of very intuitive reading of market mechanisms.
When the US dollar appreciates strongly (trend long), the price of raw materials (often) collapses (oil, gold, silver, copper ) All Fall Down.

Same time runs better the world economy and in principle can be seen an appreciation of the major stock market indexes (upward DAX, Nikkei, S & P500 and related annexes).

Obviously, in the case of a weak dollar (short trend), we begin to see an increase in commodity prices and an economic deficit reported by the collapse of the stock market indices.
The concept quoted fully embraces the range of correlations that is very vast.

How can we use this reading in our favor?

The question, obvious and necessary that refers to practical, finds response in the following example:

I have a nice pattern on AUD / USD telling me to go long.
At the same time the dollar is strong against all, the raw materials are depreciating (collapse of gold, silver, oil) and the economy is running well (CFD on DAX, FTSE MIB, NIKKEI, S & P500 acquire value).
It ‘s very likely that, by virtue of what has been said above (and the direct correlation between Australian and gold), the change indicated go in the opposite direction (short) and it leads to a stop.
How many times have consolidated loss (stop loss) that, based on this simple reading, could have been avoided (.!?)
It ‘happened to everyone does not understand why the perfect pattern did not work. Good! Most likely the market dynamics were unfavorable.(As we are having right now).

 

correlation 3

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