How To Navigate Disjointed Markets?
There are only two ways to effectively navigate disjointed markets, find out what they are in this short video.
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
We have a quick here from a subscriber who says they often find themselves a bit confused and paralysed when the market has disjointed moves across asset classes, we’ve recently seen some pretty big moves in equities which took a while to0 really follow through to high beta and safe haven currencies, and they want to know how to better navigate these type of disjointed moves?
Thanks for the question, and it’s a very important one as well because these type of environments you are describing might happen more often than you think at first, especially once you get into the habit of going through various asset classes and looking at cross asset volatility, you get into a habit of picking up on potential disjointed moves very quickly.
Now, in my opinion, there is only two ways you can look to navigate these type of scenarios, and that is firstly by looking to exploit them for potential opportunities, and secondly by just staying away from them all together.
As I’m sure you can imagine, the option you should choose between these two will largely be based on your experience as a trader, meaning if you are a bigger or novice trader it will probably be hard to try and pick up on the finer nuances that could create trading opportunities when you see these disjointed moves.
For example, in your question you referred to some of the recent moves in equities which took some time to follow through to the FX space. Now, there is really only two things that can happen if that type of scenarios happens, and that is, either equities will recover and move back higher or you might see a catch up move lower in the FX space to reflect the moves in equites, now recently we of course had the latter happen where FX took a few days to really react and then once it did it was strong and classic risk off moves in the FX space.
Other times you might see the bond market give you a potential signal that things might not be as rosy as equities portray, a good example would be equity markets that are rising across the board but bond yields are moving sharply lower across the board, now again, you can try to exploit some opportunities there because you are either going to see bond yields or equities catch up to the other, and that can of course create opportunities, but it’s important with these type of trades to you what the highest probability outcome would be.
For example, in the example with the recent moves in Equities and FX, a novice trader might spot the disjointed moves, and they might know that either one of these two asset classes needs to catch up to the other, but they will probably not have the analysis and market experience to know which outcome has the higher probability of happening.
That’s why, if you are approaching the market as a novice and are still finding your feet in the world of fundamental analysis and intermarket analysis, my advice would be to rather just sit out of those type of events, you will often here Giles say “when in doubt, just stay out”, and it’s so true, the best thing you can do when you are unsure in those environments is just to stay out, because when you try to take a punt in environments like that it’s probably not going to do your account any good in long-run.
So, hope that helps, any other questions just let us know.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
We have a quick here from a subscriber who says they often find themselves a bit confused and paralysed when the market has disjointed moves across asset classes, we’ve recently seen some pretty big moves in equities which took a while to0 really follow through to high beta and safe haven currencies, and they want to know how to better navigate these type of disjointed moves?
Thanks for the question, and it’s a very important one as well because these type of environments you are describing might happen more often than you think at first, especially once you get into the habit of going through various asset classes and looking at cross asset volatility, you get into a habit of picking up on potential disjointed moves very quickly.
Now, in my opinion, there is only two ways you can look to navigate these type of scenarios, and that is firstly by looking to exploit them for potential opportunities, and secondly by just staying away from them all together.
As I’m sure you can imagine, the option you should choose between these two will largely be based on your experience as a trader, meaning if you are a bigger or novice trader it will probably be hard to try and pick up on the finer nuances that could create trading opportunities when you see these disjointed moves.
For example, in your question you referred to some of the recent moves in equities which took some time to follow through to the FX space. Now, there is really only two things that can happen if that type of scenarios happens, and that is, either equities will recover and move back higher or you might see a catch up move lower in the FX space to reflect the moves in equites, now recently we of course had the latter happen where FX took a few days to really react and then once it did it was strong and classic risk off moves in the FX space.
Other times you might see the bond market give you a potential signal that things might not be as rosy as equities portray, a good example would be equity markets that are rising across the board but bond yields are moving sharply lower across the board, now again, you can try to exploit some opportunities there because you are either going to see bond yields or equities catch up to the other, and that can of course create opportunities, but it’s important with these type of trades to you what the highest probability outcome would be.
For example, in the example with the recent moves in Equities and FX, a novice trader might spot the disjointed moves, and they might know that either one of these two asset classes needs to catch up to the other, but they will probably not have the analysis and market experience to know which outcome has the higher probability of happening.
That’s why, if you are approaching the market as a novice and are still finding your feet in the world of fundamental analysis and intermarket analysis, my advice would be to rather just sit out of those type of events, you will often here Giles say “when in doubt, just stay out”, and it’s so true, the best thing you can do when you are unsure in those environments is just to stay out, because when you try to take a punt in environments like that it’s probably not going to do your account any good in long-run.
So, hope that helps, any other questions just let us know.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
