Ultimate Intermarket Analysis Course for Traders

so today you are going to learn intel market analysis so if you learn this properly you'll be able to trade just like the professional traders and one very important thing make sure you get your pen and paper out because i'm gonna go really fast okay so let's talk about that right now [Music] so i'm gonna cover the important principles you need to take note of if you haven't watched the previous inter market analysis video you can go and recap but if not i'm going to do a quick recap spoon feed you a little bit three ways to analyze the markets you don't need to copy me but there are easier ways and also harder ways to analyze it so i'm going to share that with you as well and then we are going to compare currencies versus bonds versus commodities versus stocks and also versus cryptona it seems like very tedious very tiring and why am i learning all this i just want to know what macd number do you use what moving average number you use if you want to trade just like retail traders go and learn indicators if you want to trade just like professional traders then we can keep talking so if you don't know what is inter marketing this is basically you're comparing currency markets with stock market bond market basically you're comparing with other markets so this one is called cross market analysis basically it's the relationship between different markets relationship between currency markets and bonds bond market and stock market some relationships are stronger some relationships are weaker they don't last long just like you and your ex so this means that relationships might exist right now but they don't last forever okay so inter-market relationships change over time basically they don't last forever and if you look at many of the relationships in the past you realize that during certain periods the relationship will change so for example if two markets tend to move in the same direction for the past 20 years but then this event happened let's say your sugar baby just comes in then this relationship will break they're gonna divorce if you study the past 50 years you realize that relationships will change when there's massive deflation okay especially during financial crisis where it's deflationary right so a lot of times after financial crisis you need to check okay is this relationship still impact or is it divorce or is it broken later i'll give you some examples and the second principle you need to know is that certain relationships will be stronger in certain market cycle so if you watch my economics video i talk about expansion recession trough and peak in the economic cycle so during various stages of the economic cycle the relationship can move from strong to weak to medium depending on the stage of the comic cycle okay so strength depends on it can't economic depends on the economic cycle you cannot trade in a bubble okay because nowadays markets are interconnected if you trade in a bubble you just look at forex market you don't look at stock market you don't look at commodities market you're going to get stopped a lot of time and you don't know what's the reason and most retail traders they are probably gonna be like maybe my indicator number need to change and why do inter market relationships exist is because a lot of hedge funds trade speculate on it and also a lot of hedge funds they use it to hedge a lot of hedge funds they run algorithms okay algorithms that track the strength of these different relationships and then trade based on that so as you already know the liquidity provided by hedge funds institutions is a lot if you want to master intermarket if you want to master intermarket analysis one of the most important thing you need to learn is coalition okay so you can classify correlation into two main types first one is direction second one is strength okay so correlations can be positive and of course negative and also random okay so correlations can be positive means that it moves in the same direction it can be negative means that it moves in the opposite direction and also if the two market has no relationship with each other then their relationship will be random okay and correlation can also be weak medium or moderate and also strong what you want to focus on are the strong relationships and also the positive relationships and also negative relationships don't make life so complicated and then look at this this this so there are three ways to analyze markets the first one is using correlation coefficient if you haven't went through my previous video okay collagen coefficient don't forget this and of course the easier lazy way which i don't really recommend is just look at it visually i mean you can use this to do a quick glance but don't use this to analyze okay then the other way for you technical chart traders okay this is good for you is to use this indicator so if you use trading view a lot you can actually insert a correlation coefficient indicator and it's going to tell you whether these two markets are they positively correlated most of the time or they negatively quality most of the time and if you want me to teach you how to insert this into your trading view let me know it measures everything in terms of absolute numbers so the maximum is plus 1 and then the negative is negative 1 is the same thing if the correlation is 0.8 just change it to percentage terms times 100 then you get 80 percent so basically it's the same thing just that they express it differently so don't get confused by that and if you like statistics you like numbers excel sheets you can do what i do once in a while is to calculate it manually okay manually maybe you want to measure the correlation for one month between two currencies so you take the closing price of every single day take one month's worth of data and then using excel function there's a correlation function and press enter and then you'll be able to find the collision but you know if you want to make life simple simple you don't want to do so much work i would say correlation indicator because you can look at it visually just like any other indicator so correlation you can measure it in terms of percentages so a strong percentage will be anything more than 80 you can go online and there's a lot of collision tables and it's all free and anything less than 80 percent is a strong negative collision anything more than 80 strong positive correlation anything less than 80 anything less than negative 80 percent strong negative correlation so you should focus on all these don't go and look at 10 percent 20 the relationship is not very strong they're just on a one night stand if you haven't watched my past video let me do a bit of recap so if i tell you that two markets their correlation for today is positive 95 what does this mean it means that it's very strong right but specifically what does it mean it means that 95 of the time these two markets will tend to move in the same direction how about the remaining five percent of the time the relationship is random okay and understand that there's no two markets that are perfectly correlated meaning hundred percent there's no perfect relationship in this world you quarrel with your husband's wife all the time all the time sometimes once in a while and that's normal so no correlation is perfect okay that's another important principle make sure you write that down how about for negative numbers let's say for example negative 75 this means that these two markets they tend to move in the opposite direction to each other 75 percent of the time then the remaining 15 not 15 absorbed the remaining 25 their relationship is what's that random okay if you're a currency trader make sure you look at other markets too stock market make sure you look at commodities market this means that you need to go and get your basics right what are the different commodities out there and how do they function what drives these commodities what affects the supply and demand who is the major exporter of communities who is the major importer who are the major consumers what the major producers know all these things okay and then make sure you look at bond markets bonds also go and learn properly the different types of bonds what are bond yields what are bond prices how is it related to each other so is this all let's say today if you are trading aussie yen okay if you're trading ljn you also need to compare with other currency pairs because certain currencies will tend to affect another currency because take for example canada and us they are both trading partners okay so if the u.s economy goes down gets affected it's going to affect canada as well you need to look at the other pairs that can set those with strong correlations example canadian yen as of the making of this video the correlation is about 80 which is okay so is this enough not enough not enough certain markets tend to drive another market and that market will in turn drive another market so bond markets are going to drive stock market sometimes stock market is going to drive bond markets so you need to know the relationship between stock market and bond market relationship between bond markets and commodity markets commodity markets with your currency stock market with commodities market how many relationships number one relationship between currencies over here okay number two relationship between currency and stock market relationship between currency and bond market number three four five six seven and also add one more add one more crypto so if you like to open multiple positions at one time you need to be careful because if you open many different positions in which the currency pairs they are positively correlated to each other what's gonna happen is that you're going to increase your risk exposure without you knowing it and also if you want to hatch your currency pair with another currency pair you need to open different positions that are inversely correlated to each other and also if you are a forex trader and then you trade stocks you trade crypto you trade commodities the more you need to study other markets because if you open multiple positions in your whole entire portfolio and all these positions they're correlated to each other guess what's gonna happen if everything goes down it's gonna go down all at the same time and if you want to hedge your portfolio you want to do proper asset allocation you want a balanced portfolio you need to know which assets are inversely correlated to each other but first thing first before you learn currencies and stocks currency with bonds and all the other different relationships the first thing you must learn is the relationship between different concepts so let's say if you pair a higher you can see a risk currency a commodity currency with a safe haven currency or a lower yield currency you would have a currency pair that can help you track risk sentiment because your base currency is a commodity currency it's a so-called risk currency okay even though interest rates have been cut in the past few years it went from four percent then down down then now to 0.1 percent but still relatively higher as compared to yen which is right now at negative even though the interest rate is lower as compared to the past few years investors still perceive that this is a risk currency why is it called commodity currency is because australia is a major exporter of commodities for example gold iron or copper and hence gold prices iron oil prices copper prices is going to move in the same direction as aussie yen okay so this is your safe haven currency when times are good this whole currency pair is going to go up because people are going to buy risk currencies because risk appetite increase and they are going to sell off lower your currencies safe haven to find higher yields and investors would sell off the lower yield markets not only to buy high yield currencies but also buy higher yield bonds higher youth stock market this is another reason why these different you know relationships i'm saying if you compare aussie yen with canadian yen in which the base currency is a higher yield currency high you can see and commodity currency canada exports oil that's the main export and our safe haven currency japan imports oil and hence when all prices go up during good times when inflation is high canadian yen is going to go up when times are bad these two currency pairs is going to go down so if you look at the correlation between these two currency pairs you realize that it's pretty strong most of the time today is about 80 which is quite strong and most of the time you realize that these two currency pairs tend to move in the same direction so to put things in simple terms if you pair a higher yield currency with a lower yield currency they are going to move in the same direction most of the time so another correlation i want to talk about dollar index okay if you compare dollar with for example your dollar these two would tend to have an inverse correlation if you trade you wrong understand that euro is so called anti-dollar so basically anything that is non-usd is going to move inversely as compared to the dollar and also because dollar here is the counter currency and hence when dollar goes up this entire conceived pair is going to go down dollar index is going to move in the same direction with currency pairs in which the base currency is the dollar for example dollar yen dollar swiss just make sure that you check the collision tables to make sure that the correlation coefficient is still strong make sure that they are still married they are not divorced yet and also another relationship i need to talk to you about is euro dollar and dollar yen now i see a lot of traders they make this mistake of indirectly opening a trade in a third pair even though they are not literally opening it so what do i mean by that let's say if based on fundamental factors sentiment factors technical factors you want to go long on your dollar okay you're gonna go long and let's say for some reason you want to short yen so if you want to short yen then you would buy dollar yen right because it is at the counter currency for some fundamental reasons sentiment reasons you perceive that okay investors is going to get out of yen they're going to sell off yen so the whole currency is going to go up so let's say you open two positions in your dollar dollar yen okay long positions there actually two problems with this when you loan your dollar you are essentially shopping shopping dollar right yeah when you're long dollar yen you're buying dollars so this contradicts with your dollar shot how come you're shopping dollar here and then you are having a long position here assuming that you want to speculate you don't want to hatch because if you want to hatch it's a different story let's say you want to speculate for a profit for a profit this contradicts with this and also the other thing is that if you open these two positions at the same time you are indirectly opening a position in your yen so essentially you are buying your yen in directly and if you switch to your young chart and is on a major downtrend for some reason then do you think it's a good buy not so much and the second thing is that if you open two positions at the same time you are paying the broker two times why not pay the broker just one time by trading euro yen of course your yen the spread is higher as compared to euro dollar but if you combine these two sometimes it can become higher as compared to your yen another thing is that if you times the price of these two currency pairs together you realize that it becomes the price of your yacht so let's say today your dollar the price is what is it one one euro dollar price 1.21664 the price of dollar yen which is at 109.511 the answer is equal to the price of your yen so the price of euro yen today is one three three okay let's write this over here one three three point two five zero you times these two together but you get one three now there's always a one to two pip difference but it's pretty close it's pretty close so you can see that even if you times these two together you are kind of like trading you're all yen you know what i'm saying so this is another reason why you need to understand correlations and also another main problem is that if you long these two currency pairs together it just doesn't seem right especially if you want to speculate because most of the time your dollar and million they tend to be inversely correlated if you want to hatch it is fine but if you want to speculate and make a profit buying these two positions at the same time just doesn't make sense so after you've learned your currency correlations you need to learn other things and that is stock market bond market how does currency move with the stock market how does currency move with bond market commodity market so like i said just now if you pair a higher yield currency with a low you can see aussien is going to track the higher risk markets so stock market around the world they tend to move in the same direction because investors perceive that stock is a higher risk market enhance they all tend to move in the same direction most of the time so you can look at smp 500 that's if you're trading euro food save your trading pump hang seng index but to make things simple you can look at smp 500 as a start so realize that aussie yen will move in the same direction with all the stock market so the relationship is positive okay positively positively correlated so consist with bonds you can look at u.s tenure treasury use okay and then pair it with remember your high you currency with low you can see your wrist barometer conceived pairs are going to move in the same direction as bonus okay so basically if you don't know the basics yet when times are good economy is growing bond yields are going to go up and hence stock market is also going to go up if you compare aussie yen with gold prices iron oil prices copper prices is going to move in the same direction as aussie and because australia exports these commodities so whatever the country exports is going to move in the same direction as that countries currency so if one day australia decides to remove all these exports and decide to export nothing else but cotton just cotton because the world needs more plushies cotton to make clothes and all that then what's gonna happen cotton prices is going to move in the same direction as aussie yen okay so now let's look at the relationship between stocks and bonds commodities so again we use our u.s 10-year treasury yields 10-year project yields it will tend to move in the same direction as the stock market if you're a stock market investor the more you need to know this because bond yields a lot of times it tends to be a leading indicator for the stock market this means that bond markets is going to you turn first before the stock market so when times are good stock market is going to go up agreement bond prices are going to go down and hence bond yields are going to go up okay so when times are bad stock markets gonna go down and bond yields are going to go down and bond prices are going to increase and when times are good stock markets gonna go up then inflation is going to push commodity prices higher so stocks and communities most of the time the relationship is positive or negative is positive same thing with stocks and bond yields now sometimes stocks will lead commodities once in a while commodities will need stocks but as a general guideline you realize that most of the time especially during recession bond yields are going to be a leading indicator to the stock market meaning bonds are going to new turn first before stock market newtons then followed by commodities okay so commodities that move in the same direction as the stock market you have all prices and if you want to look at a basket of commodities you can look at crb index okay so you realize that most of the time crb index will tend to move in the same direction as stock market and crb index will tend to move in the same direction as us 10-year treasury yields so again if you compare bonds with commodities the relationship between these two it is positively correlated so one thing you need to know before 1998. okay what happened was that bond prices bond prices they used to move in the same direction as compared to stock market after the asian financial crisis the relationship became inverse before the 2008 financial crisis the relationship between stocks and commodities okay they used to be very weak like they are half divorced but then they are still attached you know it's very complicated relationship is complicated but then after 2008 when financial crisis hit you know how tough times bring people together the relationship between stocks and commodities strengthened after 2008 so as for now you can actually use commodity prices to so-called predict where the stock market is going to go and use stock market prices to predict where commodities is going to go but i will say this relationship is a little bit complicated because sometimes this one tends to lead this one this one will sometimes lead the other one you know what i'm saying but bone yields in the past has always been a leading indicator for stock market and commodities market and like i said just now the relationship between stocks and crypto especially bitcoin it ranges from 40 to 75 so it's not considered strong yet but overall the relationship between stocks and crypto it is positively correlated okay by the way if you are a beginner complete beginner don't touch crypto yet because it is super volatile because elon musk can just wake up today in a bad mood and then be like i'm about to end your career i mean that's for now unfortunately but then in the future when the liquidity increases when more and more institutions take up cryptocurrency as a hedge of speculation then elon musk would lose power on crypto and maybe he's going to move on to something else like dodge coin elon coin okay let me go through a couple of examples so what i need you to do is to pause the video write down your answer only after that i'll reveal the answer then you compare did you get it right or did you get it wrong if you get it wrong it's okay because we all make mistakes you know what i'm saying what is the relationship between dollar index versus crb index remember crb index is a commodity index that tracks commodities it is a basket of communities so is this relationship positively or inversely correlated pause the video now write down the answer okay so if you have written down the answer you think about this again commodities they are priced in usd agreement when usd becomes weaker commodities become cheaper and hence investors see very cheap communities they are going to buy or sell communities they are going to buy commodities because it is very cheap so when usda goes down crb index is going to go up when u.s dollar strengthens cib index commodities is going to go down so in the past central banks what they did is that they would try to weaken the usda just to push commodity prices up so if inflation is going out of control if it is going too high central banks are going to try to strengthen the usd so that commodity prices is going to go down and also inflation will go down it doesn't get out of control so this relationship most of the time it is inversely correlated it has a negative correlation if i give you another currency new zealand yen versus snp 500 now don't cheat okay don't cheat don't go and google and don't cheat okay you can only eat cheetos so if you look at what's on the base currency this is a commodity currency what does new zealand mainly export soft commodities right so you have a higher yield currency higher currency so carry traders are going to buy new zealand dollar and sell borrow yen to buy a higher you can see for example new zealand dollar so when you pair a higher you currency with a lower yield currency safe haven currency is going to move in the same direction or opposite direction pause the video write down answer what's the answer it will be positively correlated to each other most of the time so if you go back last year march 2020 when stock market 10 you can see the same thing happening to new zealand yen when stock market recovered u-turn you can see the same thing in new zealand if you turn so this relationship is quite easy also it's quite easy it's very easy for you let me just make it a bit harder let's make it a little bit harder okay smp500 with this atf i shares high yield corporate bonds this etf is it going to be inversely correlated to s p 500 or positively correlated the answer is it is inversely no it's positively correlated why is that but just now you said bond prices is inversely correlated to s p 500 yes that is treasury bonds now we are talking about corporate bonds so if you study bonds if you don't know anything about bonds there are many different types of bonds right treasury bonds corporate bonds junk bonds high yield bonds because corporate bonds they are issued by companies right and hence when the company is doing well it's going to grow so it is kind of like the same thing as the stock market this is why both will be positively correlated to each other so my point here is this you need to study bonds study what are different types of bonds you know how does bond works what drives bond prices also studying stock market in that i've already done the stock market course on my channel go and find it yourself okay another example i know you might be trading this because it's a very popular currency euro dollar versus versus versus let's take crb index again so is it positively or negatively correlated positively correlated most of the time if you look at european debt crisis when your dollar fell 2010 early 2010 crb index dropped a lot more and it dropped at the same time and when your dollar recovered crb index also recovered so this means that when a non-usd currency drops along with crb index it tells you that okay times are kind of like bad not so good when euro dollar is going up along with crb index so this is when inflation is increasing and this one a lot of retail traders don't know because they only look at one currency they just trade this based on technical indicators they don't know what drives the currency up the only thing they know is okay because moving average is sloping up yeah that's it that's it technical nurses have it's time and place okay but you cannot just look at technical analysis alone and use that to trade investors see this as a risk currency of course some people might say this is a safe haven but then most investors they perceive euro as a risk currency and when you have a risk currency as the base currency so it kind of acts like you know the aussie dollar aussie yen the examples are shown just now okay so how about how about all prices compare this with let's say u.s treasury tenure youths okay treasury notes you does it move in the same direction or opposite direction the answer is same direction okay positively correlated how about u.s tenure use with gold prices positively or negatively quality positive positive usually you're not paying attention i'm not bringing my cane positively or negatively correlated what is god safe haven right so so-called second currency you know when people are scared they are going to buy up gold so when you're scheduling you to go down for example what's going to happen the stock market is going to go down right so investors they want to find a safe place to park their money hence gold prices is going to go up will go down it's gonna go up okay because if you think about this bond yields are down right so investors they always want to find a place where there is higher yields you know i'm saying so when youths are down the interest rate is not that attractive anymore so investors are going to withdraw their money from the bond market remember capital flow very important withdraw money from the bond market and then part their money into gold so you need to understand that gold is not like other commodities even though it is a commodity it kind of operates in a different world because it functions as a safe haven and also at the same time and alternative currency is very different from oil right okay alternative kanji that is why you cannot put everything together okay good prices all prices coffee prices orange prices natural gas prices is going to move in the same direction it's different different and there are many different ways to track gold prices you can look at gold spot and also you can look at ets one example is spdr gold trust okay so let's say if you look at another currency pair and that is one dollar comparing it with let's say oil prices let's say uk oil is this relationship positively correlated or negative if you think about this without cheating about 10 percent of uk's gdp is contributed by by what energy production and hence when all prices strengthen what's gonna happen to pound it's gonna benefit the uk economy and hence these two markets are going to move in the same direction most of the time what's the correlation positive okay when you study a currency you also need to know what the country exports what the country imports so this is why you need to study fundamental analysis what is the fundamental reason that drives a currency okay you gotta study what are the countries major exports and also imports okay and also of course the economy indicators and is the country's financial markets attractive or not because this is going to affect capital flow financial market attractiveness and also number four what are the central that countries central banks mandate basically what is their job to reduce employment to control inflation manage inflation or to prevent the currency from strengthening there's a lot of different mandates also whether this currency is a popular reserve currency or not is it being held by central banks all around the world basically amounts of reserves help these are some of the factors you need to study before you even trade a currency and what else is the currency perceived as a high yield currency or risk currency or is it perceived as a safe haven currency so maybe this one for another video actually i've covered this in the past but maybe it's for another video i don't know what title to put this at but we'll think about that next time ken so i hope that this crash course helped you understand the different types of markets and how do they move in relation to each other do you want more fundamental analysis video sentiment analysis or intermec analysis video let me know down in the comment section below okay so then i'll talk to you in the next video bye [Music]

Channel: Karen Foo (Britney)

Views: 91,446

Keywords: intermarket analysis, intermarket analysis karen foo, intermarket analysis forex, intermarket analysis course, trading course, free trading course, free trading courses online, intermarket analysis john murphy, forex trading, intermarket relationships, intermarket correlation, forex fundamental analysis, intermarket carry trade, intermarket trading strategies, intermarket technical analysis, correlation trading strategy, correlation trading forex, correlation trading, forex

Id: RivkTEu6PjY

Length: 40min 53sec (2453 seconds)

Published: Tue Jun 15 2021