During operations on the Forex market. Surely you also know that this market has many relationships with other financial markets. However, those relationships are often not fixed. Therefore, we need to know how to do technical analysis between markets to capture that valuable information. At the same time, optimize your trading strategies. Let’s see Learn Forex Trading‘s article!
What is inter-market technical analysis?
Intermarket technical analysis is an analysis method. Helps us look at the correlation between different asset classes in different markets. This method comes from the principle that what happens in one market can affect other markets. And studying those relationships will benefit the trader.
Instead of analyzing assets or markets individually. Then you go to technical analysis of inter-market. Will be able to review two or more assets at the same time. Typically stocks vs bonds or currencies vs commodities.
Intermarket analysis is not about trading multiple assets or markets at the same time. But when trading, we will see how different assets and markets are correlated. From there, you can have a more comprehensive view to know more signals for the assets being traded. To understand better, you can learn through forex books
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What are the 4 main branches of the financial market?
To understand Technical analysis between markets. First of all, we need to understand the branches of the financial market. We will go through each type to be able to access this method more easily. This is extremely important news forex.
Stock market
The stock market is perhaps the most popular. This is where businesses list their shares to be able to raise capital (IPO). And they will be bought and sold by traders.
Stocks are traded on exchanges. Those exchanges are licensed organizations and managed by competent authorities. Exchanges in any country will list stocks of companies in that country. Or foreign companies registering trading activities in that country.
Bond market
Bonds are also a type of collateral. It is issued by businesses or the state to borrow capital to operate. Or sponsor investment projects. In which the main investor lends money to the issuer at a predetermined interest rate for a specified time.
The bond market is also known by other names. Such as the debt market, and credit market. And it is also an investment channel for both issuers and investors. The bond market also reflects the operating situation. The economy of a certain country, especially government bonds.
Currency market – foreign exchange
The currency and foreign exchange markets can be separated into two different markets.
The currency market is a place for foreign currency transactions with very large volumes between financial institutions. Individuals can also invest through these funds or purchase certificates of deposit. Treasury bills from banks or state treasuries.
The foreign exchange market is similar to the currency market. It is a place where currencies are traded, but trading in this foreign exchange market does not take place directly in cash. Which participants will have to buy or sell based on the exchange rate of the currency pairs with each other?
Commodity market
The commodity market is a place for producers and consumers to trade goods and metals with each other. This is called the spot commodity market.
However, commodity transactions will take place more commonly in the derivatives market. Like futures or options, you place a buy order at a certain price but will not trade it physically immediately.
Other markets
Above Self-Study Forex has shown 4 branches in the main market. But in reality, today’s financial market also has countless other branch markets. But in general, it has little or no impact on the currency market we are trading. Therefore, in the technical analysis of inter-market, we can ignore it.
Other markets include the cryptocurrency market, derivatives market, and OTC market.
Meaning of inter-market fundamental and technical analysis
Intermarket technical analysis is a valuable method for medium and long-term analysis. The analysis is based on the correlation between assets and markets. This can help you confirm the trend or signal a reversal more accurately.
When analyzing intermarkets, you need to consider many different markets at the same time. Based on many factors and in general they are like we are analyzing the overall macro economy. From that overall view, you will know the sectors and markets. Or a specific asset is trending at a profit. And based on that, find transactions to help you increase your account balance
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It can be said that this is also the reason why investors consider this type of analysis an important analysis method. To analyze intermarkets most effectively, you need to understand macroeconomic indicators. Know how to analyze and comment on the financial market landscape.
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Pay attention when doing fundamental and technical analysis of the market
When analyzing intermarkets, you need to keep in mind that correlations are not immutable. At one point the correlation between assets A and B could be strong above 0.7. But that correlation tomorrow or the day after tomorrow could change. Or even when there are major economic fluctuations. Those two assets may no longer be correlated.
In fact, in different economic cycles, you can see a lot of changes in the correlation between assets. They can decrease or increase and can be lost or reversed from positive to negative.
In general, the correlation of Technical analysis between markets is not a constant. It fluctuates continuously through different periods.
However, on an overall level. You need to understand that we cannot rely solely on inter-market analysis to make trading decisions. Which needs to be combined with fundamental analysis. To evaluate the macro situation to see what cycle the economy is in at that time. You must also combine it with the Technical analysis method to find appropriate trading signals.
Epilogue
Hopefully through the above article of Learn Forex Trading. Investors have a more general view of inter-market technical analysis. Follow our articles to learn more about inter-market correlations. From there, apply it to your trading strategy to gain higher profits.
