subject: Forex Trading: Importance Of Intermarket Relationships [print this page] Forex Trading: Importance Of Intermarket Relationships
When trading, it's important to have a firm grasp of all of the things that can influence forex prices. If you don't know how to interpret the variables or understand how markets interact, you won't have all of the tolls you need to make an informed decision about your deals. forex prices are affected by capital and trade flows as well as commodities and stock and bond markets and the way different markets interact can have a big affect on the playing field.
The forex market is the world's biggest market, but it can still be affected by the things that are happening to smaller financial markets. This is largely because changes to individual markets can affect the economy of the country of origin, For example, a dip in the British stock market could lower the value of the pound or a boom in the US bond market could boost the power of the dollar. This means it's a good idea to pay attention to intermarket relationships when trading.
While it may seem that some relationships aren't directly related to the market you're trading in, the relationships between markets can be quite complicated and intricate. So it's always a good idea to ensure you've done your homework and know the existing relationships and how they can affect the currency pairs you are trading.
Keeping an eye on what is happening in other financial markets can sometimes give you an early warning of what is about to happen in the forex market and it's knowledge you could use to your benefit. By knowing what to look for in commodity, bond and stock markets, you can enjoy the chance to be looking for the same opportunities as some of the world's biggest institutional investors.
Thing to look out for are fluctuations in other markets that are both positive and negative, to help you predict how they could affect the forex market and your potential investments. For instance, if you see that the value of gold is sharply increasing, you can stay vigilant for a corresponding rise in the value of the AUD/USD.
Different financial markets can affect the forex market in different ways, but if you want to be making the same kind of trades as some of the biggest investors you need to make sure you know intermarket relationships inside out. Currency trading successfully means knowing your markets and playing them well.
