Why We Trade Multiple Markets
Why we trade multiple markets
One of the things that crossed my mind today is the fact that I’ve gotten a lot of people asking me about what happens if they can’t trade the stock markets? What happens if I just can’t trade the stock markets because maybe it’s moving down too fast and with a huge amount of volatility I just can’t seem to find a good area in a good opportunity. What I say is that for that exact reason it’s important to trade multiple markets.
When we look at where money can go we typically look at four major areas.
- Equity markets (Stock Markets)
- Bond markets
- Cash markets (Forex / Currencies)
- Commodities (Futures)
Typically money doesn’t just disappear, it changes hands. Not only does it typically change hands but it also typically changes locations, especially in periods of extreme volatility. When money flows out of the equity markets it flows into other places. In our current market environment we are seeing money flow out of the stock markets and into the cash markets, specifically the US dollar. The US dollar is continuing to gain in value relative to all other currencies as we are seeing a huge influx to the dollar as everything else seems to be falling. The other thing we’re seeing rise is bonds as the market is falling during this period of high volatility. Commodities however are continuing to fall, most notably oil. The thing to consider is that it is not always this correlation but the ability to trade multiple markets will always give you an opportunity.
It’s okay to not find trades in volatile markets, but it does not mean you should be paralyzed by a fast moving market because you don’t know multiple markets. Take the time to understand both futures, and forex so that in the instance that you don’t have access to the stock markets you still have multiple opportunities.
Chuck Fulkerson is the Co-Founder and Senior Trader at TradersArmy.com. Fulkerson helps train individuals across the globe in what it means to be a successful investor and trader. He currently trades options as a swing and position trader; futures as a day trader; and equities as an investor to round out a truly diversified portfolio.
