Inter-market relationships - Trading-Lab

breakout · #1 11-19-2007, 04:50 PM

hello,

I would like to better understand how different markets interact with each other in order to have a broader picture of how domestic (US) and global markets work. For example, it is well known that when interest rates rise, stocks usually suffer. But what about all the other relationships? at first glance, it seems like there might be several combinations available.

ProTrader · #2 11-19-2007, 07:26 PM

what "other" kinds of market relationships are you looking for exactly

Leth · #3 11-20-2007, 01:00 AM

how does knowing how or why markets move in relation to each other make you a better trader?

hedger · #4 11-20-2007, 01:37 PM

you are right, there are several. For example:

bonds vs stocks
dollar vs stocks
gold vs stocks
dollar vs bonds
dollar vs gold

you want more?

as you can see there's a whole bunch of them and there's a whole slew of economists, portfolio managers constantly watching them to figure out where the economy is headed.

breakout · #5 11-20-2007, 07:54 PM

Quote:

Originally Posted by Leth

how does knowing how or why markets move in relation to each other make you a better trader?

It's not really gonna make me a better trader as prices adjust instantly to news as they come out, but I think it's good to know how different markets interact if you want to do some longer term investing as well. The more you understand how the economy works, the higher the chances you will do well on your long term investments, am I wrong?

Leth · #6 11-20-2007, 11:40 PM

please define longer-term investing. how does understanding how/why the economy works raise your chances that you will do well?

i assure you my intent is not to change your way of thinking. my intent is simply to be a mirror that allows you to view your own reflection and experience one of the rare things in life (an aha moment). also, i would never think of telling you whether you are right or wrong...only you have the right to do that; which is why i never give advice...only perspective.

im looking forward to your answers

leth

daytraderB · #7 11-21-2007, 01:17 PM

this is a very interesting subject. Looking forward to your answers too. We might come up with some interesting insight.

ManhattanTrader · #8 11-26-2007, 05:21 PM

you might want to check out John Murphy's books. They have everything you need when it comes to inter-market relationships

breakout · #9 11-26-2007, 06:31 PM

Leth, daytraderB,

I'm not exceptionally good at defining things, but I'll try my best

When I say long term investing I refer to any investment activities which rely heavily on fundamental data rather than technical analysis. An example of long term investing might be the well known buy and hold strategy, where you pick a stock based on its fundamentals and growth prospects and you hold it for several years/decades.

knowing how different markets interact with each other might help me time my entries on my longer term plays. For example, if interest rates are on the rise, stocks will probably suffer in the near future. Thus, giving me a better entry on my longs.

please do not hesitate to tell me I'm wrong. I'm here to learn.

Leth · #10 11-27-2007, 12:19 AM

first you have to know whether you want to make a lot of money or a little money.

trading + more risk = making alot of money
investing + less risk = making a little money.

here is an analogy....

trading
buying - we go to the super market to buy (go long) a loaf of bread. we trade money in return for bread. we get the most out of the bread by consuming it (we make money). we then buy more bread. we repeat the process.
selling - we are a bread maker, we go to the super market and sell (go short) our bread. we trade bread in return for money. we get the most out the bread when buyers consume it (we make money). we then make more bread. we repeat the process.

buy and hold (investing)
buying - we go to the super market to buy (go long) a loaf of bread. we trade money in return for bread. we leave the bread on top of our kitchen counter and hope that it gets better with age (buy and hold) because, according to the baker (analyst), "it has high quality ingrediants" (fundamental information). for some reason, the baker fails to tell us when to consume it (exit). we get very little out of the bread if anything (we make very little or no money). we then buy more bread, this time a different recommendation from the baker (analyst). we repeat the process.
selling - we don't sell (go short) bread because we are bias to buying only.

which sounds more logical; trading or buying and holding (buying and hoping)?

how does using fundamental information help you time entries on long-term plays? more importantly, how does using fundamental information help you time exits on long-term plays?

just a perspective

btw...i will still never tell you if your right or wrong.

everyone has to ultimately make thier own decision based upon information thats most logical to them.

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#1 11-19-2007, 04:50 PM
breakout Member Join Date: Jun 2007 Posts: 63	Inter-market relationships hello, I would like to better understand how different markets interact with each other in order to have a broader picture of how domestic (US) and global markets work. For example, it is well known that when interest rates rise, stocks usually suffer. But what about all the other relationships? at first glance, it seems like there might be several combinations available.

#2 11-19-2007, 07:26 PM
ProTrader Senior Member Join Date: Jun 2007 Posts: 109	what "other" kinds of market relationships are you looking for exactly

#3 11-20-2007, 01:00 AM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	how does knowing how or why markets move in relation to each other make you a better trader? __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School

#4 11-20-2007, 01:37 PM
hedger Member Join Date: Jun 2007 Posts: 38	you are right, there are several. For example: bonds vs stocks dollar vs stocks gold vs stocks dollar vs bonds dollar vs gold you want more? as you can see there's a whole bunch of them and there's a whole slew of economists, portfolio managers constantly watching them to figure out where the economy is headed.

#6 11-20-2007, 11:40 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	please define longer-term investing. how does understanding how/why the economy works raise your chances that you will do well? i assure you my intent is not to change your way of thinking. my intent is simply to be a mirror that allows you to view your own reflection and experience one of the rare things in life (an aha moment). also, i would never think of telling you whether you are right or wrong...only you have the right to do that; which is why i never give advice...only perspective. im looking forward to your answers leth __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 11-21-2007 at 12:39 AM.

#7 11-21-2007, 01:17 PM
daytraderB Member Join Date: Jun 2007 Posts: 63	this is a very interesting subject. Looking forward to your answers too. We might come up with some interesting insight.

#8 11-26-2007, 05:21 PM
ManhattanTrader Member Join Date: Jun 2007 Posts: 45	you might want to check out John Murphy's books. They have everything you need when it comes to inter-market relationships

#9 11-26-2007, 06:31 PM
breakout Member Join Date: Jun 2007 Posts: 63	Leth, daytraderB, I'm not exceptionally good at defining things, but I'll try my best When I say long term investing I refer to any investment activities which rely heavily on fundamental data rather than technical analysis. An example of long term investing might be the well known buy and hold strategy, where you pick a stock based on its fundamentals and growth prospects and you hold it for several years/decades. knowing how different markets interact with each other might help me time my entries on my longer term plays. For example, if interest rates are on the rise, stocks will probably suffer in the near future. Thus, giving me a better entry on my longs. please do not hesitate to tell me I'm wrong. I'm here to learn.

#10 11-27-2007, 12:19 AM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	first you have to know whether you want to make a lot of money or a little money. trading + more risk = making alot of money investing + less risk = making a little money. here is an analogy.... trading buying - we go to the super market to buy (go long) a loaf of bread. we trade money in return for bread. we get the most out of the bread by consuming it (we make money). we then buy more bread. we repeat the process. selling - we are a bread maker, we go to the super market and sell (go short) our bread. we trade bread in return for money. we get the most out the bread when buyers consume it (we make money). we then make more bread. we repeat the process. buy and hold (investing) buying - we go to the super market to buy (go long) a loaf of bread. we trade money in return for bread. we leave the bread on top of our kitchen counter and hope that it gets better with age (buy and hold) because, according to the baker (analyst), "it has high quality ingrediants" (fundamental information). for some reason, the baker fails to tell us when to consume it (exit). we get very little out of the bread if anything (we make very little or no money). we then buy more bread, this time a different recommendation from the baker (analyst). we repeat the process. selling - we don't sell (go short) bread because we are bias to buying only. which sounds more logical; trading or buying and holding (buying and hoping)? how does using fundamental information help you time entries on long-term plays? more importantly, how does using fundamental information help you time exits on long-term plays? just a perspective btw...i will still never tell you if your right or wrong. everyone has to ultimately make thier own decision based upon information thats most logical to them. __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 11-27-2007 at 07:27 PM.