I’ve been trading overall for 2 years, stocks and crypto for 2 years and forex for a year. This is my culmination of the knowledge I’ve obtained thus far involving general trading knowledge between all three markets. Most the markets intertwine in some type of way. Learning how to use this information to your advantage can help you tremendously. If you’re a forex trader here’s 2 of the most important economies to study, The us economy and the uk economy. The us dollar and the euro have two of the largest economies in the world behind them. With this being said both economies have a wide influence on the markets.
Here’s how a trader could use foreign exchange to trade the stock market or vice versa. When the stock market is down the dollar is up. So the main indexes in the stock market more times then none move opposite of the us dollar. A stock market trader could use something like the usd/cad forex pairing or better the us dollar index to make an overall decision in the stock market dependent on if the pairing is up or down. When you add the volatility index (vix) also known as the fear index you can plan your trading strategy around the movement of these assets. When the vix is up there isn’t any fear from the forex trader, simply buy the dollar. In the stock market the vix being up could mean to buy the dip, close a swing trade, or your investments/open positions are down. The options community is likely to know the most about the vix, but it’s no reason to fear its a reason to hedge.
A forex trader should also have some type of knowledge of the futures market, at the least be able to read a futures chart and find the tickers you may need. Some of the futures charts you could watch or quite possibly trade are euro fx futures (6E1!), S & P 500 index futures (MES1!), Dow Jones Industrial Average futures (MYM1!), Nasdaq 100 futures (MNQ1!), and us dollar index futures (DX1!). The stock market index futures are mini versions of the same futures indexes, meaning it cost less to open a contract on them. The futures market is directly corelated with foreign exchange and the stock markets. You’ll see that forex futures influence forex pairings and the beautiful thing is you could use this knowledge to make money in multiple markets.
The crypto market doesn’t have much if any influence by the other markets. But this could be changing as the companies that make up the stock market gain interest in crypto currencies like bitcoin and Ethereum. Crypto’s focus in retail ownership gives it a lot of influence by retail traders. You’ll notice that crypto tends to follow forex chart patterns very closely. This makes it a bit easier to trade, but the volatility of crypto of crypto is what to worry about. This doesn’t mean that crypto may not be our new hedge against inflation. Recently we’ve seen the crypto market being used as a hedge against the stock market. As retail traders/investors allocate capital from stocks to crypto and technology continues to advance, we could see the crypto market begin to have a lot of stock market influence. That’s just a theory though. As of now crypto is just another lane of investment, although it’s so much more then that.
With the proper information you could make trading and investing so much easier for you. Money maybe the goal but longevity should be the focus. Creativity and having an open mind can make you different from your peers. A trader doesn’t just listen to someone because they seen them make money. A trader asks questions, like how did you make the money? It’s cool you made money, but was it from trading? To get past the steep learning curve in this business to be willing to ask question and be willing to look for the answers to the questions you have. Read all the articles you can and learn as much as you can about the way prices move. You have to figure out why the price is moving over just seeing price move and making a decision off of that. Simply understanding the market can push your isn’t enough, but its a great start. Add on understanding yourself and how you may react to the market can take your trading to new heights. Study hard and go get it, believe in yourself. Even if no-one else believes in you.