Leading Indicator Markets & Segregated Funds
There are two key advantages to doing your Forex business on a platform that also handles futures business.
• You can keep the bulk of your funds on the futures side of the account where your money is segregated from the brokers operating funds
• You have access to free quotes and charts on leading indicator markets such a U.S. Treasury bonds and notes & U.S. stock indices.
During U.S. market hours, when the currency markets tend to become a bit choppier, U.S. Treasury prices and stock indices can sometimes provide a hint as to price movement in the different currencies. We generally don’t teach parallel analysis, feeling the only time to trade is when you have a specific set-up and signal in one market. However, given the influence of interest rate markets, and stock indices there are times, such as today, where the leading indicator markets do arguably provide a “heads up”.
This collage of 15-minute charts below demonstrates how a rally in 10-year notes prompts stock indices to top out, leading to a reversal in both stocks and fellow asset class market AUDSUSD. The white vertical line on each chart highlights the same time on each chart – - 3:15 GMT, 10:15 EDT. Often times a sharp rally in U.S. treasuries spells a “flight to quality” move which means money coming out of asset class markets, such as stock indices and carry pairs.
The treasury future chart is lower left, the S&P 500 lower right, and the Aussie is on top – all are 15 minute charts. What made the Aussie an even more attractive sell set-up is that it is down on both its daily trend and 4-hour trend – as represented by the yellow line and the teal colored line above price. You will likely find that you have more confidence in taking a sell signal on a lower time frame chart such as the 15 when those higher time frame trends are already pointed lower. The up-tick in T-Notes prior to the accelerated down-move in the asset class market’s S&P 500 and AUDUSD proved a nice bonus.
To open a demo account where you can trade both futures and Forex markets go to: BestDirect8 Account
Jay Norris is the host of Live Market Exercise, a complimentary service for clients of Clovernest Financial Group, and the author of Mastering The Currency Market, McGraw-Hill, 2009. Jay’s second book, Mastering Trade Selection and Management, will be in book stores in May.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor!