Every Sunday evening Brannigan leads a Periscope trader training session to prep for the week ahead, share a trade strategy, and review the Axia Team's focus areas from the week before. In this session we look at how to trade correlated markets and how to setup your price ladder to create an edge in your trading.
When it comes to trading correlated markets, the relationship tends to be identified during news releases and when flows enter the market. One of the key reasons behind why correlations exist is that large participants hedge positions and buy one market while selling another.
Brannigan shows us to assess correlations and make sure that they actually exist and have strength. We sometimes see two-way correlations and one-way correlations. For example, we have recently seen an inverse relationship between the Dax and Eur, and a one-way positive relationship between the German Bund and Spanish 10 Year bonds, both bidding together, but not offering.
The key to trading correlations is to first ensure that a strong correlation exists, and to then trade it when there are flows present or into a technical breakout. Also note, the same correlations don't always exist in the same way, which is why it is important that we do correlation analysis.
A tool you can use to assess market correlations for yourself is Metastock Xenith. Use this link to get two extra months free when you purchase one:
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The second half of this Periscope involves Brannigan showing us how he sets up his price ladders. We look at the best way to setup your ladders, what markets to position where, clip settings, time and sales, sizes of ladders and colors. Small edges are created by using the right tools and shortcuts and accumulate into one larger edge.
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