I open this thread to discuss about topic as the title said: to exploit the divergence between multiple correlated assets. Let's do this together. I believe traders on the street look at multiple assets and react according to the prevailing theme.
For example in an economic ecession, as stock rallies when sign of confidence, commodity price and commodity/emerging market currency will also get a boost as they share the "same energy" in a trading theme..
Sometimes they just sell bond when stocks rally. I don't know why, that's what happened. Although bonds and stocks have many reasons for moving together and have been moving together for few months, in very short period - second, minute, hour, few days they still go against one another. Maybe because of programmed algo or trader's habit, misinterpretation, etc - as i call the phenomena "marriage couple's trouble", because they have short term trouble, but they're still be together for years.
I recognize which we often call "Market correction" is actually market adjustment, or money flow rotation. We often look at one market and wonder: why did it make a correction move? And then the answer are simple, but still not totally satisfied: some players take profit, bad news, big boys hunt for stoploss, etc..
When i see market theme changes, i also see something happens in other market and the way they move hand in hand together before the "correction" and after the "correction", they're seem like strangers. So sad.
People tend to get excited about the contradiction between Gold and Dollars, Gold and Stock, Bond vs Stock, correlation between Commodity & stock vs Gold and some risk on-off currency. Conventional wisdoms being said like facts. Although as a trader, we cannot simply take it to our heart.
When i look at the multi asset performance, then i ask myseft what happened in those years: 2017 is for international stock, 2018 is a phenomenal for Dollar, 2019 Dollar slowly risen with US Gov's bonds & Gold, last year was everything against Dollar, I wonder why stick to one market.
Can price tells another the story?
*i'm sorry if my English is hard to read. Im not native speaker. Although, this thread is not investment advice or anything; im still learning and i will mostly post case study or stuff i found interesting.
For example in an economic ecession, as stock rallies when sign of confidence, commodity price and commodity/emerging market currency will also get a boost as they share the "same energy" in a trading theme..
Sometimes they just sell bond when stocks rally. I don't know why, that's what happened. Although bonds and stocks have many reasons for moving together and have been moving together for few months, in very short period - second, minute, hour, few days they still go against one another. Maybe because of programmed algo or trader's habit, misinterpretation, etc - as i call the phenomena "marriage couple's trouble", because they have short term trouble, but they're still be together for years.
I recognize which we often call "Market correction" is actually market adjustment, or money flow rotation. We often look at one market and wonder: why did it make a correction move? And then the answer are simple, but still not totally satisfied: some players take profit, bad news, big boys hunt for stoploss, etc..
When i see market theme changes, i also see something happens in other market and the way they move hand in hand together before the "correction" and after the "correction", they're seem like strangers. So sad.
People tend to get excited about the contradiction between Gold and Dollars, Gold and Stock, Bond vs Stock, correlation between Commodity & stock vs Gold and some risk on-off currency. Conventional wisdoms being said like facts. Although as a trader, we cannot simply take it to our heart.
When i look at the multi asset performance, then i ask myseft what happened in those years: 2017 is for international stock, 2018 is a phenomenal for Dollar, 2019 Dollar slowly risen with US Gov's bonds & Gold, last year was everything against Dollar, I wonder why stick to one market.
Can price tells another the story?
*i'm sorry if my English is hard to read. Im not native speaker. Although, this thread is not investment advice or anything; im still learning and i will mostly post case study or stuff i found interesting.
