Forex Course

209. Inter Market Analysis At A Glance


Internet analysis is referred to as a method leveraged to analyze markets by assessing the correlation between various categories of assets. This means that the ups and downs happening in one market may or may not impact the other markets. Therefore, a thorough study of their relationships is beneficial to the trader.

Understanding The Basics Of Intermarket Analysis

It works with multiple financial markets and asset classes related to each other to identify strengths or weaknesses. Rather than assessing the asset classes or financial markets individually, Inter-market analysis evaluates different correlated asset classes or financial markets like bonds, stocks, commodities, and currencies. Such analysis expands on looking at each market or asset individually while comparing them with each other.


Correlation Of Intermarket Analysis

Performing an Intermarket analysis is simple as you would need access to only data. And there is no dearth of data in today’s time; you can find them broadly and access them for free. Charting programs and spreadsheets are other things that you need for this analysis. Here you will compare one variable with another in a different data set.

In this analysis, a positive correlation can move up to +10, signifying a positive and ideal correlation between two data sets. Additionally, in a negative or inverse correlation, the value can go as down as -1.0. When the reading comes close to the zero lines, it will reflect that there lacks a discernible correlation among the two samples.

An ideal correlation between two variables for an extended time period is very uncommon. However, analysts generally agree that reading maintained below the -0.7 level or above +0.7 level is quite prominent. This level depicts around a 70% correlation. Moreover, when the correlation changes from positive to negative, it indicates an unstable relationship, which is not ideal for trading.

Please take the quiz below to know if you have got the concepts right. Cheers! [wp_quiz id=”102178″]


By Reddy Shyam Shankar

I am a professional Price Action retail trader and Speculator with expertise in Risk Management, Trade Management, and Hedging.

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