The purpose of intermarket trading is to identify and capitalize on synergies that exist across different but connected marketplaces. We will hunt for the similar trading conditions in two other markets so that we can trade both markets using the same strategy. Consider the scenario in which we would like to trade the Euro/US Dollar pair using an IRESS trading platform, for example. An excellent example of intermarket trading can be found here due to the fact that we are now aware that the market conditions for trading the USD/JPY and the EUR/USD are the same. If both currency pairs are unrelated to one another yet have similar levels of trading volume, we can trade them using the same strategy.
We shall go into detail on the various IRESS trading tactics employed by traders. A hybrid strategy is used to implement many of these techniques.
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One of the simplest trading platform methods is to buy the market and sell it. Using this approach, we purchase the market when it is in a position that lowers our risk and sell it thereafter when it increases our return. For example, let’s imagine we wish to trade the EUR/USD pair.
- Bounce Trade: This straightforward trading method is another popular one. A trading method known as a “rising channel” is what this is. We aim to buy a market when we notice a significant upward movement by first looking for one that is in a trading position where we wish to reduce our risk. We may observe, for instance, that the JPY/USD is in a trading environment where it could decline.
- Fibonacci Retracements: One of the more sophisticated tactics, it is applied in many markets. This trading approach is based on the notion of searching for Fibonacci retracements. A Fibonacci retracement occurs when a market reaches a level of support or resistance. The market is said to be in a “zigzag” trading pattern when two Fibonacci retracement levels are seen in a row; this is a favorable trading scenario for those that employ this technical trading method.
This example will show you how to increase your trading profits by utilizing intermarket trading tactics. If you want to trade the USD/JPY pair, for example. You are aware that there is a good likelihood the USD will lose ground to the JPY. Numerous other factors also point to a potential decline in the JPY’s value relative to the USD. Using intermarket trading tactics in this configuration is a terrific idea. You can tell that these markets are unrelated by looking at the trading volumes in the USD/JPY and JPY/USD pairs. Compared to the JPY/USD pair, the USD/JPY pair has a substantially higher trading volume. Because of the lower expected returns, it is a significantly riskier market to trade. Also, you can see that from the start of the year, the USD/JPY pair has been creating a support level near JPY 120. You can use this Fibonacci retracement level to increase your trading gains.
This extremely advanced trading strategy can be fairly profitable for experienced traders, provided that they follow all of the necessary steps. You can play both sides of the market utilizing this method by using the same trading approach and looking for similarities between two connected marketplaces. This is a trading approach that involves a high level of risk and calls for substantial knowledge of technical analysis. It has the potential to be incredibly profitable for those who use it in the right way. If you are interested in implementing this method to raise the amount of money you make from trading, you should read our whole tutorial.