Trading Markets and The Economy

Intermediate • Course 3

When analysing an asset, traders consider technical analysis, pricing, trading plans, etc. However, it is also important to take into consideration external factors which may affect the price of the asset. For example, market conditions, correlations and the economy.

Correlations

A correlation is a relationship between two or more assets which are proven statistically. Assets which are correlated can either be positively correlated or inversely correlated. A positive correlation means the two assets move hand in hand. For example, Gold and Silver increases and decreases similarly. An inverse correlation is when one asset is increasing while the other is decreasing. Correlations are also important in order to ensure traders are not overexposed.

Market conditions

Market conditions refers to the state of a current sector of asset category. For example, the stock market, technology market or cryptocurrency market. Traders take the market conditions into consideration in order to determine how the price is likely to move in the medium to long term. Traders should also note that assets within the market tend to move hand in hand. For example, during a stock market boom, most stocks are increasing in value. During a stock market crash, most stocks are declining in value.

The economy

The economy of course has a strong influence on how traders invest within the financial trading markets and as a result this influences the price of assets. For example, during recessions, investors prefer cash investments, bonds and safe-haven assets. Whereas, during economic growth, investors prefer to invest in more risky assets such as stocks, ETFs, cryptocurrencies and derivatives. When evaluating the economy, investors analyse inflation, interest rates, fiscal policy and economic data.

So even though analysis of a specific market and the economy is not necessarily used to pin-point an entry and exit point, it is used to ensure you are trading in the right direction. This is specifically relevant when trading in the medium to longer term.

Derivatives are complex instruments and come with a high risk of losing money due to leverage. You should consider whether you understand how derivatives work and whether you can afford to take the risk of losing your money

Need Help? Visit our Help Section

NAGA is a trademark of The NAGA Group AG, a German based FinTech company publicly listed on the Frankfurt Stock Exchange | WKN: A161NR | ISIN: DE000A161NR7.

The website is operated by NAGA Capital Ltd which is authorised and regulated by the Financial Services Authority Seychelles (FSA) under licence No. SD026. The registered address of Suite 3, Jivan’s Complex, Global Village, Mont Fleuri, Mahe, Seychelles. Tel: +248 4373121

Partner Companies: NAGA Markets Europe Ltd, authorised and regulated by the Cyprus Securities and Exchange Commission ("CySEC") under license No. 204/13 with registered address at Agias Zonis 11, Limassol, 3027, Cyprus and NAGA Global (CY) Ltd, with registered address at Nikokreontos 2, NICE DREAM, 6th floor, Flat/Office 601, 1066, Nicosia, Cyprus.

RISK WARNING: Derivatives are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money. This is not investment advice. Trading with NAGA Trader by following and/or copying or replicating the trades of other traders involves high levels of risks, even when following and/or copying or replicating the Lead Traders. Such risks include the risk that you may be following/copying the trading decisions of possibly inexperienced/unprofessional traders, or traders whose ultimate purpose or intention, or financial status may differ from yours. Before making an investment decision, you should rely on your own assessment of the person making the trading decisions and the terms of all the legal documentation.

Restricted countries: NAGA Capital Ltd does not provide services for the residents of certain countries, such as Afghanistan, Albania, American Samoa, Anguilla, Australia, Austria, Barbados, Belarus, Belgium, Bermuda, British Indian Ocean Territory, Bulgaria, Burkina Faso, Canada, Cayman Islands, Central African Republic, Christmas Island, Cocos (Keeling) Islands, The Democratic Republic of the Congo, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Falkland Islands (Malvinas), Finland, France, Germany, Gibraltar, Greece, Guam, Haiti, Heard Island and McDonald Islands, Hungary, Iceland, Islamic Republic of Iran, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, Democratic People's Republic of Korea, Latvia, Libyan Arab Jamahiriya, Liechtenstein, Lithuania, Luxembourg, Mali, Malta, Montserrat, Mozambique, Myanmar, Netherlands, New Zealand, Norfolk Island, Norway, Palestinian Territory, Occupied, Pitcairn, Poland, Portugal, Romania, Russian Federation, Saint Helena, Ascension and Tristan Da Cunha, San Marino, Senegal, Serbia, Slovakia, Slovenia, Somalia, South Georgia and the South Sandwich Islands, South Sudan, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Republic, Trinidad and Tobago, Tunisia, Turks and Caicos Islands, Uganda, Ukraine, United Kingdom and any other countries where the citizens have British proof of identity (i.e. British Virgin Island, Gibraltar, Isle of Man etc.), United States, U.S. Minor Islands, Vanuatu, Virgin Islands, British, Virgin Islands, U.S., Yemen, and Zimbabwe.