Prop Trading And Intermarket Analysis

Prop Trading And Intermarket Analysis Introduction

In this segment, we will dig deeper into prop trading intermarket analysis. If you are a frequent reader, you are aware of the tools we specialize in such as price ladder, market profile, or footprint. On top of these tools, Axia Traders implement additional Intermarket techniques such as understanding the correlations, when they work and when they don’t as well as other important market operations such as options expiry (OpEx). Overlaying these techniques on top of each other can give you an extra conviction you can lean on in your trading setup. Let’s have a look at these techniques and how they can improve your trading game.

Option Expiry Intermarket Strategy

LONG AND TRAPPED. That’s how some traders might feel trading the options expiry in 2022. In 2021, options expiry week presented some amazing buy-the-dip opportunities. But the landscape has changed and those that are waiting to repeat the trade of 2021 might have a hard time doing so.

Option Expiry Market Strategy

The name of the game is flexibility. Patterns work until they don’t. It is our goal not to focus on the absolute, but on the situation in which the patterns we find valuable repeat.

The more people trade the same idea, the more people gooing to be trapped trading the stuff that no longer works until they got burned multiple times. But what if those that traded the long, are long and trapped?

Option Expiry Of 2021 - chart going up in 2021 with dip buy strategy before expiry.
Option Expiry Of 2021

Your goal as a trader is to think in terms of scenarios. If this is not a dip buy what is going to happen? Document this trade, save it to your playbook, put a name to it and keep an open mind. Most importantly, observe the price action during the week and the first day after the expiry.

How To Trade Correlations

There is a saying in trading that correlations work until they don’t. It is helpful to understand the general correlation theme between markets but nothing should be taken as a hard strict rule. Especially not in the markets when things are changing all the time. This is a typical hurdle new traders need to deal with. They read on the internet that X is correlated to Y and take it for granted. Then they become surprised when this rule suddenly does not apply.

How To Trade Correlated Markets

When we focus on trading correlations, we would like to understand the specific situations that trigger correlation dynamics and leverage those situations to our advantage.

Image of two charts: S&P500 and Oil. One is going up, the other is going down suggesting the inverse correlation.
When correlations matter

A good example of such a situation triggering inverse correlation was the announcement that Germany won’t impose sanctions and won’t stop buying Russian oil. In that situation, S&P went bid and Oil offered in a very highly correlated matter.

So rather than being fixated on the general order of correlations, try to understand what specific themes can trigger correlations and how you can use them to your advantage. You have to ask yourself: what is the fundamental reasoning for correlations to work? Look for specifics, when does this correlation matter? Don’t just follow what is written on the internet. Build a deeper understanding of why certain correlations work in the environment you are currently in.

If you want to learn how Axia Traders work with other intermarket analysis techniques, visit the free workshop we are running at:

If you liked this type of content, you might check these videos as well:

If you like our content and would like to improve your game, definitely check one of our courses that teach you all the techniques presented by AXIA traders from a market profilefootprint, or order-flow. If you are someone who likes to trade the news, we have a great central bank course. And if you are really serious about your future trading career, consider taking AXIA’s 6-Week Intensive High-Performance Trading Course.

Thanks for reading and until next time, trade well.


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Written by Jaroslav Kohout

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