At Beta Analytics we provide free analysis of a multitude of different financial markets.
We hope we can provide some insight to how the markets are all interconnected and the cause and effect of daily price fluctuations. We believe our analysis is unbiased in nature and can show you the underlying message of each security and the likely direction that it will follow.
Along side Technical Analysis, we cover major news and fundamental releases including the effects on the various asset classes. Fundamental and Technical analysis are normally seen as two ways to trade. We try to combine the best of both and truly understand the markets.

Wednesday, 12 December 2012

Risk FX - E-Mini Spread

The following is an example of How I like to trade short term between two normally highly correlated assets. Here AUDUSD is overlayed with ES and towards the close of New York there was an obvious divergence where AUDUSD didn't fall nearly as much as ES.

As shown by other periods on this chart these two lines do commonly diverge but frequently converge during fundamental releases. This is what I take advantage of.

As mentioned in a previous article, already short AUDUSD from 1.0575 and I expect the two lines to converge, if not fully at least a lot.

Here is where the form of hedging comes in to play, Once short AUDUSD you can open a long ES as a hedge. This will mean your profit and loss will come from the spread between the lines and it's very likely that the spread will tighten.

AUDUSD (red) vs E-mini's (yellow). Thomson Reuters.

In this case I have not longed ES as I am seeing some downside potential especially because of this.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)