Today, we would like to share with you the interconnectivity and cyclicality of the stock, futures, and foreign exchange markets.

First, let's talk about interconnectivity.

I believe that most of the readers of this article are likely to be more involved in stock trading, as the barrier to entry for stocks is relatively low. You can open an account at a bank or exchange, deposit money, and start trading. It is not as complex as the foreign exchange or futures markets.

In our perception, the futures market is also considered to have higher risks. Why is that? Because it involves leverage, and there is a concept of margin calls or liquidation. As for stocks, if you invest in a good company, or a state-owned enterprise that is not likely to be delisted, it will not face a margin call.

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What is the correlation between stocks and foreign exchange futures? Today, I will share one or two points about their interconnectivity.

This is a daily chart of the Australian dollar. Do you know what the correlation is between the Australian dollar and our domestic stocks or our domestic futures?

Anyone who has been trading foreign exchange for a few years should know that the Australian and New Zealand dollars are typical commodity currencies. Their main trading partners are our country, and they rely mainly on exporting their own energy, minerals, and agricultural products to trade with our country.

So, the price of the Australian dollar is almost tied to that of iron ore, as it is the country with the highest iron ore content in the world and almost has the pricing power for iron ore.

Take a look at this: when the Australian dollar falls, you can refer to the futures market for iron ore. The price of iron ore has been falling from a high level. At this time, let's look at the price of rebar, especially stainless steel, which has been soaring.

Have you found the correlation? If not, let me help you find it.Iron ore is the raw material for all steel products, and currently our country does not have the pricing power. What does its decline mean? It means that our military enterprises and our steel mills, our costs have decreased.

And for finished steel products like stainless steel and rebar, their transaction prices have increased. Then what is the direct concern? Cost reduction, and the finished products' prices have risen, so has my profit increased?

Once my profit increases, won't my company's financial statements look better? With better financial statements and profit growth, my valuation will rise. Those in the stock market should know what to do next.

However, when we notice that domestic steel companies start to rise, it's already very, very high. When you want to buy, you will be very hesitant, afraid of being trapped if you chase, and afraid of missing out if you don't.

In fact, you can completely find its pattern in the prices of the Australian dollar, iron ore, and stainless steel.

When the Australian dollar starts to fall again, if you see iron ore also falling, and the stainless steel price does not fall, it doesn't have to rise, it just needs not to fall. At this time, if the steel stocks, whether Baosteel, Ansteel, or Shougang, or some steel stocks, are definitely lying still, because they do not have this keen sense of smell. At this time, if you use some funds to layout the stocks of steel companies, I believe your returns will be very substantial.

But when does it start to turn bullish? When iron ore starts to rebound, and the price of stainless steel starts to fall, this is also the earliest opportunity you can find in the stock market to sell at the highest point, which is our forward-looking view of the stock market.

Because the stock market and futures, commodity futures markets, and the foreign exchange market are all closely related, they are interconnected. Once you understand this pattern and this correlation, you will know that many things are very easy.

When we do this, we know its decline, its related enterprises and its related commodities will rise or fall, and we will make relevant arrangements, so that our transactions will be smoother, right?

And before other traders and most stock market investors have smelled this, you may have already anticipated that it might rise early on, and I just gave a simple example of steel.Images from the internet.

Let's take the example of live pigs again. In late October last year, many friends asked me, will the price of live pigs rise again? Because during that period, the price of live pigs kept falling. That is to say, we ordinary people already knew that the price of pork has now fallen to an unprecedented level. In the past, you had to spend more than a hundred yuan to buy a pound of pork belly for a meal of braised pork, and now it's only a few yuan per pound.

Even if you buy it at the local vegetable market, it's only about thirteen or fourteen yuan per pound, which is a benefit for us ordinary people. However, if you are a futures trader, you would be very distressed about when it will rise again.

I dare not short sell, and long buying, bottom fishing, hit a loss again and again, loss after loss, when will it rise again? I can responsibly tell you that it will definitely rise again, but I dare not be sure of the time.

Its decline actually has an underlying logic, because live pigs account for a relatively heavy proportion in our country's CPI consumption plan. So in such a major economic crisis, our country needs to regulate CPI, and sometimes it is necessary for the prices of some commodities to fall instead of rising.

I'm not saying that the country uses any policy to regulate it, and this matter has caused many livestock enterprises, that is, pig breeding enterprises, and pig feed enterprises to suffer significant losses. It has also caused many pig farmers, these individual enterprises to go bankrupt, and even stop doing it. What will happen next is self-evident, right?

After a year or two, when the economy recovers, our demand for live pigs will be higher and higher, and our live pig production enterprises will be fewer and fewer, which will cause what? It will rise all the way. So it is cyclical.

For example, why did cotton break through the previous high this time? It is because our cotton field, due to the sharp cooling in the northern hemisphere in the past one or two years, the demand for cotton is very, very high. However, when you are dealing with such futures varieties, there are also some stock varieties, you must consider its cyclical behavior.

What is cyclicality?In other words, it has its off-season and peak season. If you insist on investing in this stock during the off-season, it's normal to get stuck. Therefore, it has an annual cyclicality, and when its main business is in the peak season, its profits will definitely rise significantly. All investors in the trading market will be aware of this, and they will chase this stock.

We also know that whether it's the stock market, foreign exchange, or futures, the money flows to where it goes up. We need to follow the trend, and how is this trend formed? Later, I will analyze the underlying logic of the formation of the trading market trend for everyone, and what I want to share today should be helpful for some investments.

Because I am just using steel, iron ore, and Australian dollar prices to share the most basic correlation with you, and there are many correlations between them. If you are interested, you can watch some videos related to these correlations.

So when we trade, we must not focus on one type, saying that I only know how this one type will perform.

For example, the Australian dollar is not only a commodity, but its correlation in the foreign exchange market is the New Zealand dollar. The New Zealand dollar and the Australian dollar are almost the same, why?

Because their trading countries are both China, and their main businesses are similar. In the foreign exchange market, many people know that New Zealand's economic situation and political opinions are closely related to Australia and follow its opinions.

So when we trade, whether it's foreign exchange or futures, we must know the correlation. Through the example of the Australian dollar and iron ore, you can deduce many examples.

For example, for some enterprises that produce edible oil, when you see soybeans, soybean No. 1, and soybean No. 2 falling, and soybean oil is rising, what should you do at this time? Buy the stocks of those edible oil enterprises, because it will definitely rise. It will rise in a short time of three to four months, and it will rise in a long time of half a year, because its performance will rise significantly.

So when we trade in equity, we must know the correlation between them. They are interconnected, all products, all foreign currencies, and all stocks are on a string. Once you understand the correlation, your trading will be very smooth, and you will also know which type I should layout next, because it is about to start.

Why will it start? Because of what? So this correlation is the magic weapon for your future wealth.That concludes all of today's content, and we welcome everyone to follow, like, and share!