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Thread: The Relationship Between Stocks and Forex

  1. #1
    Join Date
    Aug 2014

    Default The Relationship Between Stocks and Forex

    One issue with using global equity markets to make forex trading decisions is figuring out which leads which.

    It’s like answering that age old question, “Which came first, the chicken or the egg?” or “Who’s yo daddy?!”

    Are the equity markets calling the shots? Or is it the forex market that wears the pants in the relationship?

    The basic idea is that, when a domestic equity market rises, confidence in that specific country grows as well, leading to an inflow of funds from foreign investors. This tends to create a demand for the domestic currency, causing it to rally versus other foreign currencies.

    On the flip side, when a domestic equity market performs terribly, confidence falters, causing investors to convert their invested funds back into their own local currencies.

    For the past couple of years, however, this principle holds contrary for the U.S. and Japan.

    Any upbeat economic figures in the U.S. and Japan more often than not weigh down on their respective currencies, the dollar and yen.

    First, let’s take a look at the correlation between the Dow Jones Industrial Average and the Nikkei to see how stock markets all over the globe perform relative to each other.

    Since the turn of the century, the Dow Jones Industrial Average and the Nikkei 225, the Japanese stock index, have been moving together like lovers on Valentine’s Day, falling and rising at the same time. Also notice that sometimes one index leads, rallying or dropping first before being followed by the other index. You could say that stock markets in the world generally move in the same direction.

  2. #2
    Junior Member
    Join Date
    Jul 2014


    with stock all price are centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. meanwhile Spot currency trading, is decentralized, which means quotes can vary from different currency dealers. Forex traders get quicker access and cheaper costs, I trade with ECN account type at Tickmill broker, has high execution process supported by numerous liqudity provider they use. Low cost trading fee, with 0.3 pips average on EURUSD trade, had no restriction for any kind trading strategy use. The ECN is solely focused on matching up your order with the opposite side held by another market participant on the ECN as quickly as possible.

  3. #3


    this is apart of financial market. but it has weak relationship. becuase stock market is company healthy but forex market is a economic of country. it is different

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average, correlation, flow, foreign currencies, forex, forex market, forex trading, index, japan, japanese, markets, stocks, time, trading, yen

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