The use of related markets in trading is one of the most valuable skills to apply in trading and fortunately one of the easiest to learn.
The only reason it’s not more popular is that a lot of the discussion on line about related markets is about trying to find a market that is leading so that you can trade the lagging market. Obviously that does happen from time to time but it’s more of an infrequent gift that something you could base your whole method on.
In this video, from Richard Bailey at AXIA Futures shows the relationship between the Bund and the Euro Currency Futures. It’s an inverse relationship – when one goes up, the other goes down,
You can see that the Euro is a lot more volatile than the Bund – which is par for the course for correlated markets. You can’t really pick and choose the correlated markets and there’s pro’s & con’s to using faster/slower correlated markets.
Anyway – Richard puts it better than I do, so here he is: