From the July/August 2013 issue of Futures Magazine • Subscribe!

How to exploit and profit from market correlation

“Bad day rising: T-bonds and E-mini S&P” (below) is an example of a “bad” trading day when T-bonds rise and stock indexes fall. However, fast-acting traders could have made money on the short side, particularly in a market as liquid as the E-mini. At about 8:10 a.m. on May 20, the bond futures hit their low for the day before rising. While bonds were rising, the E-mini was decreasing in value. This trade could have led to a profit of 12 ticks, or three full points.

Many traders are drawn to the markets because they value one thing above all else — freedom from economic servitude. We seek a way to earn a living as a trader. Even if you maintain a day job, knowing you have an alternative means of income gives you the confidence to be decisive, pro-active and operate from a position of strength, rather than be hamstrung by fear. Knowing how to trade both good and bad trading days is a step toward conquering that weakness.

Nick Mastrandrea is the author of Market Tea Leaves, a free daily commentary that focuses on market correlation. You can reach him at

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