Often times when you tell someone that you are a global macro trader they will assume that you are a commodity trading advisor. The truth is that while they both share some similarities they are actually quite different. The typical commodity trading advisor will focus on the technical aspect of the markets as well as risk management with total disregard of the underlying trading instrument. This doesn't make them a good or a bad investment it is just that a global macro trading firm uses a lot of other types of analysis.
Macro trading is similar to commodity trading advisors because global macro traders also use trend following knowledge. But as opposed to the commodity trading firms they only use them as part of the analysis and rarely trade without an underlying fundamental reason.
Global macro trading incorporates fundamental as well as sentimental and technical analysis to form its trading ideas. Why only use one type of analysis when by adding in more you are able to improve your risk to reward on a trade by trade level as well as on a portfolio level.
One great example is when George Soros broke the bank of England in 1992. The chart pattern had signaled a double top and the first down day was an outside reversal pattern but the thing that enabled George Soros to push his bet and leverage his position was that the fundamentals warranted it.
What happened is that the bank of England did not want to raise their interest rates or float its currency. But the reality is that you can not support a currency indefinitely without doing major damage to your economy. So at some point England had no choice in what happened.
Eventually the bank of England gave in a devalued the British pound which enabled the Soros funds to make over a billion dollars in the ensuing two days. If the fundamentals had not been in place there is no way that they would have put the trade on in such size.
This trade essentially encompassed something that another great trader Michael Marcus who once said: I think the secret is cutting down the number of trades you make. The best trades are the ones in which you have all three things going for you, fundamentals, technicals, and market tone. If you can restrict your activity to only those types of trades then you have to make money in any market under any circumstances.
Trading is one of the more enlightening as well as most difficult endeavors. It can make or lose you all the money in the world as a matter of speaking but if you trade without using the tools available to you then you will lose your shirt. Incorporate technical, sentiment, and fundamental analysis into your trading and you will see the benefits.
Macro trading is similar to commodity trading advisors because global macro traders also use trend following knowledge. But as opposed to the commodity trading firms they only use them as part of the analysis and rarely trade without an underlying fundamental reason.
Global macro trading incorporates fundamental as well as sentimental and technical analysis to form its trading ideas. Why only use one type of analysis when by adding in more you are able to improve your risk to reward on a trade by trade level as well as on a portfolio level.
One great example is when George Soros broke the bank of England in 1992. The chart pattern had signaled a double top and the first down day was an outside reversal pattern but the thing that enabled George Soros to push his bet and leverage his position was that the fundamentals warranted it.
What happened is that the bank of England did not want to raise their interest rates or float its currency. But the reality is that you can not support a currency indefinitely without doing major damage to your economy. So at some point England had no choice in what happened.
Eventually the bank of England gave in a devalued the British pound which enabled the Soros funds to make over a billion dollars in the ensuing two days. If the fundamentals had not been in place there is no way that they would have put the trade on in such size.
This trade essentially encompassed something that another great trader Michael Marcus who once said: I think the secret is cutting down the number of trades you make. The best trades are the ones in which you have all three things going for you, fundamentals, technicals, and market tone. If you can restrict your activity to only those types of trades then you have to make money in any market under any circumstances.
Trading is one of the more enlightening as well as most difficult endeavors. It can make or lose you all the money in the world as a matter of speaking but if you trade without using the tools available to you then you will lose your shirt. Incorporate technical, sentiment, and fundamental analysis into your trading and you will see the benefits.
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