In this post I am going to briefly discuss and outline my trading/investing approach to the volatile financial market place of today. So what is global macro trading?
Global Macro consists of 2 words... Global and Macro. What do these terms stand for?
Global - The "global" in global macro means that I am looking to participate in any market place around the world. Many investors/traders stick to one market or one region of the globe, whether it be just U.S. Stocks or European debt markets. Global macro traders however look for any opportunities/inefficiencies in any country, in any market that is established enough to conduct trade efficiently. This expands my trading mandate so that I can profit at all times, as it is almost guaranteed that there is something occurring in one of the thousands of global markets. Also, every market is interconnected. For example, when the European debt debacle was in full swing last year, it didn't only affect European equity and debt markets, but it affected the U.S. economy, Chinese economy, U.S. debt markets and so on. Global also allows me to be diversified. For example, if I have a picture that the U.S. economy will grow at an accelerated pace, I can express my views by purchasing U.S. stocks, emerging equities, selling yen vs. the Australian dollar (carry trade) etc.. By dispersing my position through many different trading instruments, I accomplish two things. 1. I am able to capture bigger moves in different markets, for example, emerging equities may outperform U.S. large caps, and I take advantage of that. 2. I keep a pulse on many different markets. I try to have a position in as many markets as I can, as it allows me to have an opinion, with conviction. In other words, I am more confident with my positions.
Macro - Macro is short form for macroeconomics. Macroeconomics is the study of the behaviour of the economy in general, as opposed to microeconomics (which can be helpful as well) which is the study of the behaviour of economies of certain specific sectors and businesses. Studying macroeconomics allows you to create a big picture of the world and where money is going/should be going, given the variables constantly changing such as employment, GDP, inflation and the likes. Macroeconomics is extremely important as the financial markets are just reflections of the opinions of people BASED on these variables mentioned in the previous sentence. Once you have an understanding about WHY markets move, you are able to enter trades/investments with much more conviction and confidence. Trading on macroeconomic principles in theory is typically a contrarian view, as typically markets over extend from their true value. This is great for traders because typically, contrarian trades offer better reward to risk trading opportunities, which is essentially to the success of any trader in the long run.
In summary, global macro trading is forming an idea/perspective on the economy in general, and trading individual global markets, reflecting your views, using an effective way of managing risk all the while. Global macro allows you to understand WHY market move, and allows you to profit on them.
Look forward to more posts!
Julian Marchese
thank you Marchese :),now i have better understanding why macro is important,i trade forex,i'm technical trader,but every trade i do i still filled with something missing,i feel like a blind,then i try to find why i still blind, even i know how to trade,and here i am.
ReplyDeletethank you very much Marchese :).i wish i can go to collage to learn more,unfortunelly i cant.