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.
As opposed to most commodity trading advisors global macro trading funds also use a heavy dose of fundamental analysis to ensure that the market really should go their way. They still use technical analysis but they combine it with sentiment and fundamental analysis.
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.
The bank of England was reluctant to raise their interest rates along with the rest of Europe or to float its currency. The economic situation essentially said that England had to do one of those two things or they would have to devalue the pound.
Eventually the bank was forced to devalue the currency and in two days time the Soros funds were able to bring in more than a billion dollars. This was not a bad trade for a few days work.
Trading this way is what global macro trading is all about. Line up the fundamentals, the technical's, and the market sentiment and then you can gauge the upside and the downside and position yourself accordingly.
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. - 15224
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.
As opposed to most commodity trading advisors global macro trading funds also use a heavy dose of fundamental analysis to ensure that the market really should go their way. They still use technical analysis but they combine it with sentiment and fundamental analysis.
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.
The bank of England was reluctant to raise their interest rates along with the rest of Europe or to float its currency. The economic situation essentially said that England had to do one of those two things or they would have to devalue the pound.
Eventually the bank was forced to devalue the currency and in two days time the Soros funds were able to bring in more than a billion dollars. This was not a bad trade for a few days work.
Trading this way is what global macro trading is all about. Line up the fundamentals, the technical's, and the market sentiment and then you can gauge the upside and the downside and position yourself accordingly.
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. - 15224
About the Author:
href="http://www.themacrotrader.com/subscribe/">Mean Reversion is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.
