Global Macro Trading

As the first post to this site we thought it would be helpful if we described what global macro trading is.

Historically global macro trading has been one of the most popular hedge fund styles as it has virtually unlimited capacity.  Funds such as George Soros Quantum Fund and Julian Robertsons Tiger Funds gravitated towards macro trading as their assets under management grew larger and larger.  If you are managing $20 Billion it is a lot harder to invest in great small and mid cap stocks as you end up being the majority of the trading volume.  On the other hand when you trade currencies or Treasury bonds the daily trading volumes and dollar volumes are so high that you could have a multi billion dollar position and unwind it in only a few minutes.

The other reason and in fact the primary reason that many successful traders have gravitated towards global macro trading is that it presents far more opportunities then any one market can do.  This is because the true global macro trader goes wherever they can find the best risk to reward scenarios.  Due to the wide variety of securities traded the macro trader is able to structure virtually any scenario imaginable.

That brings us to the next and best part of the macro trader and his arsenal.  Macro traders trade domestic stocks, foreign stocks, bonds of all types (Treasuries, Investment Grade Corporates, Junk Bonds, Municipal Bonds, even hard money loans), commodities, currencies, real estate, and if they are large enough they even invest in venture capital and private equity.  On top of all these asset classes the macro trader also trades any derivative related to these assets in order to trade within their risk parameters.

A very simple example of this would be in the options market.  If the macro trader wants to go long BHI-Baker Hughes because they think that the oil industry is going up they can either buy the stock or buy the options.  Depending upon the timeframe of the trade and the price of the options the trader will be able to take far less risk while being able to achieve the same or even greater gains.

While many strategies lock you into one market, macro trading allows you to go where the money is.  What is better to call every 10% move in the SP500 each year or to be in the best performing industry group each year?  As cool as calling every 10% move sounds you will make far more by being in the best place instead.

In case you haven’t picked up on it, the macro trader is able to trade wherever he or she sees opportunity and avoid the dead areas of the market.  Along the same lines the macro trader is also focused on absolute and not relative returns.  This is because relative returns can still be negative while absolute returns focus on positive results.  We don’t want to be the best looking pig, but instead want to be the markets equivalent of Kate Backinsale.

Judging by tthe long term performance of global macro trading as an asset class it is also apparent that we have some of the best risk adjusted and steady returns of any strategy out there.  While Soros has managed to do 30% returns since the late 1960’s there have also been several operators that have returned 15% and higher returns over long periods of time.

If you would like to learn more about global macro trading as well as recieve guidance regarding several different asset classes then try out The Macro Trader, a research and trading firm dedicated to global macro trading.  They aren’t a simple trend following CTA system masquerading as a macro trader, but instead are legit and not full of hype.

Good Luck,

Global Macro Trader