Global Macro Trading

Global macro traders are a very diverse group of investors who have several different methods in which they go about selecting trades.  Some specialize in one type of trade while others are generalists and look at several different criteria.  Because of this there are a gazillion different tools that macro traders use.

One of the first tools or indicators is that of interest rates.  No investor should be doing anything without tracking interest rates.  Which interest rates need to be tracked?   Well you should probably track everything but at the bare minumum you should be tracking short and long term rates for the G-10 nations.  In addition it is worth reading the central banks meeting notes from all of these as well.  The price of money is invaluable and knowing where things are headed can really help you pinpoint where we are in the business cycle and what the world thinks is going to be happening in the economy.

Another really basic and yet invaluable tool is that of interest rates.  A moving average helps to smooth out data and in some data and price series can give you a clearer view of the prevailing trend.  In fact some of the larger CTA’s are rumored to be using some very simple moving average crossover systems in order to be on the right side of the trend more often than not.  Regardless of your view of technical analysis moving averages are an invaluable tool.

The Economist is the next tool.  If you are along time trader you likely already read the economist religiously but if you are new you may think that it is just another news service.  Yes, they provide news but as opposed to most other services The Economist does a great job at covering virtually every country on the planet.  By reading this each week you will be expanding your horizons in a global sense and it will help your anaysis.

This is but a small sampling of veryuseful tools that everyone should be using to find global imbalances and other situations that usually give us some extraordinary risk to reward trading opportunities.  There are countless other tools like a Bloomberg Terminal, different economic and trading models, as well as a host of other indicators and things to look at but this is a good start and will help the macro trader find several different trading opportunities that would have otherwise gone unnoticed.  By expanding your toolbox you are expanding your opportunity set.  Your opportunity set is of course where all your profits come from.

Global macro trading is commonly referred to as macro trading, global macro, big picture trading, global investing, pure speculation, etc.  There are a gazilliong different names but the underlying themes remains the same.  The global macro trader is focused on the best risk to reward opportutnities on the globe.  If stocks are good in India he might be there.  If bonds are looking great in South Africa she might be active there.  And if crude oil is looking good for the world in general he might be long the black gold.

Hopefully this paints the picture that the macro trader makes money by following every asset class in every country that is tradeable.  If you don’t then you are regularly leaving money on the table and in the same stroke are taking undue risk.

So how does a macro trader track all of this?  In the old days it was quite hard and most traders only traded the major markets of the world.  With the internet and technology we are able to track just about anything anywhere.  Using anything from an Excel spreadsheet to a Bloomberg terminal you can check quotes, get fundamental data, and even track sentiment on so many securities and markets that you have no excuse not to be doing it.

The majority of successful global macro traders use different timing models to cue them in on when a market is favorable or unfavorable and then they will go and dig deeper to make sure that it is a valid opportunity and that it has the proper risk to reward characteristics.  By using technology and different data series we are able to more efficiently find great trades across the globe.

For the retail trader that is interested in getting into global macro trading there are some wonderful and relatively new securities in the market today that enable you to trade in many markets that would otherwise be hard to get into to.  ETF’s or exchange traded funds are securities that trade like stocks but represent anything from the SP500, to platinum, to Malaysian equities, to the South African Rand.  Using these easily accessible instruments you can easily and at a low cost access the global markets.  Now you really don’t have an excuse to not look into global macro trading.

Become a Macro Trader