What is Global Macro trading?
What is Global Macro trading?
A systematic asset selection process
This discussion was started to explain my world view and the objective, evidence-based frame work I use to develop trade ideas.
This style of trading uses one’s discretion to cut through the noise and avoid being biased by someone else’s agenda.
To do this we have to understand the business cycle primarily.
Nobody does a better job at articulating this than Ray Dalio. The video below truly is beautiful in it’s simplicity.
It really is as simple as that. Once these basic principles are understood we need to establish where we are in the business cycle.
To do that we use economic indicators of which there are three; leading, coincident and lagging.
The indicators, specifically leading economic indicators help us build a framework to understand how the world functions.
It’s a top down approach starting with a view on a country, it’s currency, it’s stock market, the industries and sectors within the market and finally down to the stocks within the sectors.
There are only about 7 variables required to build a better model that gives you greater insight into the economy than 90% of the commentators on media.
These principles can be applied to any country or region.
It really isn’t rocket science, just requiring common sense, curiosity and the ability to read. A habit lost to this generation.
To that I would say, read what you love until you love to read. Twitter makes things exponentially easier.
All from freely available economic data than you can use to back test for yourself.
Actually the whole point of this is for you to verify everything I say yourself, quantitatively, qualitatively or both.
“If upon the road you meet Buddha, kill him.”
My ethos in trading and life is that you have to figure it out for yourself. There are no gurus or crystal balls.
This is the same frame work I used to predict the 2007 crash, it's recovery and start of bull market, the Yen short trade from 2012-2016, the March 2020 covid low and of course every losing trade I've made in between.
You need not use this frame work solely to trade on.
It can be used to determine if it's time to take out a business loan or mortgage to buy a house. (Where will interest rates be in 5 years?)
Where or when do I go on vacation? (Which destinations offer best currency values to get best bang for my holiday buck?)
Of course I didn't predict the Kung Flu but I had been preparing for a recession since October 2019 so was positioned to react to this crisis and it was the leading economic indicators that alerted me to a healthier and more robust economy that would thrive in the subsequent year.
Contrary to what was being portrayed in the media at the time.
I am not a fortune teller, I am simply interpreting the data that we all have accessible to us.
The economic data changes daily however the last and first weeks of the month are when the bulk of the high impact economic readings come out.
As such my views can change on a weekly or daily basis for that matter.
My aim here is to show you how NOT to react to the news but rather have the news confirm your existing views of events.
Luck is simply where preparation meets opportunity and the same can be said of trading.
The process does involve a degree of work, investment of time and energy.
If you aren’t up for the challenge of building a better life, financially and otherwise, for your family and yourself, then take up another pursuit.
Thankfully modern technology, social media and the infinite library of the internet makes life significantly easier than when I started in this game.
As a quick frame of reference, a Bloomberg terminal costs around $24,000 per annum in subscription and that was just for the basic package. Then there were the broker fee’s and commissions, technical software tools that cost in their thousands in licensing. That’s before you even work out the capital required to trade.
Being a trader meant you already existed in that rarefied part of society with access to the wealth, connections and opportunities unavailable to the masses.
The internet has democratised this and all I mentioned above is now freely available from various online sources.
So where to next?
Milton Friedman’s “Free to Choose” video series is an excellent starting point to give you a broad stroke understanding of macro economics.
Bare in mind that this was filmed in 1979 and his prediction of the way the current world exists is almost prophetic.
Feel free to ask me any questions and I will continue to upload content consisting of trade ideas and instructional's of the subject matter discussed.
