Global Macro Trading Themes
May 1st, 2009 by admin
The average investor goes around and finds one idea here and another idea there. They will buy a retail stock, a few tech stocks, and maybe a their favorite drug stock as well. Basically they trade without a plan and without looking outside of stocks.
If you look at the average investors results you will see that by and large their results are very similar to the market averages or maybe a bit worse due to added costs such as commissions and slippage. Essentially they put in very little work and hope for, but do not end up generating strong returns.
Contrast that with The Macro Trader who uses both systematic and qualitative research to find different economic themes that will likley alst for months, years, and even decades. After finding these great emerging trends they then look to see how to best capitalize on them.
Many times they will find ways to play our the boom, the bust, and the recovery using a variety of investment vehicles such as stocks, bonds, commodities, and currencies. Sometimes a stock is the best way to profit from an idea but other times a bond, commodity, or currency can give you a lot more reward while taking significantly less risk. So the macro trader goes through and plots out the projected cycle and then makes a gameplan to profit from it.
By having this framework they are able to be prepared and really capitalize on their research. This is the benefit of global macro trading themes. Whereas the average investor tries to make money with a haphazard approach using only one asset class the global macro investor looks for high probability trends and then builds a plan to maximize their potential profit from it. This is the way to get the best returns without taking too much risk. In fact by having a plan you can also figure out how to minimize your risk along the theme.
So take a step back and reevaluate your current situation. Do you have a game plan when you look at your account? Do you really understand the different risks you are taking? Are you looking at more then just stocks to profit from your ideas? Do you have a good grasp of the research required to really understand your investments?
By asking these questions you will be better able to successfully trade global macro trading themes and significantly improve your trading results. Remember that while stocks go up in the long run, in the long run we are all dead. We have had several periods in history where it took over twenty years for investors to make any money at all on their investments. Be prepared and trade well.
Happy Trading,
