Investment Themes and Global Macro Investing
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by: GeorgeKovner
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Word Count: 516
Over the past century or so global macro traders have been some of the most consistently profitable traders around. According to Credit Suisse global macro is the number one overall trading style since at least 1994. There are many reasons for this not the least is the opportunity to play out an entire trading theme.
The global macro mandate is simple, make money. You can trade the SP500, you can trade the Thai Baht, you can trade pork bellies. But you must make money. Global macro is the most opportunistic and truly capitalistic trading style there is. You can trade anything anywhere as long as you can make money. So instead of focusing on one asset class above all else macro traders are able to go where the money is and focus on the best opportunities anywhere and not just in the regular playground.
Another difference between global macro traders and regular investors is that successful global macro traders don't just talk about risk management, they practice it. A lot of this probably comes from the fact that a lot of well known global macro traders came from the futures pits where the inherent leverage demands respect or it takes all your money away. Risk management is the key to successful trading. Anyone that claims to have "the secret" to trading is either a liar or is selling you risk management as it is the true key to success.
Now that we have discussed the opportunistic behavior and the risk management aspect of global macro trading we will talk about another major benefit of global macro trading. The next best thing about global macro is that you can trade an entire investment theme. From start to finish you can trade the appropriate instrument, or instruments to best capitalize on the theme.
Depending upon your trading vehicle you can take advantage of part of the theme. And instead of participating in the second leg of the theme with a proxy security, or one that doesn't meet the exact scenario but comes close you can use the right security.
If you are a global macro trader then you will be able to take advantage of the entire thing. You can go long emerging market stocks, later go long oil as the demand picks up, then go short bonds as inflation picks up, then watch as it all gets over heated and then go long bonds, short commodities, and short the stocks as it all unwinds. That is a lot more profitable then just buying the stocks or selling some bonds.
It is amazing that it makes so much sense and yet most traders leave so much money on the table due to the tunnel vision of only following stocks or bonds. If you are a successful trader you should be trading multiple asset classes and getting the full benefit of your trading expertise.
Obviously the benefits to a global macro investment approach are simple to understand. If your goal is to make money, and not just trade stocks then you will want to take a serious look at trading the global macro trading way.
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