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What is global macro trading, and how can I do it? See inside our platform. Start trading Includes free demo account. Quick link to content:. What is global macro trading? Who are some famous macro traders and hedge funds?

What are the three approaches to macro trading? According to the Corporate Finance Institute, macro trading falls into three categories:. Discretionary Macro: This approach allows flexibility and discretion. The macro trader does their analysis, whether fundamental or technical, and then deploys capital as they see fit. They are not limited to going only long or only short, or only trading certain assets or in certain countries.

Essentially, based on their analysis, they can trade how they want with this information. Systematic Macro: This approach is more rigid and rule based. Systemic strategies are often programable, meaning the rules are precise enough to be fed into a computer and have it decide what to buy and sell.

There is no discretion here. The strategy defines exactly what to do based on the data points provided. The manager may take a discretionary or systematic approach, but they only trade in futures contracts.

Futures contracts can be traded on stock indices, commodities, volatility VIX , currencies and interest rates. Practise trading with virtual funds. Open a demo account Learn more. What are some global macro trading strategies?

Trading on fundamental analysis Macro traders look at economic data on a macro or country level. Monetary and fiscal policy Monetary and fiscal policy are tools central banks and governments use to help control the economy.

Geopolitics Macro traders look at how stable countries are and consider how that may change in the future. Technical analysis and trend following Price trends in an asset may warrant interest from macro traders, as this suggests that there is movement or volatility within the stock market for some reason. Market mispricing Macro traders may watch for events that signal major price turns in an asset class. Black swan events Black swan events are rare events that are not expected by most market participants.

Demographics Macro investors may look at demographic changes to predict emerging trends. Your browser doesn't support HTML5 video tag. Share baskets. Global Macro Trading is a very popular form of trading in the investing and trading community. It has also been used by many very wealthy hedge fund managers as an important part of their analysis and trading approach.

This list includes people like George Soros , Paul Tudor Jones and Bruce Kovner. Some of the greatest trades ever in the history of the world have been placed using global macro analysis. Global Macro Trading is a form of order flow trading. It focuses on finding swing trades and long term trades that you can hold for several days, weeks, months, even years. Global Macro Trading attempts to use economic and political forces to justify the placing of their trades. It attempts to find factors that can generate order flow and move the price that can last long enough to form a nice swing trade or long term trade.

There are many different potential global macro factors that can generate order flow and move the markets. Such examples can include interest rate differentials, growth differentials, global growth, inflation, recessions, financial crisis, housing market, consumer confidence, natural disasters, political uncertainty, etc. The global macro trader can take a look at the big picture and find the dominant themes in the market place that can take place in the future and cause gradual, sustained order flow over a period of time.

When a currency pair is a trending market and it makes a huge move that is sustained over a long period of time, there are usually macro factors to support the movement. There can be one single macro, or many different macro factors all generating order flow to create the medium term and long term trends.

When a currency pair makes a huge move in one direction, say pips or more, usually there are macro factors that caused the order flow, with the market participants pricing in a certain macro event, or outlook into the market. The market dropped to around.

A macro trader looking for an opportunity would play out different scenarios and think of what the macro outlook would be 6 months from now, 1 year from now, 2 years from now. The macro trader would try to realize whether the drop would be over done and what scenario could play out in the future. That was just the beginning of prolonged, systematic Euro sell in the coming months. Well, the actual selling started in June, after the European Central Bank unveiled an unprecedented package of measures , sealing the fate of the currency.

Here is the Euro Futures chart with the COT Commitment Of Traders net positions study on the bottom:. We can clearly see how the Large Speculators, represented by the dark green line, started to sell the market by establishing net short positions in May of In fact, back then, some Fundamental analysts were expecting the Euro to reach parity with the Dollar by the end of The COT is a weekly report produced by the US regulator CFTC Commodity Futures Trading Commission.

It gives you a snapshot of the Futures position in a number of underlying Markets; Commodities, Stocks, Currencies, etc. Few things to note about the report; the COT report is based on the Futures market and there is a lag to this report. Back in the days, it used to come out only once per month, then twice and now we have data being released every week. Yes, there is a lag in information of more than a week, nonetheless, it could be a very useful tool for the long-term speculator.

Essentially, it gives you a sneak peek at what the Big players are doing with their holdings; are they increasing or decreasing their positions, and in certain times that could be a very powerful information.

These are regular corporate giants like Exxon Mobil, General Electric, Johnson and Johnson, Microsoft, Nike and the list goes on. Even though, there are consumers among this group, they are still classified as producers in the end. For example, if I own an Ethanol producing business, I need sugarcane to actually produce the fuel. So, I am a consumer to the sugarcane producer. Brazil is the biggest Ethanol producer in the world.

Now, the country needs to import the raw material from other nations like Mexico, United States, India. This is why typically the Commercials hedge their risk against the negative expectations.

They are hedgers by nature. These are smaller funds and smaller commercial hedgers as well as private speculators that do not qualify to be in the above mentioned groups. They do not have huge impact on the markets, however are still big enough to be registered and reported with CFTC. There are many ways to analyze the COT reports , but, we at davematias. com believe that for the most part the net position and actual changes in those positions over a recent two to three week periods are the most crucial numbers to monitor.

We also believe that Divergences between the actual price-action and the positions of the Non-Commercials participants can signal possible trend reversals. Since the Non-Commercials provide the liquidity to the Commercials, it is correct to say that the Commercials their net positions initiate the reversals by drastically reducing, or increasing their holdings.

This is the Euro futures weekly chart and as we can see from the middle of November, the Commercial Speculators red line started to sell their positions.

At the same time, the Large Specs green line started to buy the Euro. It is worth mentioning that, as a group, the Commercials will always be selling if they anticipate prices to rise, and always buying in anticipation of a price decline.

For them buying and selling in the Markets is almost always associated with hedging their commercial risk. Below is the Euro vs the USD spot chart just to illustrate that spot Fx charts are very much the same as the Futures charts:. It is only until the January, the Euro started to show signs of possible strength. As the price was coming down for the past two months, the Commercials were net-sellers at the same time the Large Specs were net-buyers of the currency see the Futures chart.

This discrepancy between the actual price and the net positions of the Commercial Specs, or we can use the positions of the Large Specs; since they mirror each other, is called a Divergence. Divergence is actually an old concept which was observed and then introduced by Charles Dow, he even mentioned it in his Dow Tenets. Divergence can be viewed as a concept and as a strategy at the same time.

What Dow witnessed had actually a very logical explanation: when the Dow Industrial was making new highs or new lows, the Transportation Index would also follow the suit, because; when industrial production is high then transportation is used more to deliver the goods. In times of an economic slowdown when production was falling, so was the use of transportation decreasing.

Macro trading is a strategic investment approach that considers macroeconomic trends occurring within a country, and on a global level, to determine whether financial securities will benefit from these trends as they play out.

Several prominent hedge funds and billionaire investors use a macro trading strategy, including George Soros and Ray Dalio. In this article, we explain what global macro trading is, how to do it, and strategy ideas that may be worth following.

Test drive your macro trading skills with our free zero-risk demo account where we give you access to our advanced trading platform and £10, in virtual funds to play the market with.

Sign up for a free demo account. Get tight spreads, no hidden fees and access to 12, instruments. Global macro trading looks at major trends occurring on a country or global level.

If this outlook is favourable, investors may buy assets that appreciate in such conditions. If the outlook is flat, they might choose to stay invested in cash or low-risk interest bearing instruments. If the outlook is weak, they may short assets that could decline. Macro investors may buy or short stocks, bonds, currencies, commodities, and exchange-traded funds ETFs. For example, if a macro investor believes that the US economy is heading towards a recession and predicts that stocks may decline, they may start shorting a wide array of stocks or stock index ETFs.

Macro investing is not concerned with the profit levels of an individual company. Rather, the macro investor looks at whether profits are rising, on average, within a country for most companies.

They look at whether the economy in that country is doing well or poorly, and what the political situation is like or may become, in order to find potential trading opportunities. The investor considers whether commodities are rising or falling and the direction of interest rates.

Value investing and growth investing strategies are also micro trading strategies because they focus on individual assets as opposed to broad-based trends. George Soros is a well-known macro investor, who founded Soros Fund Management in Ray Dalio is another macro investor, who is the founder of Bridgewater Associates. According to TipRanks, the firm has returned an average of This is similar to its longer-term performance going back to Seamlessly open and close trades, track your progress and set up alerts.

Below are examples of the type of strategies macro traders may look at:. Macro traders look at economic data on a macro or country level. Important data points include GDP, price indices inflation , employment rates, home sales and builds, interest rate announcements and expectations, manufacturing, and shipping numbers.

No single data point is important on its own. Rather, macro traders look for trends and extremes in the data relative to historic levels.

Monetary and fiscal policy are tools central banks and governments use to help control the economy. Monetary policy controls the supply of money in the economy, primarily using interest rates. Lower interest rates and increasing money supply generally mean higher asset prices.

Higher interest rates and decreasing money supply mean less buying and lower asset prices, generally. Fiscal policy is how governments spend and tax. Higher spending and lower taxes tend to stimulate the economy. Lower government spending and higher taxes on businesses and individuals tend to result in slower economic growth. Macro traders may look at these trends to assess whether it is a good time to buy or short the various asset classes.

Macro traders look at how stable countries are and consider how that may change in the future. Stability allows for growth, while instability could create fear and push asset prices lower.

Price trends in an asset may warrant interest from macro traders, as this suggests that there is movement or volatility within the stock market for some reason. Stock market cycles can last several years, whereas interest rate cycles and commodity cycles can last decades. Therefore, spotting a trend early can mean that you can profit from that trend for years to come, if successful. Macro traders may watch for events that signal major price turns in an asset class.

These major trend changes tend to occur when market prices have moved far away from their intrinsic value or historical norms. Bubbles and crashes result in extremely high and extremely low asset prices, respectively.

A carry trade borrowing from a lower interest rate asset to fund the purchase of a higher interest rate asset or currency peg fixed exchange rate for a currency with another country can result in an asset trading at a very different value than it otherwise would.

If the carry trade unwinds or the peg is lifted or adjusted, it can result in rapid and sizable price movements. Black swan events are rare events that are not expected by most market participants. They cause price moves well outside normal expectations or typical market movements. When a black swan event will occur, or its magnitude, is unknown in advance.

But macro traders can look at prior black swan events to get an idea of the potential fallout if another similar event were to occur. An example of a black swan event is when Long-Term Capital Management, a high-profile hedge fund, was liquidated in and nearly brought down the whole US financial system with it. Macro investors may look at demographic changes to predict emerging trends.

An increasing number of younger people in a population may increase technology demand, while an ageing population means greater demand for healthcare, for example. Get exposure to the world's fastest-growing, trending industries, from Driveless Cars to Streaming Media. If you are interested in learning more about macro trading, here are some books that explore this strategy in further detail:.

Interested in creating your own macro trading strategy? Here are steps you can take in order to get started:. How can I practice macro trading? Look at how different data points have affected asset prices. For example, look at interest rates and stocks. Plot interest rates along with a stock index and note what was happening at major stock index turning points.

Consider how this interaction may be tradable. What tools does the trading platform have to help me trade macro? Disclaimer: CMC Markets is an execution-only service provider. The material whether or not it states any opinions is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is or should be considered to be financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research.

Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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Personal Institutional Group Pro. Australia English 简体中文. Canada English 简体中文. New Zealand English 简体中文. Singapore English 简体中文. United Kingdom. International English 简体中文. Start trading. Products Ways you can trade CFDs Spread betting What you can trade Forex Indices Cryptocurrencies Commodities Shares Share baskets Treasuries ETF trading Product details CFD spreads CFD margins CFD costs CFD rebates.

Latest news Highlights Featured chart Our market analysts Michael Hewson Jochen Stanzl Kelvin Wong. Learn to trade CFDs What are CFDs? Advantages of trading CFDs Risks of CFD trading CFD trading examples CFD holding costs Learn cryptocurrencies What is bitcoin? What is ethereum? What are the risks? Cryptocurrency trading examples What are cryptocurrencies? The advance of cryptos. Help topics Getting started FAQs Account applications FAQs Funding and withdrawals FAQs Platform FAQs Product FAQs Charges FAQs Complaints FAQs Security FAQs Glossary Contact us FAQs How can I reset my password?

How do I fund my account? How do I place a trade? Do you offer a demo account? How can I switch accounts? CFD login. Australia English Australia 简体中文 Österreich Canada English Canada 简体中文 France Deutschland Ireland Italia New Zealand English New Zealand 简体中文 Norge Polska Singapore English Singapore 简体中文 España Sverige United Kingdom International English International 简体中文.

Personal Institutional Group. Log in. Home Learn Trading guides Global macro trading. What is global macro trading, and how can I do it?

The COT is a weekly report produced by the US regulator CFTC Commodity Futures Trading Commission. This is the Euro futures weekly chart and as we can see from the middle of November, the Commercial Speculators red line started to sell their positions. Systematic Macro: This approach is more rigid and rule based. Now, the country needs to import the raw material from other nations like Mexico, United States, India. United Kingdom.

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