An increase in orders means more future business for manufacturers. It is also important to think about what types of traders would be providing liquidity to the global macro players. Having established his position, the Macro Trader may need to do very little.
This is easier than it sounds. There is an enormous amount of macroeconomic discourse in the media to do the thinking for the trader. His problem is to restrict the amount of information he has rather than increase it. These big players have access to economic levers which they can pull to directly affect trading markets. This ranges from raising or lowering interest rates to restricting the supply of a scarce commodity over which they have control like oil or gold or aid.
Big players are driven by social economic and political forces which the dealer needs to understand. Use market sentiment to time your trades Having found a mismatch between the economy and the markets, the trader needs a change in sentiment or market expectations to realise his profit.
Market sentiment can change instantly with the publication of a critical economic release. But often it takes a long time for entrenched conventional wisdom to change direction. So contradictions between the real world and the market can be long lasting. The true skill of the Macro trader is anticipating the change in market sentiment bringing that mismatch into line.
If he thinks a bull market is ahead of the economic trend, the trader strives to sell just ahead of a general perception that that is so by the market as a whole. So market expectations govern. The truth differs from market to market. In some, like the short end of the interest rate markets, there are clear predictable relationships with economic fundamentals giving rise to trading opportunities.
But the general point remains that in a free market the successful macro trader must anticipate the next concern of the mass of other traders. How is a change in sentiment to be anticipated?
They would expect global growth to pick up, commodity prices to rise, thus increasing inflation in Australia and eventually the Reserve Bank of Australia increasing interest rates. That would make the currency attractive to investment causing the currency to appreciate in value. This move was caused by many reasons: Strong Australian economy 2.
Interest rate increases in Australia 3. Under performance of the U. Global Financial system stabilized resulting in outflows from the U.
Commodity boom increasing Australian economic growth. Note that such an order flow trader would NOT be looking at moving averages, or technical indicators or anything like that. For they know that those do not generate order flow. It is also important to think about what types of traders would be providing liquidity to the global macro players.
The list can be endless. There may have been other macro traders that took a complete opposite viewpoint from you. They may have been betting on a continuation of the financial meltdown and increase in the U. There may have been technical traders trying to short the market on a retracement higher and they may have used their fibonacci retracements to find a short entry. The list of inefficient traders that can provide liquidity to the astute global macro trader is truly endless.
With global macro trading there are an endless stream of opportunities that occur. An endless stream of opportunities that no supercomputer, quantitative program, algorithm, high frequency trading program can ever take away from you. That is the most alluring aspect of global macro trading. It offers an escape from all the noise and news articles talking about how computers, quants, and high frequency trading are taking over the world, and how if you do not learn it you will be left out in the cold.
Global Macro Trading is immune to all those quant trading programs.
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