Interest Rates and The Macro Trader
Macro traders via their mandate are able to trade any and all liquid asset classes. Whether they be stocks, bonds, commodities, or currencies macro traders look for the best risk to reward opportunities on the planet.
An area of the financial markets where macro traders tend to do really well is that of fixed income and interest rates. Both academia and practitioners of global macro have found this to be the case over the years. This is not a fluke as the basic trend of interest rates essentially screams profit opportunity.
Interest rates to go up one month, down one month, and then back up the next month. No, instead they tend to move in relatively smooth trends with the very rare blip where a central bank quickly reverses course.
Basically once rates start moving they typically keep going in the same direction for months if not years. Central banks are trying to manage economies and not a lemonade stand. In addition to the fact that rate cycles are a slow and methodological, central banks also let us see inside the machine by issuing periodic reports as to what is happening in their minds and in the economy.
If you take the time to track the economy and to read the central banks meeting notes you will have a very good chance at predicting what the bank will do. In fact even if you wait for the first easing or tightening announcement you will typically have ample time to out on some good trades to take advantage of it. This is because in a few months they will likely do the same thing again and again. These trends are real and they last for a while.
Since interest rates effect every segment of the financial markets traders can make money in stocks, bonds, commodities, and currencies. Typically when rates go down stocks go up and vice versa. When rates go down bonds go up and vice versa.
One of the classic trades is to go long zero coupon Treasury bonds when rates are to be cut and to short them when rates are headed back up. By doing this a macro trader can earn substantial profits and if they use leverage they can make even more. While there are several potential risks involved in the trade the primary one, especially in a easing cycle, is simply that of interest rates.
If you want to trade using global macro then start learning about how interest rates effect different asset classes and how to read the notes of central banks. In recent years they have been giving increasing transparency which makes it easier to decide what you as an investor must do. - 23159
An area of the financial markets where macro traders tend to do really well is that of fixed income and interest rates. Both academia and practitioners of global macro have found this to be the case over the years. This is not a fluke as the basic trend of interest rates essentially screams profit opportunity.
Interest rates to go up one month, down one month, and then back up the next month. No, instead they tend to move in relatively smooth trends with the very rare blip where a central bank quickly reverses course.
Basically once rates start moving they typically keep going in the same direction for months if not years. Central banks are trying to manage economies and not a lemonade stand. In addition to the fact that rate cycles are a slow and methodological, central banks also let us see inside the machine by issuing periodic reports as to what is happening in their minds and in the economy.
If you take the time to track the economy and to read the central banks meeting notes you will have a very good chance at predicting what the bank will do. In fact even if you wait for the first easing or tightening announcement you will typically have ample time to out on some good trades to take advantage of it. This is because in a few months they will likely do the same thing again and again. These trends are real and they last for a while.
Since interest rates effect every segment of the financial markets traders can make money in stocks, bonds, commodities, and currencies. Typically when rates go down stocks go up and vice versa. When rates go down bonds go up and vice versa.
One of the classic trades is to go long zero coupon Treasury bonds when rates are to be cut and to short them when rates are headed back up. By doing this a macro trader can earn substantial profits and if they use leverage they can make even more. While there are several potential risks involved in the trade the primary one, especially in a easing cycle, is simply that of interest rates.
If you want to trade using global macro then start learning about how interest rates effect different asset classes and how to read the notes of central banks. In recent years they have been giving increasing transparency which makes it easier to decide what you as an investor must do. - 23159
About the Author:
If you need actionable trading ideas then check out The Macro Trader It is a weekly global macro trader advisory publication with frequent intra-week updates for time-critical analysis and actionable trading ideas.
posted by X - Men @ 4:21 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home