Often times when you tell someone that you are a global macro trader they will assume that you are a commodity trading advisor. The truth is that while they both share some similarities they are actually quite different. The typical commodity trading advisor will focus on the technical aspect of the markets as well as risk management with total disregard of the underlying trading instrument. This doesn’t make them a good or a bad investment it is just that a global macro trading firm uses a lot of other types of analysis.

The one place that global macro and commodity trading are very similar is that they both use charts for their buying and selling points. In fact many macro managers use charts extensively as well as other technical studies. The difference is that in macro you use a lot more.

Global macro trading incorporates fundamental as well as sentimental and technical analysis to form its trading ideas. Why only use one type of analysis when by adding in more you are able to improve your risk to reward on a trade by trade level as well as on a portfolio level.

Probably the most famous example of using technical as well as fundamental analysis is when George Soros and Stanley Druckenmiller broke the bank of England. No they did not actually break anything. But they did make over a billion dollars in two days. Without fundamental analysis this would not have been possible.

The bank of England was reluctant to raise their interest rates along with the rest of Europe or to float its currency. The economic situation essentially said that England had to do one of those two things or they would have to devalue the pound.

Eventually the bank was forced to devalue the currency and in two days time the Soros funds were able to bring in more than a billion dollars. This was not a bad trade for a few days work.

This trade essentially encompassed something that another great trader Michael Marcus who once said: I think the secret is cutting down the number of trades you make. The best trades are the ones in which you have all three things going for you, fundamentals, technicals, and market tone. If you can restrict your activity to only those types of trades then you have to make money in any market under any circumstances.

Trading is hard enough as it is you do not need to make it even harder by fighting the underlying market moving factors. Learn and use all forms of analysis so that you can be a better global macro trader.