by Gavin M.
Of the 1% of us traders who still worry about macro events and trade the world of forex, futures and bonds, it really continues to be a roller coaster. Let me begin with the most significant yet will be gradually downplayed prospect of a FED rate hike. When you have multiple data points conflicting each other, how do you position as a trader?
All the data and news can drive a trader into madness. This is why you figure out a strategy and manage your positions from there. I have taken the stand that they will NOT hike this year. So far, my trades have done pretty well in the forex world with that stance. The EUR bounced hard this week only to be sold off after Friday's unusually good US CPI number. But nobody still knows if the FED will really raise rates.
We then move across the pond to Europe. Yes, that continent that continues to put up a show that they're united but in reality, they are ruled by Germany. France likes to think they have some pull but they are just Germany's little sidekick. We do not know if Greece will stay or go. For posterity's sake, the EU wants to really prove to the world that they will save Greece 'whatever it takes'. I liken Greece to a sick heifer. Either put her out of misery or just leave her to live out her last days in isolation. Greece will get its Gotham moment. It has to be destroyed before it can rebuild itself. At what point will the EU truly realize that Greece is a lost cause?
Traversing further east, we now have China. China's ridiculously high stock markets are really remarkable. They popped the real estate bubble, so now they are making the stock bubble even bigger. I am truly impressed that despite Chinese regulators warning the citizens that they are reaching bubble levels, the populace does not care. It is the "nothing could go wrong" attitude that will eventually take a lot of these stock markets down from their lofty valuations. But, not yet. As sure as a tsunami gets big before it recedes, stock market booms must reach that ultimate peak before it can trough.
We have plenty of geniuses on both sides of the argument. Some have argued these markets are going to crash this year. Some have argued the bull market is still strong. Ultimately, only one group will be right but so far, the bulls are winning. Therein lies the conundrum majority of us macro traders face each day. Do we place large directional bets? Do we believe one group's arguments over another's?
In the end, it is all about focusing on what is important to you as a trader. Quieting the noise and figuring out what is profitable right there and then. There is power in being small. The advantage of being an individual, retail trader is that you can position yourself small without the pressure of impressing your clients. There will always be money to be made, just make sure you side with money and not with stupidity. And yet, sometimes those two go hand in hand.
Traders from Equity Sense will be writing on this blog on positions and other market-related things.