How to trade based on macroeconomics?

I just wanna ask if how you trade using macroeconomics?

A good way to do this is with a Forex Calendar, and keeping an eye out for anticipated news events.
Stuff like NFP etc

Personally I generally try to avoid trading during news as it can create some pretty volatile movements, I wait for the dust to settle and see if there has been a new direction set up from the news.

I think Forex Peace Army have members like Sive Morten who provide really solid break downs of anticipated news events that can be useful to trade.

Monthly, weekly, and daily reports.

Bloomberg is the best, hands down.

do you mean bloomberg terminal? If that so, I don’t have that much money :slight_smile:

I feel that if you want to trade on the basis of macroeconomics, a good way to start is keeping an eye on the economic events taking place around the globe that can have an impact on your trades. Yahoo Finance and some economic calendars are good places to check major events.

As we are talking about macroeconomics, they are associated with a lot of branch effects for their market movement. News, reports, and influential trader interviews can tell a lot about the macroeconomic market fluctuations. Once you start to learn, you will obviously understand a pattern. You can interpret your findings and co-relate with previous events. Try to get an overall picture and make a prediction chart for your trade if possible.

It all boils down to predicting what will be next central bank action. Using macroeconomic data you attempt to predict whether central bank will tighten monetary policy or make credit conditions softer. To be more precise you want to understand which central bank will “diverge” from other central banks, i.e. hike or decrease interest rates faster than other banks since this will determine investment inflows/outflows which at the end affect supply demand on particular currency

Macro economics is the big picture view of the economy - timeframe for a macro thesis is measured in yrs, not months, days and certainly not hours!

I suppose you are referring to trading news or economic releases and not macro.

With that said I get your point.

Regardless of time frame I suggest first off you keep an eye out on inflation stats, retail sentiment and bond yields.

Currently we are seeing strong inflation numbers, with many ‘experts’ saying we are heading to stagflation or even hyperinflation.

What they fail to see is that these inflation numbers are now being rejected by the consumer - which will lead to lower bond yields not higher.

It is this type of interplay between inflation numbers, retail sentiment, and bond yields that if understood could be played on a short term ‘macro’ basis.

Watch the 10 yr yield - it’s the most followed metric on the planet.

And soon enough (already starting to happen) economists will once again be concerned with deflation NOT inflation, as stimulus and furlough checks are used up.

Following macro is a tough game indeed, especially for the beginner.

Best of luck

I was thinking the same thing as I read the comments.

How will the CHN perform this year? Will the EUR go down over the next 6 months?

I feel like looking at GDP and emerging economies would be good trades. But if your trades are that long-term, I imagine you’d be better off trading ETFs.

What do you think @Johnscott31?

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@Johnscott31
Sorry! Haha I just edited that comment

Oh my god - you asking my opinion on a long term forecast?

I have no idea.

My biggest ‘thesis’ right now is the thai baht will collapse - of course I’ve got a boots on the ground opinion of that

My second ‘thesis’ is I think GBP is going to be one if not the strongest currency for some time to come - based mainly on a new brave world post brexit.

I think carbon credit ETFs could become massive - regardless of my take on climate change.

I think agricultural commodity prices could go much higher with the possibility of endless droughts in the USA.

I think due to NSFR compliance rules for the LBMA gold market, gold will go much higher, as the physical demand starts to be main price driver.

As for predicting GDP and which currencies will be strongest I don’t know.

At a guess, I actually think the dollar might rise, as participants start once again buying US treasuries.

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I gotta hear more about this!!! What’s going on there??

This is what I meant. It’s difficult to trade based on those kinds of macroeconomics. I think ETFs would be a better option.

You trade other commodities besides gold? I didn’t even know there’s an ETF for carbon credits!!
You’ve got quite the portfolio!!

I am just learning about the whole carbon credit market - but yes they have ETFs and as of yet I do not have any.

But like it or not, we are moving to a more woke world, and climate change and reducing emissions is going to be playing a more prominent role.

It’s a long-term theme and one I intend to spend more time investigating.

Yes, I have been trading corn for some time now, and I really like the way it trades - trading off 8-hour charts are beautiful.

Not to mention that the world’s population isn’t getting any smaller, major droughts in the US and even the prospect of a declining dollar, will all be backdrops to this market and other ags. There are a number of institutions that say food shortages are going to be a major concern over the coming years.

As for the THB, its just a feeling more than anything else. The baht was the strongest currency in the world for a time - much to the chagrin of many expats I chat to.

But the tourism industry is decimated beyond repair, and there don’t seem to be any other industries going to take up the slack.

The Thai government are running around like headless chickens and whole swathes of the economy are still down. Plus the vaccine role out is totally unorganized.

There are real structural problems with the Thai economy, education, training, language barrier being some of the main ones. The likes of Vietnam and even Cambodia will benefit at Thailand’s expense over time.

The Thai tourism thing was on life support, even prior to covid. The world has moved on from holidays to Phuket, Pattaya, and Bangkok.

Not to mention the biggest tourism market China, is not letting anyone out the country.

This is why I think THB could take a big fall. You may want to ask @steve369 as he only lives a few miles from where I am in Chiang Mai.

As for trading off macroeconomics, I don’t think you do. Macroeconomics is strategic, not tactical. It will tell you which markets to be in, the ones most likely to have tailwinds behind them. Macro economics would be utterly useless for most market timing systems

Two reasons why Thai baht won’t fall much: it’s linked and supported by the USD, and tourism only accounts for 10% of GDP. I agree GBP will benefit, though, once Johnson is replaced by a person who has morals.

What is interesting is that the USD trading against the THB & TBH are correlated pairs. If one goes up the other follows - same as the DAX & DOW indices. Clear trading opportunities there.

Also, IMO, the commodity markets are rich buying opportunities - hence the rise? in corn - which is a new source of funds, John?

Interesting though I couldn’t disagree more!

From what is becoming apparent tourism has been making up far more than 10% of GDP.

That was always the figure given out by the government but even government sources of late say it could account for up to 30%!

As for dollar supported, I’m assuming you mean a loose peg - yes that’s true.

But in my experiences here whenever the dollar is performing poorly us Brits and Aussies tend to get a great exchange rate for Thai Baht - Americans not so much.

I suspect part of the reason the gbp vs thb has gone from a low of 34 to now around 44 is general dollar weakness.

I DO believe the baht will fall alot, but not in the short term. I just see too many neighboring countries with so much more to offer in numerous ways than LOS.

On the flip side grouchy expats have been saying for years the baht needs to crash - so who knows for sure.

Well, I hope you’re right. I could do with an GBP exchange rate in the 60’s which it was when I first visited Thailand in 2006.

Those were the days…

BTW - In 2019, contribution of travel and tourism to GDP (% of GDP ) for Thailand was 21.9 %. I suspect it’s a lot lower now.

I guess trading on macroeconomics is a consistent part of fundamental analysis which is highly spread among investors and long-time traders (weeks and months). Of course everything you have to do is to download or setup a economic calendar (by the way there are brokers who offers such option for their traders) and check the news everyday in ordr to prevent the falling of the price or in contrary the increasement of the price in case you open a short position. To my mind everyting is pretty clear here, however you shouldn’t forget about various indicators/patterns which are spread in fundamental too.

Perhaps you know that trading based on macroeconomics isn’t in demand because it isn’t considered as an effective strategy for traders. However, there several indicators which can hlp you to trade bsed on macro. The first indicator is employment. Unemployment rates show the percentage of the total labor force that is unemployed but is actively seeking employment and is willing to work. An increase in unemployment levels negativel perceived by the financial markets as a signal to retreat from the currency. The second indicator is inflation. CPI is the key indicator of inflation, so if the publications of CPI is higher than expeted this means that inflation pressure is high and the central bank could raise interest rates which could lead an increase of national currency value. These two indicators in my opinion are the major to understand the trading based on macro.