Global Macro Trading is different from other trading strategies such as long equities, fixed income arbitrage, or other strategies. Instead of being put in a style box Global Macro Trading is characterized as being able to go anywhere in the world, trading any instrument, using any strategy. Basically the objective of a Global Macro Trader is to find the absolute best risk/reward situations on the planet earth.
Many of the best traders of our time are Global Macro Traders. Probably the most well-known Global Macro Trader is George Soros. In 1970 he started the Quantum Fund with Jim Rogers and since then he has averaged around 30% a year building up his net worth to the tune of about eight billion dollars. Other well known Global Macro Traders are Paul Tudor Jones, Bruce Kovner, Michael Steinhardt, Julian Robertson, Stanley Druckenmiller, Nick Roditi, and Louis Bacon. What do all of these traders have in common apart from their basic trading styles? They have all done exceptionally well running multi-billion dollar funds. Everyone that I have named have averaged over 20% a year for fifteen plus years. It’s safe to say that they are some of the best traders ever.
Why do so many great traders gravitate to this style of trading? As noted above Global Macro Traders go anywhere and everywhere looking for great risk-adjusted rewards. Look at the chart below. It is a chart of $10,000 invested in the Barclay Group’s Global Macro Index with the SP500 returns overlaid from 1997 to now.
What stands out the most from this chart isn’t just that the Macro Trading Index beat the SP500 by over 50%. What stands out the most is that the SP500 had a 47% drawdown and the Macro Trading Index only had a 2.81% drawdown during the same time.
What does this say to me? It says that being tied to one asset class, in one country, to one strategy is very limiting and can be very painful to your portfolio as well. With Global Macro you are able to go anywhere for the best risk/reward situations available.
The Macro Trader