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.

Macro trading is similar to commodity trading advisors because most of them also are heavy users of technical analysis. Technical analysis is the study of price and volume.

Global macro trading firms also use a lot of fundamental and sentimental analysis in order to determine what to trade. Most funds want a real reason as to why something should happen and not just that it is happening. They still use price action it is just that they have it backed up by the market fundamentals and market tone to give them better odds and allow them to adjust their exposure accordingly.

One great example is when George Soros broke the bank of England in 1992. The chart pattern had signaled a double top and the first down day was an outside reversal pattern but the thing that enabled George Soros to push his bet and leverage his position was that the fundamentals warranted it.

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.

Finally the bank of England was forced to devalue the pound enabling the Soros funds to make over a billion dollars in just two days. If the fundamentals hadn't been in place then he would not have put on such a big position and in fact would have likely avoided the trade all together.

Trading this way is what global macro trading is all about. Line up the fundamentals, the technical's, and the market sentiment and then you can gauge the upside and the downside and position yourself accordingly.

Essentially trading is a hard enough game as it is why compound it by making your chances of being right less then they already are? You want as many things in your favor as possible so it is important to use fundamentals in your trading

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