Looking for a trader's guide to macro economics

[zzaxx99]

I've studied a bit of economics in the (distant) past, so I do have a (mostly forgotten, admittedly) basic grounding in theory, but what I'm looking for is something much more focused towards the needs of someone who wants to understand how the economics will affect their trades.

For example, I'm looking for something that will give guidelines along the lines of "of interest rates do this then bond yields do that, provided that the exchange rate doesn't something else", "if American non-farm 'labor' numbers are this then cyclicals do that..." etc etc. IE, I'm looking for something much more practical than an abstract economics text.

(I realise that most of the relationships are far more complex than that, and sometimes mutually contradictory)

Has anyone come across anything like this (book, website, whatever) that they think is worth recommending?

 

[BBB]

Good luck!

If macro economics are your thing then you're probably better off looking at futures, or options on those futures. Get to grips with how to gauge the sentiment of the market first before trying to figure out how a market will take a piece of news.

 

[zzaxx99]

The reason I want to get a better handle on this stuff is because I have found several times that I have made the "right" trade on a share, only to find that the wider sector/market/world economy has lurched off in a different direction that left me completely wrong-footed - I do want to at least know what the big picture is before I trade.

A concrete example - a poster on Hemscott (Bert_E) pretty much called the bottom of the last decline and predicted the current uptrend by looking at economic factors and published figures. I, in contrast, found myself trading short against a trend which I didn't realise had reversed - painful, and something I would like to avoid doing again.

 

[zzaxx99]

... If macro economics are your thing.

It's resolutely not my thing - and probably wouldn't be, even if I got some sort of grasp of it - but I'd like at least to improve my chances of not trying to trade against a juggernaut.

 

[LION63]

The only way you can apply economics to the financial markets is if you are prepared to take long term positions. I often find that the markets often move in the opposite direction on the release of data; rise in interest rates etc.; however, it does not take too long before they reverse and move in line with the fundamentals. As such, where I base the trades on fundamentals I try and make adequate allowance for the markets moving against me for a while and quite a few points. As BBB said, you are probably better off looking at options as they limit your risk and require less capital for your type of trade.

Most traders base their decisions on Technical Analysis so it takes quite a while for the charts to show a change in direction. Until then, they are all going in the same direction (like lemmings), unfortunately for us, that is when we step up to the plate (sometimes a bit too soon). In saying that, it is worth it in the long run.

 

[zzaxx99]

Once I started looking in the right places, they were everywhere...

• The Trader's Guide to Key Economic Indicators
• Economic Indicators Investing Financial News Book
• International Economic Indicators CIBCR Book, which sounds a hell of a lot drier, and which I'm saving for a last resort.
• Atlas of Economic Indicators.
• Economic Indicators 101: Using the Clues to Future Economic Trends for Smarter Investing - which sounds ideal for my purposes
• Trading the Fundamentals - The Trader's Complete Guide to Interpreting Economic Indicators & Monetary Policy, which sounds worth a read
• Investors Guide to Economic Fundamentals - sounds a bit more theoretical than the sort of thing I'm after.
• Economics for Professional Investors

All available from either Amazon or the AdvFN/Global Investor bookshop

 

[ZigZag]

zzaxx99,
Try " what drives financial markets" by Brian Kettell. Publisher : Financial Times - Prentice Hall. The author has worked for many of the major banks. He now tutors for the banks. One chapter is devoted to the direction of equities, bonds and currencies after the main economic indicators are published. Bought it when first publshed in 1999 and consider it as good value.
regards

 

[eddiecomestotown]

Coming from an economics background i recommend you dont worry about it. What I have found is that market sentiment at the time determines what economic theory is to be applied to a piece of data, and therefore what is going to happen to the market.

Even with the economic theory behind me i have found the market shoot off in a different direction to what i expected. You just cant win.

You shouldn't try to guess the markets reaction to the news, just note that news will cause volitility and watch what happens. Keep an eye on the futures market if you want to trade in the direction of the market.

 

[JOHN LEWIS]

Seven Days Ahead

I've studied a bit of economics in the (distant) past, so I do have a (mostly forgotten, admittedly) basic grounding in theory, but what I'm looking for is something much more focused towards the needs of someone who wants to understand how the economics will affect their trades.

For example, I'm looking for something that will give guidelines along the lines of "of interest rates do this then bond yields do that, provided that the exchange rate doesn't something else", "if American non-farm 'labor' numbers are this then cyclicals do that..." etc etc. IE, I'm looking for something much more practical than an abstract economics text.

(I realise that most of the relationships are far more complex than that, and sometimes mutually contradictory)

Has anyone come across anything like this (book, website, whatever) that they think is worth recommending?

Try the trading guides at www.sevendaysahead.com