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Macroeconomics


Ali Farhad

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That depends on your trading time frame. If you are investing in a stock for at least a year, getting a macroeconomic perspective could be helpful.

I use it in my top-to-bottom economic analysis, starting from macro to microeconomic factors. It helped me get an overall picture of the financial health of the industry and overall markets.

In the hedge fund where I was working, it was one of the key methods to check off when analyzing a segment for investment.

Let me share some key points:

It was never used to get a direct investment signal but rather as a confirmation tool along with other methods.

The main aim was to learn about the trend of factors larger than the stock's earnings, such as the economy and commodity prices (if relevant), and more; which can affect either the demand for the product or the company's cost of producing the product.

The goal is to obtain an idea of the demand and supply for the overall industry, not for a specific company. Once you have a growth picture for an industry, you can then research the best-performing companies within that segment.

 

If you wish to know more, let me know :). Hope this helps!

 

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First off, I want to say that I am bias answering this question as I am in fact a macro trader. 

So yes I do believe it is the best way of assessing the markets. This is because there is always a reason an asset moves as it does. whether that is because of a cut or raise in interest rates, a trade war or some bad fundamental data. There is always a reason behind the move.

My suggestion if you want to learn about macroeconomics is to get on twitter and learn from some of the Macro traders there. Also there are a number of free subscription newsletters available. Alternatively you could learn from the community here!

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