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Global macro

A strategy that takes directional positions across currencies, rates, equity indices and commodities based on views about economic policy, growth and capital flows.

Expression is usually through liquid instruments: futures, forwards, swaps and options, which lets a manager put on and remove large exposures quickly. Positions are often asymmetric by design, using options so a wrong view costs a known premium.

Discretionary macro depends on a small number of large calls, so returns are lumpy and dispersion between managers is wide. Systematic macro applies rules to the same markets and behaves more like managed-futures.

The recurring risk is that a correct thesis arrives late. A position sized for conviction rather than for the path can be stopped out before the view plays out, which is why macro books are usually built around position-sizing and predefined risk rather than around certainty.

Related: managed-futures, trend-following, position-sizing, hedge-fund, risk-on-risk-off, carry-trade

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

How a position size is worked outAccount size, risk per trade and stop distance feed into one box giving the number of shares.ACCOUNT SIZE$25,000your capitalRISK PER TRADE1%of the accountSTOP DISTANCE$0.50entry to stopPOSITION SIZE500 sharesrisk budget: $25,000 × 1% = $250position size: $250 ÷ $0.50 = 500 shares
Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.

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