Rates and FX traders: how much time spent on fundamental research?
From what little I know, rates and fx traders first and foremost need to understand the technical aspects of their products, supply and demand in their markets, and what drives price action on a day to day basis. But if I'm interested in understanding the economies of countries and real-world consequences of economic policies, am I completely deluded in thinking that a rates or fx trading role would provide such an understanding (even if it's more of a side effect than a direct job responsibility, ie. I don't expect to spend 4 hours a day at work in an fx trading role researching the bios of government ministers in Mexico to develop a long-run view on USD/peso). I'd assume that joining the econ or fx or rates research teams would be a more direct path to my goal, but I'd rather be in a trading role if at all possible.
Thanks for any help!
Regarding length of the time horizon of fundamental/technical research:
Research (months/years) > Strategy (weeks/months) > Sales (days/weeks) > Trading (hours/days)
All of these roles need to understand the stuff you are interested in, but you need to decide which time horizon is best for you.
By trading forex you will gain an overall better understanding of countries and how policies affect them. Just last week for instance if you look at the AUD/USD the aussie dollar went through the roof.
Australia's jobless rate fell for the second consecutive month in December to 5.5% against expectations of a rise.
That's why the AUD sky rocketed
I'm just a kid trading forex and don't know much at all. But, from the trading I have been doing in forex I have learned a great deal on what effects currencies and why. So I'm positive being a fx trader you would get your fill of learning economics and trading at the same time. Plus I think it would be personally funner anticipating the economic events, announcements and acting on them.
Thanks both. trade_nrg, does everyone differentiate between research and strategy?
Most of the big banks have broader Economic or Fixed Income Research groups and a more concentrated FX Strategy group. Research provides macro info to the whole trading floor whereas strategy traditionally caters to salespeople, traders, and clients within FX.
Forex trading is a zero sum game. Your expected return on a diversified porfolio of currencies is negative after trading costs, so how is it anything other than glorified gambling?
I personally don't think it is like glorified gambling at all. Yes it is a zero-sum game and yes it is very hard. But it can be a great additional source of alpha in a global macro fixed-income/equity portfolio. It becomes gambling when people get into it on a retail broker when they have no idea what they are doing and are levered 100:1. However, I think a lot of American investors over the past view years have hedged their domestic equity portfolio globally by being short the dollar a bit.
Why not just invest in foreign equities and get the automatic foreign currency exposure that comes with that?
not equities - bonds, if you hold large positions in fx for substantial amount of time you invest in sovereigns. hence, the carry trade. hence, forex is part of FICC along with fixed income, as opposed to equities.
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