"Manual" macro day traders at MM pod funds - whats your strategy?
not talking about long / short equity portfolios or other types of relative value....i'm talking about actively trading the macro products like treasury futures, equity index futures, FX, energy...etc...all the deep liquidity products where you can trade in/out at a tight spread for size.
to a certain extent, if you are manual, you don't have a perfectly defined strategy (otherwise it would be automated).....but of course there is greay area.
Just curious what other manual macro day trading strategies are acceptable at the MM pod funds...
I would bucket the overall strategies as either: a) Systematic: well-defined, fully codified, automated trade generation / execution b) Discretionary: non-codified, decision-making process, ad-hoc execution approach c) Hybrid: big spectrum in between the two poles where a lot of people tend to fall
The vast majority of macro at MM fall into the Hybrid bucket. Even the most pure discretionary PMs tend to have a process / system they use for idea generation: read news flow every AM / read these reports from these sources / dig into price action /network + conversations / rinse and repeat....
In terms of actual strategies, I think you can bucket it into: a) Directional: Big directional views (i.e. risk looks overpriced or expect some negative catalyst --> Short Equities, Long Rates, Long Gold, et al...) b) Relative Value: Spread positions between asset classes (i.e. U.S. equities are overvalued relative to those of Europe --> Sell SP Mini, Buy Eurostoxx )
Again, a typical macro mandate tends to be super open-ended and practically lots of PMs end up doing a combination of both Directional / Relative Value and an element of Event-Driven where people are focused on events (elections, stat releases, central bank meetings) as catalysts to move markets towards how they believe they should be priced.
Lot of over simplification in this description and it can often be combined with other "macro adjacent" strategies like Fixed Income RV, Equity Sector Relative Value, et al...
edit: The answer to your question as to "what strategies are acceptable to MMs?" is very straightforward: whatever makes money. No one cares what it is as long as it has consistently produced results and there are reasons to plausibly believe it may continue to do so in the future.
so, whats YOUR strategy?
Primarily discretionary, directional macro, liquid markets/products.
Question regarding elections/ central banks meetings, I am guessing that PMs play with derivatives or other ways to structure bets such that you have favorable ecnomics, because PMs are not geniuses and should be right only 50% of the time on these toss coin events and it surely wouldn't be profitable to trade vanilla products does it?
Another way to think about it is that derivatives (you mean options) are negative sum because banks trading them always make money...
The best guys will trade that stuff if there is some edge in the distribution, but all the big money is made on delta. If you are good at dynamically adjusting your risk - it's same risk profile as using vol but cheaper.
One thing I've been curious about is how do macro traders define their edge when their strategy consists of "read news flow every AM / read these reports from these sources / dig into price action /network + conversations / rinse and repeat...."
Like do they think their news reading and conversations with brokers are systematically better than the rest of the street? I've seen so many macro discretionary traders come to the desk in the morning, read some news and put on a trade that they hadn't thought about until 10 minutes ago when their sales coverage at Goldman IBed them that this is the trade of the year. I don't understand how that systematically makes money
I don't think this happens anymore. I don't see how any tenured PM running risk could have this process.
"One thing I've been curious about is how do macro traders define their edge when their strategy consists of "read news flow every AM / read these reports from these sources / dig into price action /network + conversations / rinse and repeat...."
This may be what appears to be happening from the analyst's perspective but did you consider that perhaps the PM doesn't feel the need to explain his every intuition to his team?
He's ultimately there to manage the risk of his book and the analyst is there to provide a flow of good ideas for him to consider. A macro PMs views are generally nuanced and multi-faceted while often seeming incredibly lazy and simple to the outside observer. I'm not saying that every Macro PM is playing 4D chess but they generally see the markets as a constantly evolving story and every incremental piece of information or data is just another tidbit to help mold the book. Of course, there is generally at least some event-driven/catalyst element to book construction even in a macro construct. So what may seem to be on a whim to you has a process behind it. At the same time, the Macro style is sometimes hard to grasp for analysts trained fundamentally. You're so focused on your model (if you even have one) that you can't imagine such whilly nilly security/asset selection. However, your PM may need _________insert high beta industrial name here and 15 different stocks/bonds could suffice. He may need an EM currency of which several could suffice...etc. That is why they can often make size trades on (seemingly) a whim.
Highly doubt many PMs worth their salt give a flying F what their sales coverage thinks- he likely was just able to provide liquidity in something the PM was interested in at that moment.
In markets with ample liquidity and low transaction costs, the initial "research underwrite" loses some importance.
In a stand-alone sense, I think you’d be very hard pressed to find someone to let you run risk on that claim. With respect to the pitches from the bank sales coverage, I don’t think any PMs will go ahead and throw on a trade because a sales guy flagged it (if it’s a short time horizon trade.. definitely possible). The more important factor in all of this is trying to figure out market sentiment, what is priced in, is this data a fade? or has it not reacted as much as i think it should. Was everyone expecting 1.5t of stimulus? That’s where real intraday edge can come from.
What is day trading? Are a lot of people trading at night?
buy stonks when the merry men of robin hood log into reddit is the only acceptable day trading strategy from my research.
https://twitter.com/stoolpresidente/status/1281246933999333376?s=09
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