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How to Make Money with Global Macro- Javier Gonzalez (Book Review )

Intermarket analysis is tricky at best. Javier Gonzalez, in How to Make Money with Global Macro,offers a couple of templates to simplify the task. Reduced (and oversimplified) even further, we get the “dollar strategy.” “If the dollar is appreciating, it invests in the Nasdaq. If the dollar is depreciating, it invests in commodity-exporting markets or commodities. There are some conditions, whether the dollar is appreciating or depreciating, in which it is best to hold cash or bonds.” (p. 6)
At the heart of Gonzalez’s framework is the core-periphery paradigm. Although currencies exist in a continuum, the paradigm divides currencies into the world’s reserve currency (currently the U.S. dollar), hard currencies (ones that appreciate during episodes of risk aversion, such as the Japanese yen, the Singaporean dollar, and the Swiss franc), and soft currencies (emerging market currencies or commodity-exporting currencies). The reserve currency economy has many advantages over other economies. Most notably, “worldwide monetary conditions are typically ‘optimal’ for the reserve currency economy and only for the reserve currency economy.” It can “generate wealth out of thin air,” it has “longer uninterrupted business cycles” (witness 1991-2001), and it can “have a currency account deficit apparently indefinitely.” (p. 22)
Gonzalez presents two blueprints of the dynamics of global macro, the episode from 2003 to 2008 and that from 1995 to 2001. Here things necessarily become more complicated. Nonetheless, Gonzalez suggests that “there are some difficult-to-manipulate relationships” in these blueprints, which is “why they just might increase the odds of profiting from global macro.” (p. 32)
The bulk of the book is a history lesson, from the commodity boom of the 1970s through the monetary experiments of the 2010s. The author analyzes global macro events in each decade and follows that analysis with graphs covering such areas as currencies, U.S. economic policy, U.S. equities, commodities, global equities, U.S. real estate, and U.S. economics.

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5 Principles of Trading Psychology

Trading is a performance activity
Like the playing of a concert instrument or the playing of a sport, trading entails the application of knowledge and skills to real time performances and this is the core idea behind my most recent book.  Success at trading, as with other performances, depends upon a developmental process in which intensive, structured practice and experience over an extended time yield competence and expertise. Many trading problems are attributable to attempts to succeed at trading prior to undergoing this learning process. My research suggests that professional traders account for well over three-quarters of all share and futures contract volume. It is impossible to sustain success against these professionals without honing one’s performance–and by making sure that you don’t lose your capital in the learning process. Confidence in one’s trading comes from the mastery conferred by one’s learning and development, not from psychological exercises or insights.

2: Success in trading is a function of talents and skills
Trading, in this sense, is no different from chess, Olympic events, or acting. Inborn abilities (talents) and developed competencies (skills) determine one’s level of success. From rock bands to ballet dancers and golfers, only a small percentage of participants in any performance activity are good enough to sustain a living from their performances. The key to success is finding a seamless fit between one’s talents/skills and the specific opportunities available in a performance field. For traders, this means finding a superior fit between your abilities and the specific markets and strategies you will be trading. Many performance problems are the result of a suboptimal fit between what the trader is good at and how the trader is trading. (more…)