There’s not much information to get. The most important variables in global macro are the economic conditions and how central banks respond to those conditions.
To get that information, I read the paper, look at the data, watch what the officials say, and try to read between the lines. From an actual trade point of view, it’s price action that determines when and where to put on a trade.
Otherwise, there’s a huge amount of noise in the world. Other people’s opinions are irrelevant. I can’t bear talking to salespeople because all they want to do is tell you something new, and things don’t change enough to warrant that. I don’t pick up the phone if I can avoid it.
– The Currency Specialist, from Drobny’s Inside the House of Money
My take:
A big part of successful trading is learning how to effectively separate wheat from chaff and signal from noise.
This is no easy task.
We live in a world of 24/7 information flow. It’s easy to drown in the constant firehosing of data, opinions, and hot takes.
Traders get into trouble when they mistake the noise for actionable intelligence. This happens because they don’t yet have a framework for which to filter out what’s useful and what’s not.
All a framework is is a set of mental models, broad first principles, and general truths that you stress test for robustness and which hold up through time.
The key is to start with the simple truths and build, slowly, while never sacrificing veracity for complexity.
Munger gave a killer speech about how to do this back in the 90’s. Here’s a cut from it (emphasis mine).
Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.
You’ve got to have models in your head. And you’ve got to array your experience both vicarious and direct on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.
