I’m a multi-strategy global macro trader. Here’s how I trade:
Core position
I focus on macro trend following, seeking to capitalize on major trends in stocks, bonds, and commodities that are driven by clear macro themes/narratives. This strategy typically forms the core of my portfolio, except during periods when clear trends are not evident.
To quote Reminiscences of a Stock Operator: “the big money is made by being right and sitting tight.” I focus on key themes/narratives that drive major trends, such as:
Long tech stocks in 2020 (COVID money printing + work from home theme)
Long commodities in 2021 (inflation theme)
Short bonds in 2022 (inflation = interest rate hike theme)
Long India + U.S. tech stocks in 2023 to mid-2024 (earnings growth theme)
While I follow trends, I also adjust my core position’s size using contrarian signals. For example, if a rally becomes overextended in an uptrend, I may scale back exposure from 200% long to 50% long.
Beyond my core trend-following approach, I take 2 additional types of trades. These non-core positions typically don't account for the majority of my returns, but serve to enhance overall performance.
Non-core position: mean-reversion trades
From time-to-time I take contrarian, mean-reversion trades. I short rallies or buy crashes only when the market reaches a multi-month/year extreme. These positions are typically held for weeks to months.
Since extreme rallies/crashes can always become more extreme, these mean-reversion trades always involve small position sizing.
Non-core position: Black Swan trades
I trade significant market mis-pricings when an event's probability is significantly underestimated. For example, if the market estimates than an event has a 1% probability of occurring but I believe the real probability is 10%, I will take that trade.
In my mind, Black Swan trades are not limited to bearish scenarios; there are also opportunities to capitalize on positive black swans. Any event that is large and unexpected (for the majority of market participants) is a “Black Swan”.
These Black Swan trades always involve small position sizes but can generate substantial portfolio gains due to their asymmetric risk-reward profiles.
