How useful is Economics as a trader?
- Thread starter TraderTactics
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Economics or using fundamental analysis depends on the input variables being roughly correct.
As we know, figures can be massaged (e.g. false earnings at Enron, incorrect deficit numbers for Greece, etc.) which in my mind renders economics little more than guesswork. Put 10 economists in a room and you'll get 11 opinions..
In the Guardian newspaper here in the UK, on one day last month one headline was 'house prices to go down in 2010' whilst a few pages later it was 'house prices to rise in 2010'.. take your pick.
The truth with our current situation is that it is a giant experiment. No-one has any idea if we'll end up with deflation or inflation. Bernanke is simply pulling every lever and pushing every button he can..
As we know, figures can be massaged (e.g. false earnings at Enron, incorrect deficit numbers for Greece, etc.) which in my mind renders economics little more than guesswork. Put 10 economists in a room and you'll get 11 opinions..
In the Guardian newspaper here in the UK, on one day last month one headline was 'house prices to go down in 2010' whilst a few pages later it was 'house prices to rise in 2010'.. take your pick.
The truth with our current situation is that it is a giant experiment. No-one has any idea if we'll end up with deflation or inflation. Bernanke is simply pulling every lever and pushing every button he can..
If we start a business we are not expert about doing that we still use our knowledge to do that.
Long-term, the market trades money supply and credit growth/destruction. Period.
Academic circles teach Keynesian-Monetarism (neo-classical) which, at best, glosses over money supply. That's why Economic Profs can't trade worth shit.
Understand how money is created, destroyed, the nature of debt, and how markets (representing fixed assets) respond to various levels of credit. Done.
Learn that, and you can do 50% a year, trading fundamentals.
Aren't I generous guy? Thank me later.
Quote from Stosh:
In my opinion, a day trader doesn't "need" much knowledge of economics to be successful (just hard work).....but the longer you hold your positions, the more important the big picture becomes. This subject can inspire a lot of debate due to differing opinions about: technical analysis vs. fundamental analysis, intuitive vs. automated trading, macro vs. micro, etc. But probably knowledge of everything in the world is best. Stosh
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for macro, commodities and fixed income a formal economic knowledge is certainly indispensable.
Learning economics is very different than learning how to react to economic reports, global economic events as a trader.
That's why the opinions are different because these are different subjects. Kind'uv like comparing learning how to build a car versus learning how to drive a car. I'm in the camp of learned how to drive a car and I didn't need to get a degree in economics to do such.
Thus, I keep a close eye on economic reports and global economic events when I'm trading...it's important to prevent that feeling of what the hell just happen while trading.
Mark
How useful is physics to a driver?
Well, it depends what you drive, at what speed and who, if anyone, is after you. If you are just driving to work no need to know physics but if you are taking turns at 350 Km/h you better understand things like centrifugal forces and what they can do to you if you are not careful.
I hope you get the point. No need to elaborate.
Well, it depends what you drive, at what speed and who, if anyone, is after you. If you are just driving to work no need to know physics but if you are taking turns at 350 Km/h you better understand things like centrifugal forces and what they can do to you if you are not careful.
I hope you get the point. No need to elaborate.