How I Use Macroeconomic Data for Short-term Trading Strategy
How I Use Macroeconomic Data for Short-term Trading Strategy
I find the macro news to be especially helpful when forming a hypothesis.
In the Facebook Group, TastyTrade Czech Republic, I was asked the following question regarding how to use macroeconomic data in order to trade:
My response
I do believe it is very important to follow the macro news, which I will try to post here monthly. Will the monthly news cause volatility? Yes, in small part. For instance, when there is an FOMC meeting, then there is almost always volatility for that day.
I find the macro news to be especially helpful when forming a hypothesis. For instance, right now my hypothesis is the market will trade sideways mostly because the market in general has reached new support levels. If this is correct, then I will watch the macro news to ensure there is stability in the economy. If unemployment rate begins to tick up for repeated months and goes from 3.7% to 4.3%, then I better watch my positions carefully and maybe look to exit if my risk is spread too much.
If unemployment rate continues to float between 3.7%-3.8%, then this is one indicator that the market is stable, and then I like to buy-write, or sell covered calls as my short-term strategy. TQQQ TQQQ 0.00%↑ is one I like to do a lot of buy-writes.
I have 300 shares at ~$54, and will sell covered calls expiring every 2-3 weeks. If macro news continues to shows signs of stability, then TQQQ will trade sideways. There have been times where TQQQ dropped to $51, but I collected the premium. So I still keep my shares. Then as soon as that option expires, I will sell another covered call.
On Friday, Feb. 23rd, the next option will expire at $56. If I lose this, that's ok. I've collected the premium ($750) and the profit on shares ($600 or more, depending on final share price). Because the macro economy is fairly stable, I won't be afraid to buy TQQQ again at $58 for instance, and then sell calls. And I won't be scared if TQQQ drops to a price of $51 as long as the macro economy is doing fine. Maybe if it drops to $51, it's just a correction.
If the price drops continues to drop, then there may be some macro economic indicators that suggest the economy is not stable and instead is volatile.
Macroeconomic data goes hand-in-hand with index ETFs like TQQQ 0.00%↑, UDOW 0.00%↑, SPXL 0.00%↑, and even some thematic ETFs like SOXL 0.00%↑ . These aforementioned ETFs are all bullish and leveraged ETFs, and they each have their equal opposite inverse ETF. But since the market is trending upwards, the inverse ETFs are not a good strategy at the moment.
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