Photo by Anonymous9000

Photo by Anonymous9000

When people speak about macro and micro, does economics come to mind? I do.

Macroeconomics, as Investopedia explains, “focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world.” While “microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it.”

If you are a macro investor, you would look at GDP, CPI, interest rate, etc to determine the state of the economy. You would probably invest in Forex, Government bonds, Index Futures, Commodities, etc.

If you are a micro investor, you look at a particular firm or industry, and assess its potential to make money through the product or service it produces. You would probably invest in individual stocks.

Despite the differences, they are related to a certain extent. The health of the economy can affect the business operations in that country and in turn, influences the profits. Hence, there are some micro investors that also look at the macro level while making investment decisions. But it is rare for the macro investor looking into individual companies’ balance sheets.

A pure technical trader would not care whether it is macro or micro, as long as there is a price, he can trade. But as a fundamental investor, what is your edge then? Are you better as a macro or a micro guy? Read more…