At ChatWithTraders.com, we are able to listen to wonderful interviews of successful traders and investors done via podcasts. It is an invaluable source of insights and a great asset to many of us actively involved in the markets!
As a discretionary macro investor, an interview that stood out to me was the podcast with Dario Mofardin of Mars Capital:
Here are 4 of my main takeaways from the interview:
(I) Understand the bigger picture:
The financial markets are akin to a bio-organism. Everything is interrelated, with a small event happening in one segment having the potential to alter the fate of other segments due to it being a somewhat complex system. Dario describes this process of understanding the big picture as ‘seeing the whole board’. Looking at what the markets have been doing, the direction of interest rates, currencies and global capital flows as well as synthesizing this with inter-market analysis will help an investor grasp the bigger picture and to understand the various risks out there as well as the nature of the opportunity set.
(II) Understand the fundamentals of finance:
Dario elaborated that his finance degree aided him in understanding the various financial products and their technicalities. He also added that it helped him gain a better understanding of global capital flows as well as an understanding of macroeconomic concepts. This helps in developing a holistic framework to understand how the markets work.
He also mentioned that he pursued an MBA in order to gain a deeper grounding in the fundamentals of capital markets and fundamentals of decision making. His investment banking experience has allowed him to understand the function of capital markets and how corporate decision making forms the bedrock of global finance.
(III) Wait for the higher probability trades and swing at the fat pitches:
In the podcast, Dario shared that he used to trade short-term trades, but he realised over the years that being too focused on the short term could lead one to miss the bigger trends which are potentially more rewardable. Quoting legendary investor Stanley Druckenmiller, who said that “the way to build long-term returns is through preservation of capital and home runs”, Dario morphed himself into a position trader, taking more long-term trades that have a higher probability of working out. This requires patience and discipline on the part of the trader as higher probability trades or fat pitches don’t come very often!
(IV) Use technical analysis to calibrate positioning strategy and optimise risk/reward:
Dario utilises Elliot Waves in order to see the various cycles play out in the price action of financial asset and markets. Having build a big picture view of the financial landscape, technical analysis helps him to calibrate his execution strategy and complement his market analysis. By developing a synthesis of his macro views and fundamental analysis alongside the technical picture, he could discover higher probable trades and optimise the risk/reward profile.
Technical analysis also helps as a precision tool when it comes to timing. Fundamental macro investing doesn’t do much in calibrating a macro investor’s view in accordance with the proper time frame and horizon when managing money in the markets.
You can learn a great deal – I highly recommend this podcast and other podcasts from ChatWithTraders.com!
To find out more about Dario Mofardin and his work, check out his website!