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Global macro trading can be lumped into two main camps. Relative value and directional. Relative value trades asset classes against each other when their historical relationships are out of whack. Directional trading is when you place a trade because you feel the underlying asset is going to make a big move and you already think you know the direction.

Directional trading comes in several different styles. Some traders do their fundamental work and then buy or short based solely upon what they think the asset will do. Others trade purely on gut feel. And yet others trade technically looking at charts. Another large class of so-called global macro traders use automatic trading systems. And then finally we have the people that try and incorporate all the different types into one.

Traders that only use fundamental analysis typically hold positions for long periods of time and feel that their edge is in their valuation skills. When they are right they can do very well but at times they are worng and have large drawdowns.

Trading from the seat of your pants is typically a bad way to go about trading. That being said if you are good at risk management it can be one way to trade. If you like watching fed announcements and trading off of them then good luck. It doesn’t work for most that try it.

Some people call it voodoo and others call it the road to riches. Technical analysis is the art of the chart. Technicians focus on price action and other fully quantifiable factors. Based on this they are able to make decisions as to where they feel that things are going.

CTA trend followers are the largest group of automatic traders. They are 90% of the managed futures industry and like technicians they use price action. As opposed to most however their system is truly automatic and along with a risk management algorithm they trade in futures markets across the globe.

Traders who use the best of all these forms of trading typically will have better long term results and lower drawdowns. If you use good risk management along with a measure of what the market is telling you, and then couple that with the fundamentals of the actual market you are bound to have better long term results.

To trade commodity futures well is not any easy task. Beware of anyone who tells you that it is.

A commodity broker friend who was only half joking once told me that if you are thinking that it is a good idea to trade commodity futures you should have a nice glass of wine, go to bed, and take a long nap until the urge has completely disappeared. For most people who want to jump into the frenzied world of commodity trading that would be excellent advice.

However, for those who take the time to learn as much as they can about the commodity trading business before trading real money there is the possibility of starting out with a modest amount of risk capital and trading your way to a fortune. It is important to realize that you will be competing against some very smart, well informed individuals who will be pleased to take your money, so be sure to be up for the action before getting started.

With that said it is also important to know that you will never have complete information about any market and that the outcome of any commodity trade can not be known for sure in advance. While it is important to know what you are doing you must be able to operate knowing that you will never know everything. If you are unable to pull the trading trigger when your trading system indicates a favorable trade is offered you had best give up commodity trading right now. Even tiny delays in executing trades can be fatal to your results.

You just may be lucky for a short while when trading against aggressive seasoned commodity traders but probably your luck will soon turn into financial grief. So beware. Don’t be in a hurry to start trading before you at least have put together a trading plan and have decided how much capital you are willing to put at risk. Many brokerage firms offer a demo trading account so that you can put your trading skills to the test without risking real money. For many potential traders opening and trading a demo account is a good way to start.

There is another very important item that you must decide upon before starting to trade commodity futures. You must choose a commodity brokerage firm. You may also wish to select a commodity broker although these Internet days you may decide to trade online in a self directed account using a trading platform provided by your brokerage firm. You must do your homework to insure that the brokerage firm that you are dealing with is not running a scam.

The Commodity Futures Trading Commission (CFTC) provides guidelines to help you with your home work. Prior to opening a commodity futures trading account you should visit the CFTC website. The CFTC will not assist you to make winning trades but they can help you with your commodity trading education which may very well help to get you started in the right way.