Reading Macro Flows: A Frame for Checking the Sequence, Not Predicting > Learning materials

When you read a market outlook and start from the conclusion, you end up not checking the reasoning. Simply fixing a sequence that runs from policy to liquidity to the dollar to asset class preference, and checking only what changed at each step, can reduce overreaching conclusions.

Organize It Into Four Steps

First, check the direction of the policy rate and the announcement schedule. Next, look at whether credit conditions and capital flows are easing or tightening. Then check what pressure the direction of the dollar puts on commodities and emerging markets. Only at the end does it emerge which asset class is favored.

If You Do Not Write It Down, Nothing Remains

For any outlook, write down the date it was written, the premises, the reasoning, the opposing scenario, and the invalidation condition under which you would treat this judgment as wrong. Only if you can check what was right and what went off when you reread it later will your next judgment improve. When you copy down someone else's outlook, record the source and the date it was written as well.

Verification Checklist

• Did you check the premises and the reasoning before the conclusion?
• Did you write down the opposing scenario alongside it?
• Have you defined the condition under which this judgment becomes invalid?
• Did you check the original source and the date it was written?

This article is community learning material and is not investment advice, a personal recommendation, or a solicitation to trade. Leveraged products can produce large losses in a short period of time, and actual product terms and costs must be checked directly in the official documents and your account screen at the time of use.