CTA Strategy Types
Commodity Trading Advisors (CTAs) utilize a specific strategy in managing assets, and tend to specialize in one to two different strategy types at most. These predominant strategies include:
Commodity Trading Advisors that utilize a global macro approach to managing assets primarily focus on the overall economic and political views of various countries, along with other macroeconomic principles to determine trading opportunities. In addition, these types of CTAs use both quantitative analysis and qualitative evaluations to understand global relative price movements, volatility, business cycles, and other macro-economic conditions. CTAs that specialize in this strategy will employ interest rates, sovereign bonds, and currencies to produce returns.
Short Term trading strategies employed by commodity trading advisors are strategies that seek to take advantage of short-term movements in price. CTAs employing this type of strategy will hold trades for as little as seconds to a few days at the most. Short-term trading strategies will often use technical analysis coupled with advanced computer technology to execute trades. This type of strategy is useful because it allows investors to profit in the short run from a variety of price movements that regularly occur.
Commodity Trading Advisors that trade the markets from a discretionary approach will often look at crop reports, weather patterns, economic reports and other fundamental data to determine whether to trade. The majority of discretionary trading strategies are reliant on fundamental data to manage assets and produce returns. Discretionary trading strategies are beneficial because they center on flexibility and the ability to react quickly to changing market conditions. CTAs that employ a discretionary trading strategy focus on achieving above average returns in specific market sectors.
Agricultural trading strategies utilized by Commodity Trading Advisors primarily trade agricultural markets, which is a category comprised largely of grain and livestock futures contracts. Agricultural CTAs use a variety of analysis to guide their trading, but rely primarily on fundamental analysis, such as supply and demand, to make determinations. These types of CTAs utilize their experience and specialized world view necessary in order to create a solid agricultural managed futures program.