# How to use macroeconomic indicators for long/short trading strategies?

I am trying to understand how to use macroeconomic data in my trading. I understand that using such data could be used to gauge an overall view of the market and how it's doing as a whole. I have been trying to make sense of the information contained to infer weights for different equities/sectors but find myself stuck.

My end goal is to be able to incorporate the information in macroeconomic and other market indicators into my trading strategies(Long/Short Equity) - possibly weighting stocks differently based on this data or some sort of sector rotation strategy.

Could you please suggest a typical usage example of macro data in trading and/or recommend some good reading material(books/research papers/etc) so that I may able to make good use of macro data in trading?

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No answers/directions yet. Anyone?! –  Mindstorm Jan 21 '12 at 21:31

I believe the answers depends on the initial trading strategies and on the macroeconomic indicators. From the way you formulate your question, I imagine that your trading strategy in based on quantitative asset allocation (mean-variance, for example). Let's denote the quantitative allocation $w_q$.
Then, I would suggest you establish a framework for your macro-indicators which will output a macro-economic allocation $w_m$.
You then have to mix them together to obtain your final allocation $w$, and Quant Guy provided a brilliant response in this post.