Can You Learn to Trade Like a Hedge Fund Manager? (Part I)

There is a difference between a professional trader and an amateur trader. A professional trader never goes into a trade blindly whereas an amateur always trades based on his/her emotions. If you want to become a professional, than learn from hedge fund managers. You see hedge fund managers have to show good results to their investors for getting investments into their funds. Hedge fund managers have to convince their clients with a battle tested strategy.
As individual traders, our $20,000 trading account is as important as any $20 million hedge fund. Our $20,000 account is more important. We are using our own hard earned money on trading. A hedge fund manager is most probably trading with other people's money.
Most of the hedge fund managers follow a step by step process to develop their forex trading strategies. There is no reason why should we as individual traders also not follow that step by step process to develop our own trading strategies. We can't afford to lose our hard earned money in unsuccessful trading.
It must be clear from the beginning; every trader has to find one's own edge. We should learn from other successful traders. But, it is your methods that will make you succeed in the long run. This step by step process of developing your own trading strategies (like the hedge fund managers do) will help you in the long run.
Start by properly defining your trading strategy. Every fund manager like every individual trader follows a different methodology. Some traders use fundamental analysis. Other traders use technical analysis.
The first thing that you need to understand is what type of trader you are and what is the style of trading that best suits you. Are you a day trader? Do you want to swing trade or position trade?
The most important thing for you from the start is to figure out whether you want to trade based on fundamentals or technicals or a combination of both. When hedge fund managers develop their trading strategies they define clear cut trading rules and code them. This way they avoid the pitfalls of emotional trading.
Trading based on emotions is dangerous and will ruin you as a trader in the long run. Make your forex system rule based and mechanical with clear cut steps that you can follow in order to make your trading as unemotional as possible.
You need to decide whether you want to be a news trader or you will use technical indicators in your trading. You need to pick a few currency pairs and become master of their behavior. Not all currency pairs are created equal and you need to focus on only a few to become a successful long term trader.
Every currency pair requires a different trading strategy to make pips. You need to understand this. Some trading strategies work best on one currency pair but don't work on others. Read more in Part II of this article how hedge fund managers develop their trading strategies step by step.

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