Learning 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 peoples money.
Hedge fund managers follow a step by step process to develop and test their currency trading strategies. Over the years, currency trading has become an important part of their investment portfolio. There is no reason why we as individual traders should also not follow that step by step process to develop out own trading strategies.
One thing must be clear from the start; every trader has to find his/her own edge. We can and should learn from others. But, it is our own methods and insights that will make us succeed as forex traders. Lets discuss the step by step process of developing our own trading strategies like the hedge fund managers do.
Begin by properly defining your trading strategy and style. Every hedge fund manager like every individual trader follows a different methodology and style. Some forex traders use fundamental analysis in trading. Other forex 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 traders? 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 will 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 strategy to succeed. You need to understand this. Some strategies work best on some currency pairs but dont work on others. Read more in Part II of this article. - 23223
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 peoples money.
Hedge fund managers follow a step by step process to develop and test their currency trading strategies. Over the years, currency trading has become an important part of their investment portfolio. There is no reason why we as individual traders should also not follow that step by step process to develop out own trading strategies.
One thing must be clear from the start; every trader has to find his/her own edge. We can and should learn from others. But, it is our own methods and insights that will make us succeed as forex traders. Lets discuss the step by step process of developing our own trading strategies like the hedge fund managers do.
Begin by properly defining your trading strategy and style. Every hedge fund manager like every individual trader follows a different methodology and style. Some forex traders use fundamental analysis in trading. Other forex 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 traders? 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 will 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 strategy to succeed. You need to understand this. Some strategies work best on some currency pairs but dont work on others. Read more in Part II of this article. - 23223
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading and swing trading stocks and currencies. Learn Forex Nitty Gritty. Read about Trend Forex System. Try Netpicks Forex Signal Service.
posted by X - Men @ 2:27 AM
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