Are Hedge fund strategies really that complex?

[Alchemist123]

I might be wrong. But most successful fund managers use very simple strategy. The reason is simple, so they can survive more in different market conditions.

The more complex strategy, the more dependency it has on one market condition.

When the condition is changed, they will go out of game.

The simpler, the more chance it has when market condition changes.

 

[Kap]

Quote from riskfreetrading:

If the strategy cannot be written/explained on a lunch napkin, then it is not profitable. Your financial advisor needs a financial advisor, as for you, you need to change your financial advisor or become a financial advisor.

haha... nice one

a lot of strategies are through structured products, OTC etc and not really available to small time retail punters - but still can be explained on the back of a beer mat - anything that adds to the bottom line PnL and is scalable is game on in my experience.

Kap

 

[Indrionas]

I think the complex strategies are for arbitrage trading, since they may be based on complex inter-market relationships and similar stuff.

Directional speculative systems should not be complex, for they are just functions mapping long/short/flat positions to the price data. Let's assume we measure complexity of the system by the number of variables the system has. The more variables we add, the more accurately we can fit the system to the price data. This process is called curve fitting.

 

[Bo_D_]

Quote from Alchemist123:

I might be wrong. But most successful fund managers use very simple strategy. The reason is simple, so they can survive more in different market conditions.

The more complex strategy, the more dependency it has on one market condition.

When the condition is changed, they will go out of game.

The simpler, the more chance it has when market condition changes.

not necessarily, complex strategies will have market gates.

 

[TSGannGalt]

Trading simple is true in "a lot" of cases but what is simple for you is not exactly for funds.

If simple means, in terms of ET standard, like using technical analysis (RSI, Stochastic, MACD). Then it's completely wrong.

Simple in terms of tendencies of the market, then it's very true. Funds will and do expose simple "edges". The way they expose the "edges" can vary...

 

[jhend746]

Quote from TSGannGalt:

Trading simple is true in "a lot" of cases but what is simple for you is not exactly for funds.

If simple means, in terms of ET standard, like using technical analysis (RSI, Stochastic, MACD). Then it's completely wrong.

Simple in terms of tendencies of the market, then it's very true. Funds will and do expose simple "edges". The way they expose the "edges" can vary...

Well said. I would guess more rigorous in terms of proving and identiying. I propose a different question: what can retail traders learn and efficiently implement from hedge fund strategies?

 

[TSGannGalt]

Quote from jhend746:

Well said. I would guess more rigorous in terms of proving and identiying. I propose a different question: what can retail traders learn and efficiently implement from hedge fund strategies?

1 simple fact.

Retail trader makes their conclusion too easily. They need to know the difference between luck and skills. Once they can understand and trade based solely on skills, it's a matter of time the trader will start understanding hedge fund strategies.

 

[Bigpipn]

Easy money baby.