Hedge Fund Strategies

The Credit Suisse/Tremont Hedge Fund Index lists the following strategies:

Convertible Arbitrage
Dedicated Short Bias
Emerging Markets
Equity Market Neutral
Event Driven
Distressed
Event Driven Multi-Strategy
Risk Arbitrage
Fixed Income Arbitrage
Global Macro
Long/Short Equity
Managed Futures
Multi-Strategy

Wikipedia has a short blurb on each of the strategies.

I agree with Frank Thomas that most hedge funds are looking for a spread to trade, which, if the spread is closing, a contrarian strategy.

I think it's possible for a small retail trader to do some of these strategies, but it's hard to start from scratch. I don't think I'd be able to do it if I started on my own with just books.
 
Quote from dima777:

can you please elaborate on the relative value method?
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Predict a value on two securities. Short the overvalued and buy the undervalued, and if they're perfectly negatively correlated you can simply buy the undervalued and this is sufficient for shorting one and going long the other. Basically go long at twice the size does the same thing.
 
Quote from NY0BScalper:

Why are people asking this TraderZones clown for advice on a profitable trading strategy?!?!?!? Do people actually believe TZ knows what ANY hedgefund out there actually does? :confused: :confused: :confused: :confused: :confused: :confused:
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Great. Since you are so knowledgeable, why don't you solve the OP.
 
Quote from TraderZones:

Great. Since you are so knowledgeable, why don't you solve the OP.
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I am wondering why such huge institutions would depart from the technical analysis to the statistics.....is this the one which really works? and if most hedge funds use stats it doesnt take long to come to the conclusion that the traditional technical analysis no longer works..and is nothing short of a way to intice unknowing majority into a game won by those who use entirely diffferent methods....in other words, is there a TECHNICAL ANALYSIS CONSPIRACY???!!!! :) :)
 
Quote from dima777:

I am wondering why such huge institutions would depart from the technical analysis to the statistics.....is this the one which really works? and if most hedge funds use stats it doesnt take long to come to the conclusion that the traditional technical analysis no longer works..and is nothing short of a way to intice unknowing majority into a game won by those who use entirely diffferent methods....in other words, is there a TECHNICAL ANALYSIS CONSPIRACY???!!!! :) :)
More...

TA = Statistics in most cases. A Moving Average is a low-pass filter which eliminates noise and focuses on drift, Stochastic is high-pass that detrends data and focuses on noise.

Time Series = Noise + Drift

Noise is usually a mean-reverting process, Drift is trend-following. HF like trading noise due to the higher-frequency of trades, bunch of reasons for that. If they can identify the drift thru seasonal patterns or recognition they'll do that too. Most funds do the same thing so the ones with the best infrastrucute and reduced latency usually win.

Relative value looks for deviation of a price with anything that holds a statistical relationship, model price, MA, security, market, whatever....

These are broad broad generalizations...
 
Quote from knocks420:

TA = Statistics in most cases. A Moving Average is a low-pass filter which eliminates noise and focuses on drift, Stochastic is high-pass that detrends data and focuses on noise.

Time Series = Noise + Drift

Noise is usually a mean-reverting process, Drift is trend-following. HF like trading noise due to the higher-frequency of trades, bunch of reasons for that. If they can identify the drift thru seasonal patterns or recognition they'll do that too. Most funds do the same thing so the ones with the best infrastrucute and reduced latency usually win.

Relative value looks for deviation of a price with anything that holds a statistical relationship, model price, MA, security, market, whatever....

These are broad broad generalizations...
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Excellent knocks.
 
Quote from dima777:

I am wondering why such huge institutions would depart from the technical analysis to the statistics.....is this the one which really works? and if most hedge funds use stats it doesnt take long to come to the conclusion that the traditional technical analysis no longer works..and is nothing short of a way to intice unknowing majority into a game won by those who use entirely diffferent methods....in other words, is there a TECHNICAL ANALYSIS CONSPIRACY???!!!! :) :)
More...

The TA you see in books at Barnes&Noble is basically worthless. If value is "found" it disappears after accounting for slippage, commissions and other trading costs.

It has been studied to death and found wanting

However, that does not stop tends of thousands of lemmings from buying the books and expecting to make profits.

On EliteTrader, are huge amounts of TA lovers who scream and cry and yell when you gore the sacred cow. Look very carefully for the proof they refuse to provide in return. TA is a powerful religion, similar to Jack Hersheyism.
 
Quote from TraderZones:

The TA you see in books at Barnes&Noble is basically worthless. If value is "found" it disappears after accounting for slippage, commissions and other trading costs.

It has been studied to death and found wanting

However, that does not stop tends of thousands of lemmings from buying the books and expecting to make profits.

On EliteTrader, are huge amounts of TA lovers who scream and cry and yell when you gore the sacred cow. Look very carefully for the proof they refuse to provide in return. TA is a powerful religion, similar to Jack Hersheyism.
More...

I think we should look differently at TA..it is only a collection of tools that a skillful trader can combine to draw his own trading system..in the same manner an artist draws a painting....it doesn't make sense to criticize colors if the artist simply cannot paint...
 
Quote from knocks420:

TA = Statistics in most cases. A Moving Average is a low-pass filter which eliminates noise and focuses on drift, Stochastic is high-pass that detrends data and focuses on noise.

Time Series = Noise + Drift

Noise is usually a mean-reverting process, Drift is trend-following. HF like trading noise due to the higher-frequency of trades, bunch of reasons for that. If they can identify the drift thru seasonal patterns or recognition they'll do that too. Most funds do the same thing so the ones with the best infrastrucute and reduced latency usually win.

Relative value looks for deviation of a price with anything that holds a statistical relationship, model price, MA, security, market, whatever....

These are broad broad generalizations...
More...

thanks for interesting ideas here..:cool:
 
Quote from dima777:

I think we should look differently at TA..it is only a collection of tools that a skillful trader can combine to draw his own trading system..in the same manner an artist draws a painting....it doesn't make sense to criticize colors if the artist simply cannot paint...
More...

TA is a collection of things that have been thoroughly studied and found relatively useless.

It therefore makes a lot of sense to criticize when the artist throws in a bunch of animal droppings into his paint...

In addition to many studies, think about the industry position that probably 90% of new leveraged traders lose their money, and couple that with the fact that probably 90% of those traders also depend heavily on some form of TA.
 
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