Whistler i think you summed it up perfectly. If markets are moving there will be opportunity. Just because Vol is low doesn't mean it's impossible to day trade, you just have to discipline youself more to take the right trades and be patient. Not to mention know your trading stategy and the numbers should still fall into place. If poeple can't make money they say there is no opportunity but maybe taking a look in the mirror would do some justice because they can see the reason they really aren't making money.
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hedge fund trader vs. daytrader
- Thread starter flybynight
- Start date
Time frame of my track record was Aug 2001 to Nov 2002. And I tend to trade from the long side, so in a sideways to down market I'd say it wasn't the vix that caused me to do well on a percentage return basis. I also traded at first ny in 1995-96 with similar 40% returns on a little larger capital (made about $180K gross on average daily capital of $250K over like 18 months). The First NY net number is not reflective of my talent due to god-awful $25 ticket charges and 3 cents a share roundtrip commish. AND they took 50% of my net. If you recalc my total tix charges and commish at current rates, my net would have been about 140K which is still very respectable..
TheStudent is correct.
Yes, I agree. I don't think for a second I could apply my futures (mostly scalping, but I do some spread trades, some options, etc.) techniques to the larger scales needed for hedge fund trading, nor would I.
I think a big part of trading futures is recognizing the market environment (I find market profile and market internals) and using setups that are consistent with the environment.
Since the YM only "trends" (develops vertically) 4-6 days a month, most days I use fade type setups. That's only logical. If I'm wrong, I'm wrong. That's what stops are for.
When a trend day is developing (which usually gives itself away relatively early, if you are willing to look at what the market is doing, not what you want it to be doing), a buy the pullback type strategy is more suited. and for example, one wouldn't fade tick extremes on a trend day.
markets HAVE to move. so, as long as they do, a daytrader makes money capitalizing on riding along. the big institutions, etc. will move the market. i just try to be on their side, and scalp portions, and not be stuck on the wrong side, like retail traders tend to be.
I'd love to work for a hedge fund and maybe analyze one market segement (like beverages) or whatever, but I agree - ToTALLY different methodology, different goals, etc.
not to mention that most hedge funds are misnamed. they are rarely hedged in the sense that the term was used at the inception of the hedge fund concept. now, hedge fund is a term that refers to a fund that just has looser restrictions than the average mutual fund (for example, it can short, use derivatives, or whatnot)
The scary thing about futures, is that, unlike stocks, its zero sum. so, every cent that goes into my account came from another traders account. that's pretty frigging humbling.
I think a big part of trading futures is recognizing the market environment (I find market profile and market internals) and using setups that are consistent with the environment.
Since the YM only "trends" (develops vertically) 4-6 days a month, most days I use fade type setups. That's only logical. If I'm wrong, I'm wrong. That's what stops are for.
When a trend day is developing (which usually gives itself away relatively early, if you are willing to look at what the market is doing, not what you want it to be doing), a buy the pullback type strategy is more suited. and for example, one wouldn't fade tick extremes on a trend day.
markets HAVE to move. so, as long as they do, a daytrader makes money capitalizing on riding along. the big institutions, etc. will move the market. i just try to be on their side, and scalp portions, and not be stuck on the wrong side, like retail traders tend to be.
I'd love to work for a hedge fund and maybe analyze one market segement (like beverages) or whatever, but I agree - ToTALLY different methodology, different goals, etc.
not to mention that most hedge funds are misnamed. they are rarely hedged in the sense that the term was used at the inception of the hedge fund concept. now, hedge fund is a term that refers to a fund that just has looser restrictions than the average mutual fund (for example, it can short, use derivatives, or whatnot)
The scary thing about futures, is that, unlike stocks, its zero sum. so, every cent that goes into my account came from another traders account. that's pretty frigging humbling.
<i>"Running a fund makes no sense unless-"</i>
e) you're a good trader and do both.
I trade the ER on a personal basis, and ES via managed accounts. That gives me individual choice in my own account to trade whatever = however, with nil admin tasks in the controller account.
<b>Lescor</b>, there is no reason why you couldn't manage $10mil ~ $100mil and earn 25% of gross profits, and trade your own account if desired. Not necessarily one fund... managed accounts akin to your black box setup w/broker(s)
Limitations are personal capital, ability to raise outside capital (not that difficult) and most importantly trade style = liquidity issues therein.
e) you're a good trader and do both.
I trade the ER on a personal basis, and ES via managed accounts. That gives me individual choice in my own account to trade whatever = however, with nil admin tasks in the controller account.
<b>Lescor</b>, there is no reason why you couldn't manage $10mil ~ $100mil and earn 25% of gross profits, and trade your own account if desired. Not necessarily one fund... managed accounts akin to your black box setup w/broker(s)
Limitations are personal capital, ability to raise outside capital (not that difficult) and most importantly trade style = liquidity issues therein.
With the exception of a few, hedge funds are a vehicle that allows wall street to fleece its once beloved institutional client, now that all of its reatil customers are broke. Day trading, as you call it, is a vehicle that allows talented individuals to make a merit based living speculating on financial instruments.
If you want to make some risk free money, join a fund, and when it blows up, join another one. If you want to make money off your trading talents, keep day trading.
If you want to make some risk free money, join a fund, and when it blows up, join another one. If you want to make money off your trading talents, keep day trading.
Quote from TheStudent:
Analyzing balance sheets, building credit profiles, calculating correlation risks have little to do with watching squiggly lines on a screen.
Traders at hedge funds should be good at taking large amounts of money and make them produce very low double digit returns.
Do you think these things don't go on among prop traders? This is sort of the point Don and I have been making, the most profitable prop traders are not flipping a thousand shares at a time based on squiggly lines on a screen. They are operating as one man hedge funds, sometimes with their own support staff of clerks and programmers. They already manage a multi-million dollar book of OPM. It's just that their "client" doesn't keep any of the profits.
Quote from lescor:
Do you think these things don't go on among prop traders? This is sort of the point Don and I have been making, the most profitable prop traders are not flipping a thousand shares at a time based on squiggly lines on a screen. They are operating as one man hedge funds, sometimes with their own support staff of clerks and programmers. They already manage a multi-million dollar book of OPM. It's just that their "client" doesn't keep any of the profits.
I don't think you get my point - the "typical" hedge fund employee is engaged in an activity that is designed to return 15% on hundreds of millions of dollars.
The "typical" successful prop trader is engaged in an activity that is designed to work on millions of dollars at the most.
There are going to be exceptions that prove the rule naturally.
By the very nature of the two activities, the kinds of things you look at are very very different. The kind of thinking about corporate finance that goes on in a hedge fund is quite different from the kind of thinking that goes on in a prop shop. There are similaries when it comes to events, like how to think about an upcoming earnings report, or how to react to a corporate announcement, but speaking very generally, hedge funds pay more attention to corporate finance and day traders pay more attention to order flow - that's simply their different roles in the eco-system of markets.
A lot of prop traders have this complex where they get defensive about their knowledge of corporate finance or where they need to defend what they are doing as equally worthy to that done by mainstream institutions.
I personally think there isn't any need to be defensive - you have to accept the fact that mainstream society today will turn their noses up at hookers, gangsters and daytraders even if all three are able to make 10 times the median wage.
You have to be happy with money as your lot in life and forget about respectability. The fight for respectability by daytraders is going to be a long lonely one.
Quote from lescor:
Do you think these things don't go on among prop traders? This is sort of the point Don and I have been making, the most profitable prop traders are not flipping a thousand shares at a time based on squiggly lines on a screen. They are operating as one man hedge funds, sometimes with their own support staff of clerks and programmers. They already manage a multi-million dollar book of OPM. It's just that their "client" doesn't keep any of the profits.
Exactly, the off market hours tend to be 20-40 per week for a large group of our guys. This is streamlined a bit when "co-oping" some of the data analysis. PairCo has an excellent data base, which has hundreds of pairs and a couple hundred columns of information that I can access....without that, I would be hard pressed to do that much research on my own. Many traders do however, and it certainly pays off.
No "squiggly lines" for us, eh Lescor?
BTW, I agree that Lescor could probably handle the $$ for a hedge fund, but find it questionable that raising that kind of money is easy...I know that the hundreds who approach Bob and I have a pretty tough time, meaning zero as far as "outside" investing with another trader/firm.
We have fewer than 5 people who handle about $150 million (in our pairs), whereas a couple of years ago, it took nearly 20. The advances we've made (from all that homework) has trimmed the man hours down quite a bit. But it still takes some time.
All the best,
Don
I think where there is much more overlap is what the best prop traders are doing and what the best "stat arb" types are doing.
But quantitative types are a minority in the hedge fund world. Long short is the representative majority.
But quantitative types are a minority in the hedge fund world. Long short is the representative majority.