What Do Hedge Funds Think of Technical Analysis?

[newwurldmn]

Rentec hedge fund is purely technical and they are one of the best!

this isn’t true.

 

[SunTrader]

Yes,Uncle Steve did look at technicals(we covered him) but later found inside info to be far more effective

Over 10 years ago.

 

[SunTrader]

i have charts on my monitor too, doesn't i use them for idea generation. it's helpful as a head check and to see what's going on, but is not what's used to develop a view or make a trade.

When I'm shopping for a new car, of course I check the technicals (speed, braking & MPG in that order) how fast it goes and stops and secondarily how much does it burn doing it. No EV's for me just yet. Fundamentals like comfort and reliability are a given nowadays - no need to bother.

But most important to me is Price!!

Same with day-trading.

BTW assuming you don't day-trade why is this discussion pertinent to you and feel you know what day-traders should or should not use?

 

[taowave]

well over 10 years ago

true, a lot of old "macro" guys used candlesticks and charts but that was in the 80s and early 90s when that *was* the quantitative analysis piece. There was a good quote on market efficiency... the first to level of market efficiency makes technicals useless, the second level makes fundamentals useless, and the third level makes insider information useless. I believe we are closer to the third level lol.

Over 10 years ago.

 

[longandshort]

Which is pretty much what I said if you read my post.



Straw man argument, buddy.

Besides, comparing hedge fund strategies and a retail trading strategies is simply not a relevant comparison in my view.

But to entertain that argument - generally, top firms in any field can get top candidates that often are overqualified for what they're actually doing. Personally, I'm an engineer and have done high level math/physics/mechanics in my degree, but have used close to zero of it in my actual work as an engineer in a top consultancy firm.

High grades/qualifications/education is in many cases just proof that you're above average in your abilities and not a dumbwit.

But anyway, I already said I don't think hedge funds in general base their methodologies on chart reading and classical TA/indicators, so no need to argue that further.



Not hypothetically true. It is true.

Where we probably have to disagree is that I think there are skilled/experienced traders that can make consistent $$$ using charts alone. You will probably not find those in successful hedge funds, though.

That's not to say I rely on charts alone. I don't. I use a statistical model as my base methodology.

What’s your basis for why you think someone using a chart alone would outperform others?

 

[longandshort]

When I'm shopping for a new car, of course I check the technicals (speed, braking & MPG in that order) how fast it goes and stops and secondarily how much does it burn doing it. No EV's for me just yet. Fundamentals like comfort and reliability are a given nowadays - no need to bother.

But most important to me is Price!!

Same with day-trading.

BTW assuming you don't day-trade why is this discussion pertinent to you and feel you know what day-traders should or should not use?

I hear what you’re saying but I think we just see price and markets differently. For me the price of the car reflects the it’s perceived value, which fluctuates day to day based upon things like interest rates, dealer inventory, and such. For me to know I’m getting a good deal, I’d want to reference the ranges in kelly blue book, look at how crowded the lot is, and consider what’s happening to the model and oem production.

I don’t “daytrade” in a colloquial sense, i do round trips multiple times per week, my time horizon is ~0-20 days. 0 meaning intraday.

I’m not denying that you or others use charts and may even be lucky with them. I’m responding to the topic prompt by stating that hedge funds are not using charts and what retail considers “technical analysis” as the basis for their trades. E.g. If you walked into a hedge fund, sat next to the PM, and said “buy xyz it hit resistance and will bounce up to $ level” he would respond with “why?” and politely (or not) ask for a rationale that’s based upon more than just the price on the chart.

 

[taowave]

Before I chime in,are we strictly talking about outperformance by trading the underlying and not the options??

Im enjoying this discussion

What’s your basis for why you think someone using a chart alone would outperform others?

 

[longandshort]

Before I chime in,are we strictly talking about outperformance by trading the underlying and not the options??

Im enjoying this discussion

Charts of the underlying — spot and futures. I’m not against all charts btw I use them all the time and build charts of revisions and a variety of factors (good way to quickly scan what’s going on). To qualify I’m specifically refuting the notion that technical analysis is used as the basis of a trade.

 

[taowave]

I guess I am asking

1) can we use TA and options for our directional trades??

2) Does selling/buying vol based on TA count,or is that cheating as implied may be jacked/super cheap and the "edge" would be more of a derivatives play..

3) Does the TA argument strictly apply to pure directional bets not using derivatives..Cash only

Charts of the underlying — spot and futures. I’m not against all charts btw I use them all the time and build charts of revisions and a variety of factors (good way to quickly scan what’s going on). To qualify I’m specifically refuting the notion that technical analysis is used as the basis of a trade.

 

[newwurldmn]

I think he’s saying that using TA to determine what risk you want. Whether you use options or stocks is this issue.

I guess I am asking

1) can we use TA and options for our directional trades??

2) Does selling/buying vol based on TA count,or is that cheating as implied may be jacked/super cheap and the "edge" would be more of a derivatives play..

3) Does the TA argument strictly apply to pure directional bets not using derivatives..Cash only