What Do Hedge Funds Think of Technical Analysis?

[longandshort]

You do not understand that you do not need any outside money when you have a high sharpe strategy and you do not need an ISDA contract with a large investment bank to make money. A high sharpe strategy can be created without expensive tech too. Then you get so fast to your max. limit size you can handle that is just pure nonsense to start a hedge fund etc.

If you’re doing quantitative analysis and stats arb this is possible, but the low barrier of entry means most alphas decay quickly. Would love to be proved wrong, but I’ve seen enough quant funds to know how quickly they can crash if they are not constantly updating models, which requires staff and data (which is expensive).

Another problem is that if you cannot scale your strategy even a high sharpe one can fail due to the frequency of trading. You can have a 10sharpe but it won’t matter if you only can generate 1-2 trades a year. If you have 100k and lever up 3-4x it’d take you longer to reach your capacity than it would for your alpha source to decay.

To increase trading frequency you need staff, which is expensive. No you don’t need an isda but you do need sales coverage if you’re trading with meaningful size (10k+ shares).

Sharpes are also time varying so it is misleading to extrapolate a high sharpe into the future… what’s that saying? The worst 10yr performance of your backtested strategy are the subsequent 10yrs…

 

[longandshort]

I don't mix work and hobbies, not good for the PnL.

But you seem to wiggling around about TA. Yes they use OHLCVI etc (aka as Technicals) but no they don't use Technicals.

I’m being pretty clear — charts are useless though the data in a chart could be useful but you’d need to learn how to run a z score and regression first. You staring at a bar chart = “technical trader”. Me running a regression = “quantitative analysis”. This is not the same.

 

[TrAndy2022]

I’m being pretty clear — charts are useless though the data in a chart could be useful but you’d need to learn how to run a z score and regression first. You staring at a bar chart = “technical trader”. Me running a regression = “quantitative analysis”. This is not the same.

Sorry, but I disagree on your previous two posts. Speaking about your last post quoted here, it seems you have never seen a high sharpe trader, who is just looking and trading pure Price Action on simple charts, with maybe a few trendlines. There are very consistent traders there that do this kind of trading in discretionary trading style. You cannot say charts are useless because they are useless FOR YOU. You need to widen your horizont and you may need more experience on how different traders trade. I bet you would fall off your chair how good are some pure naked Chart Price Action traders. Your view is simply to narrowed.

 

[longandshort]

Sorry, but I disagree on your previous two posts. Speaking about your last post quoted here, it seems you have never seen a high sharpe trader, who is just looking and trading pure Price Action on simple charts, with maybe a few trendlines. There are very consistent traders there that do this kind of trading in discretionary trading style. You cannot say charts are useless because they are useless FOR YOU. You need to widen your horizont and you may need more experience on how different traders trade. I bet you would fall off your chair how good are some pure naked Chart Price Action traders. Your view is simply to narrowed.

Would love to see some evidence of this. You got some data?

 

[TrAndy2022]

Would love to see some evidence of this. You got some data?

I have but I keep it for myself.

 

[themickey]

Anyone who starts down the road to becoming a trader eventually comes across the statistic that 90 per cent of traders fail to make money when trading the stock market. This statistic deems that over time 80 per cent lose, 10 per cent break even and 10 per cent make money consistently.

An interesting point about this statistic is that it is not based on geographical region, age, gender or intelligence. Everyone aspires to be in the top 10 per cent who consistently make money when trading the stock market, but few are willing to put in the time and effort to achieve this.

When I give a presentation, I ask those present if they want me to teach them what the 10 per cent of traders know or the other 90 per cent, and every time they say the 10 per cent. To me, the answer to understanding the 10 per cent is simple - all you need to do is look at all the books and courses available and pretty much don't do most of it.

To be successful in trading the stock market, you need to do what the majority of traders don't do.
https://www.wealthwithin.com.au/learning-centre/share-trading-tips/trading-the-stock-market

 

[longandshort]

I have but I keep it for myself.

I’m not asking for a method, just if you have proof that someone trading pure technical “price action” is running a high sharpe consistently over time.

 

[themickey]

Retail traders suffer from Dunning Kruger.
They believe that by following smart money they are somehow smart.

How can being a sheep and 'following' be considered smart?

 

[murray t turtle]

%%
HE's on to something\ better not use a tight stop loss/ just dont do the trade.
The other clown that used a penny stock example is full of BS.
Certain exceptions apply;
i would not mind using a fairly tight stop around 200 dma.
ZILLO, did not they just get out of RE flippin" business??
BLK has some good ETFs, but looks like Warren Buffet has good rebuke of mr Fink ''ESG is asinine''[dumb + donkyish]
BX[not to be confuse with asinine ESG of rat fink BLK] is doing very good on stock price , not like BLKstock]

 

[Concinnity]

I am actively trading every day and use fundamental equity research. Among my peer group of traders, analysts, and portfolio managers, technicals are not seen as a serious or useful tool.

It’s kind of funny that you guys think hedge funders are just drawing lines and staring at charts. You have earned the right to be scammed lol.

What are you talking about? Who is scamming me? My trading is going just fine using TA. Not to mention there are hedge funds that use TA too. Your statement reads as if just because you and your peer group do something successful and they don't understand how to use TA as an additional advantage, than it must mean all TA is trash or not useful. It seems as if you don't even understand what all falls under TA.

You're telling me you and your peer group are placing active day trades, based on fundamental analysis? Maybe we have a different definition of active, but I find it difficult to believe you're taking multiple entries on an individual stock intra-day based on fundamentals. That's pretty impressive if that's the case. So you're taking short term trades, based on fundamentals, but yet not holding longer term to take advantage of getting the fundamentals correct? You guys would be making 10x the money if you weren't ignorant to TA.