agreed, which is why i showed screen grabs of job postings at citadel, which crushes on absolute return. when i think of hedge fund, i don't think of random dude with a brokerage account and some money (me lol), I think MLP, Baly, Citadel, P72, etc. These are the "olympic" teams of markets.
What Do Hedge Funds Think of Technical Analysis?
- Thread starter SunTrader
- Start date
How did you get quantitative analysis = fundamental analysis out of that?
Yeah, that's my entire point. You lead with misinformation or misdirection countering my claim about fundamental analysis, all while saying I am being "scammed". Than later you say you also use quantitative analysis, than cherry on top is you question how quantitative analysis = fundamental analysis. I'd have to assume thats what it means for you, otherwise the only other option is you purposely misdirected in bad faith.
I made an effort to distinguish the difference between what professionals call "technicals" (positioning data, skew, momentum, short interest, adv% deltas, etc.) and what retailers call "technical analysis" which is the use of things like moving averages, rsi, macd, or chart patterns like heads and shoulders, flags, etc. I'm not interested in debating semantics lol but if you just want to prove a point go ahead you win.
I say that I use fundamental equity research because that's my general style for trade ideas. I'm not conducting deep statistical analysis of quantitative data (quantitative analysis OF technical data, see above for definition of professional use of "technicals") to generate ideas. However, I utilize quantitative data and signals all the time -- I just wouldn't call myself a quant. Just like you might use math every day but wouldn't call yourself a mathematician ...and that just because mathematicians look at numbers does not mean they are numerologists.
That's fine man fair enough. I am not here to debate or win anything this isn't worth my time and shouldn't be worth yours either if you're as successful as say you are. I made a claim and you countered it and it does read as if you were saying fundamental analysis is all you use.
Which again if you're using fundamental analysis for short term active day trading that is truly impressive, because typically if you get the fundamentals on something correct people tend to stay in those trades longer to get the full benefit, as opposed to just day trading it. Which what you're saying makes some what more sense now, since you said you do add in other things outside of just fundamental analysis.
I am not looking to be right, it just made no sense that you're actively intra-day trading in and out of a stock based on purely fundamentals, that is pretty counter-intuitive from a multitude of angles. But hey it is possible you and your peers are exceptions. That's all I don't want to debate it anymore. We can agree to disagree if there's any disagreement left.
That's fair.
Using fundamentals means you utilize a model that forecasts company KPIs, compares them to the market and street, that helps you identify if incremental information is tradeable. E.g. if BA announces a new 100 plane order, and the stock price jumps 10% on the news, is there room to run or did that order only justify a 5% increase to your estimate? Same for earnings. You can also use the model to help you analyze how the market is pricing various outcomes... e.g. multiple scenarios for a stock and you think one scenario is more likely. I am not bound by a certain time horizon (flat by end of day, etc.), but generally my trading ideas have a 0-20 day duration.
Building a useful model is hard, not easy, which is why it's a valued skillset among the buy side community and why you see it in all of the job postings (ex-quants, who are closer to programmers anyway).
Not only hedge funds, but Smart Money, MM's, intentionally destroy trends sometimes if they are indicating counter to their goals, or they find it will benefit them, such as taking out stops so they can get more shares. Sometimes when I am Day Trading I use these sharp moves out of what is a tend, to counter the sharp move, especially is it is counter to general market movement.
Why do you always need to end your sentences with "lol"? Seems a bit condescending, but maybe that's the point.
To me, it seems like the point you're arguing is that few successful funds use or at least rely on classical TA and classical indicators and that their quantitative models are a bit more sophisticated than just glancing at a chart or applying classical indicators out of the box. That should hardly be a surprise to anyone.
However, the playing field have been quite leveled over the last few years and the retail trader can also be quite sophisticated in his play assuming an able, smart and hard working individual.
I maintain that every method which uses price history is technical analysis and within TA there is of course various subsets.
Personally, I think and believe that an experienced trader could be able to trade successfully using a chart alone, but that can be saved for another thread.
I've seen you mention this a few times and to broaden your horizon two of the interviewed traders in Jack Scwager's newest book are day traders who don't rely on technicals, but more on fundamentals and event plays. Of course, when that is the case, it goes without saying that they don't necessarily trade every day, but will wait for catalysts, policy changes, etc.
Another one I think was a strict news trader, but had a sophisticated custom programmed system to exploit that.
we can discuss stylistic choice at another time.
No, the point is that no hedge fund portfolio manager or analyst at a legit shop is using chart based analysis to generate ideas. If you went to a hedge fund and said you could trade, and all you had was your TA charts, then you would not get the job (unless you showed hunger/desire to learn the other actually useful methods). If TA was useful and if a skilled trader only needed a chart, why isn't that a requirement. Here's an actual macro analyst/associate PM role at one of the largest hedge funds:
Hypothetically true, but not for those retail traders who think all they need is charts/TA.
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.