What Do Hedge Funds Think of Technical Analysis?

[Laissez Faire]

If you're just trying to help me broaden my horizons that's appreciated.

I may have misunderstood, but I interpreted you saying you didn't understand how it was possible to day trade on anything other than technical information. As such, I wanted to highlight how two or three traders in Jack's most recent book didn't use technical analysis as the base foundation for their day trading.

I'm fairly sure they all must be using a chart when executing, though.

 

[Frederick Foresight]

If one is accurate forcasting their win rate ,the compounded return of the account will have an optimal ratio of profit target vs stop loss..

Of course it's theoretical,but if one is accurate,its has a major impact on returns and outperformance..

QUOTE="Frederick Foresight, post: 5756775, member: 488296"]I don't think leverage changes the risk/reward skew. The ratio remains the same.

I'm not sure we're talking about the same thing.

 

[taowave]

We are..Im basically referring to a Kelly/Modified Kelly approach to position sizing....

Im basically in Long and Shorts camp.

I'm not sure we're talking about the same thing.

 

[Tradess0610]

Funny how the whole conversation went into the fundamental vs technical analysis

Firstly, there are various types of hedge funds. They do not all fall in one pocket. https://www.investopedia.com/articles/investing/111313/multiple-strategies-hedge-funds.asp

Except for Quantitative hedge fund strategies i would generalize most of them are mostly fundamental. Therefore the analyst postings that were posted in this topic almost all require valuation skills.

However, I have a cool book at home - The Heretics of finance. ()

I remember one of the guys said that he was hired into an investment company which was dealing mostly with fundamental analysis. However, the fundamental team gave him a list of stocks which were a "buy" and then he researched the technical aspects to pinpoint the best point to actually buy the stock. A good point how both analyses can work hand in hand.

And one more thing - why are many of them long? Because the companies and markets are expected to grow in the long term - GDP growth is in normal conditions expected to be positive.

 

[SunTrader]

Which it is so profitable, quickly when you find a good stock to short.

"But its not supposed to do that".

 

[Tradess0610]

Of course, if you find an inefficiency in the market, you will exploit it. And therefore make the markets more "efficient"

That is the common argument why short-sellers are actually useful - they "help" the markets to reach the fair value of a specific stock.

 

[Zwaen]

If one is accurate forcasting their win rate ,the compounded return of the account will have an optimal ratio of profit target vs stop loss..

Of course it's theoretical,but if one is accurate,its has a major impact on returns and outperformance..

QUOTE="Frederick Foresight, post: 5756775, member: 488296"]I don't think leverage changes the risk/reward skew. The ratio remains the same.

[/QUOTE]

Just curious, would volatility reduction strategies - with use of options - be considered as a viable strategy in the industry, or something as retail-bogus?

 

[Frederick Foresight]

We are..Im basically referring to a Kelly/Modified Kelly approach to position sizing....

I don't think we are. The post of contention:

I think you may be missing out on a key ingredient

LEVERAGE

I went thru the numbers real quick,and if you are going to play the "get out quickly" game,I think you need to lever up at 1.4x or more

I don't see how leverage changes the risk/reward skew. Perhaps you can show me how with an example. Near as I can figure, leverage only speeds things up, which is great if you know what you're doing. But I don't think it makes something more or less relatively profitable (i.e., changes the risk/reward skew).

Again, if I'm wrong, please show me.

 

[taowave]

Look no further than the Madoff..How much money did he attract with imaginary low teen,stable returns??

Just curious, would volatility reduction strategies - with use of options - be considered as a viable strategy in the industry, or something as retail-bogus?

 

[taowave]

Take a look at Kelly or modifed Kelly..
Yes,its based of an assumption that you know what your hit rate is,but it should give you an idea on how alot of these US Investing champs put up such crazy returns..Minervini also has some good info on optimal R/R ratios given a know hit rate

I don't think we are. The post of contention:

I don't see how leverage changes the risk/reward skew. Perhaps you can show me how with an example. Near as I can figure, leverage only speeds things up, which is great if you know what you're doing. But I don't think it makes something more or less relatively profitable (i.e., changes the risk/reward skew).

Again, if I'm wrong, please show me.