How The Hedge Fund Managers Trade?

There is a difference between a professional trader and an amateur trader. A professional trader never goes into a trade blindly whereas an amateur always trades based on his/her emotions. If you want to become a professional, than learn from hedge fund managers. You see hedge fund managers have to show good results to their investors for getting investments into their funds. Hedge fund managers have to convince their clients with a battle tested strategy.

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It must be clear from the beginning; every trader has to find one’s own edge. We should learn from other successful traders. But, it is your methods that will make you succeed in the long run. This step by step process of developing your own trading strategies (like the hedge fund managers do) will help you in the long run.

The first thing that you need to understand is what type of trader you are and what is the style of trading that best suits you. Are you a day trader? Do you want to swing trade or position trade?

Trading based on emotions is dangerous and will ruin you as a trader in the long run. Make your forex system rule based and mechanical with clear cut steps that you can follow in order to make your trading as unemotional as possible.

Every currency pair requires a different trading strategy to make pips. You need to understand this. Some trading strategies work best on one currency pair but don’t work on others. Read more in Part II of this article how hedge fund managers develop their trading strategies step by step.

You need to understand that hedge fund managers are always on their nerve’s edge. They constantly look for strategies that work. You should decide whether you want to range trade or trend trade? Many hedge fund managers are trend following traders. If you want to become a trend trader than you need to become a master of predicting and anticipating trends in your favorite currency pairs. If you want to be a contrarian trader and range trade, than you should understand how to scalp.

Learn the art of entry and exit. You will need to learn technical analysis for this. Technical analysis is essential for your success. Should it be multiple entry, multiple exits? Should it be single entry, single exit? Should it be multiple entries, single exit? Should it be single entry, multiple exits?

Now, test drive the forex system by back testing and forward testing. Back testing can be done on Metatrader and other platforms. Forward test your strategies on a demo account.

Open a mini account and try to test it live with a small amount of money. This way you will not lose much money but will be playing against your emotions.

The key here is to know exactly what type of market environment your strategy performs well in and what type of market environment your strategy fails in, because only then will you know when it is time to pull the plug.

This is why it is important to spend some time on a weekly or monthly basis to go over or reflect on your trading. You need to establish a certain ROI level for yourself and keep on tweaking your trading strategies until you start achieving that figure.