Learning to Trade like a Hedge Fund Manager (Part I)


Learn forex trading from Hedge Fund Managers. Develop a forex system that is purely mechanical and rules out emotional trading.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.

As retail or individual traders, our $10,000 account is just as important as any $20 million hedge fund. In fact, our $10,000 account is more important. We are staking our own hard earned money on trading compared to a hedge fund manager. He is most likely trading with other people’s money.

Hedge fund managers follow a step by step process to develop and test their currency trading strategies. Over the years, currency trading has become an important part of their investment portfolio. There is no reason why we as individual traders should also not follow that step by step process to develop out own trading strategies.

One thing must be clear from the start; every trader has to find his/her own edge. We can and should learn from others. But, it is our own methods and insights that will make us succeed as forex traders. Let’s discuss the step by step process of developing our own trading strategies like the hedge fund managers do.

Properly define your trading strategy. Every hedge fund manager like every trader follows a different methodology. Some use fundamental analysis. Other use technical analysis.

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 traders? Do you want to swing trade or position trade?

The most important thing for you from the start is to figure out whether you want to trade based on fundamentals or technicals or a combination of both. When hedge fund managers develop their trading strategies they define clear cut trading rules and code them. This way they avoid the pitfalls of emotional trading.

You should decide whether you want to be a news trader. Whether you will use technical indicators in your trading, if so which ones and how! You can’t trade all the currency pairs. You need to pick a few currency pairs and master their behavior. Not all currency pairs are created equal and you need to focus on only a few to become a successful long term trader.

[spin]Every currency pair requires a different strategy to succeed. You need to understand this. Some strategies work best on some currency pairs but don’t work on others. Read more in Part II of this article.|Every currency pair requires a different trading strategy to succeed. You need to understand this. Some 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.

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Categories : Forex Trading