Why don't I ever hear about successful hedge funds using Gann or Elliott Wave or VSA? Are such techniques only appropriate for the small-scale traders? What prevents hedge funds using them?
That raises a more focused question...can these techniques only work around the edges of markets because if they got in among it to any great extent they'd lose their 'edge'?The size of trading funds is an issue for any strategy.
Need I say more?
ASX
How'd you edit my post (See bottomline).
Moderator privelages...part of the package.
Um shouldn't this status be declared ?
Why don't I ever hear about successful hedge funds using Gann or Elliott Wave or VSA? Are such techniques only appropriate for the small-scale traders? What prevents hedge funds using them?
http://www.marketwisetrader.com/garysbook.html said:Technical Analysis and the Active Trader’ offers a unique perspective as to the origins and use of technical analysis based on significant research. Bedrock technical analysis assumptions are exposed as little more than poorly performing rules of thumb.
One of the main reasons is that technical analysis in its "discretionary" form such as classic charts or more exotic strings such as EW or Gann is deemed to be a risk on several planes. Firstly its a "skill based" risk. If the trader who has the skill leaves the firm, gets hit by a bus, whatever, then the investor is left out in the cold. An investor will want to ensure that the fund can make returns regardless of who is at the helm.
Secondly a "discretionary" method opens the way for "strategy excursions" (the exact technical term has escaped me). If a track record is built on a certain chart pattern, say EW for example, then there is a chance that "variants" of that chart pattern can creep into the process. This usually happens during drawdown when doubt creeps into the traders mind. If an investor invests based on a track record using "XYZ" strategy, they don't want to be involved if somehow that strategy turns into a "WXY" instead.
As a result most demand for money management is via "systematic" approaches that can be replicated into the future by anyone within the business. There is no key man risk or "skill based" risk and a fully systematic approach will tend not to be toyed with.
For a VERY interesting read, have a look at "Technical Analysis and the Active Trader" by Gary Norden.
You'd be surprised about how many professional traders DON'T use TA techniques, exotic or traditional. (Paraphrasing) Gary traded on some of the biggest markets of the world without knowing what a moving average was!
This book is worth every cent and has paid for itself time after time, each time I don't do something stupid I thank Gary and his book.
wabbit
Bedrock technical analysis assumptions are exposed as little more than poorly performing rules of thumb.
You'd be surprised about how many professional traders DON'T use TA techniques, exotic or traditional. (Paraphrasing) Gary traded on some of the biggest markets of the world without knowing what a moving average was!
wabbit
I think many funds use complex multi-point models along with "gut feel" approaches to corporations, industries and sectors. There are so many sector waits and beta-based volatility requirements for each investment that without some quantitative aspect to the process they would be left behind in today's competitive markets for long-term low vol solid performance.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?