Learn 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.The difference between a professional trader and an amateur trader is that a professional trader never goes into a trade blindly. You see hedge fund managers have to show good results to their investors in order to solicit their investments into their funds. Hedge fund managers have to convince their clients that they have a battle tested strategy.

As individual traders, our $5,000 account is as important as any $25 million hedge fund. In fact, our $5,000 account is more important. We are betting our own hard earned money on currency trading. A hedge fund manager is most likely trading with other people’s money.

Most of the hedge fund managers follow a step by step process to develop their forex trading strategies. There is no reason why should we as individual traders also not follow that step by step process to develop our own trading strategies. We can’t afford to lose our hard earned money in unsuccessful trading.

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 figure out is the style of trading that best suits you and what type of trader you are. Are you a short term trader like most day traders? Are you a long term trader and 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 will follow in order to make your trading as unemotional as possible.

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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