Trading Like an Expert from a Hedge Fund

It may be surprising, but there are a lot of parallels between you and a professional hedge fund manager. Your trading account balance and self-discipline are where the discrepancies exist.

Nov 22, 2023 - 16:02

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Trading Like an Expert from a Hedge Fund

It may be surprising, but there are a lot of parallels between you and a professional hedge fund manager. Your trading account balance and self-discipline are where the discrepancies exist. Successful traders throughout history followed a similar trajectory to yours; they, too, had to learn the ropes of trading, hone their approach, and control their emotions and actions when trading. One of the most notable differences between professionals and amateurs is the level of emotional control and behavioural mastery that the former achieve. Almost anyone may learn to reliably anticipate market trends with enough practice and exposure to the market. A lot of you probably already know, though, that this isn't enough on its own. The capacity to see each deal objectively as the execution of an advantage, free of emotional attachment, is what really distinguishes the pros from the amateurs, as indicated before. Without a doubt, overseeing hedge funds with assets valued at millions or perhaps billions of dollars is an arduous and risky undertaking. One must have total command of their market ideas and behaviours in order to properly handle such enormous money and serve clients with high net worth.

Keep in mind that all it is is numbers.

Changing your perspective on the money in your trading account is the most important factor in winning this game of trading. Unlike novices, seasoned pros in the world of hedge funds view their trading accounts as scoreboards in a massive international game. Their trading account balance—just a bunch of numbers on a screen—is the score that matters to them. Their perception of their performance improves as the number of zeros after the first digit increases. Think about it: if you had to manage a $1,000 position, would you approach it with the same mentality as a billion-dollar one? Staying grounded in the fact that it's all just a bunch of zeros—just numbers on a screen—is the only way to pull this off. Your advantage is already gone if you give in to the temptation to "feel" the importance of the money. Your best defence as a small-scale retail trader is to keep your emotions out of your account balance. You may do this in a number of ways: never trade with money you cannot afford to lose; know exactly how much money you have after paying all of your bills; and never risk more than a tiny fraction of your liquid cash in any one trade. The "sleep test" is useful in my opinion; if you can maintain an upright position while you sleep, it means you're making progress.

There needs to be a shift in how you look at the money you're trading if you want to trade like a hedge fund manager. From personal experience, I can say that trading with one's own money is the most nerve-wracking thing you can do, second only to dealing with other people's money. As a result, hedge fund managers who lack unwavering serenity and control cannot produce outstanding returns for clients.

What is their secret?

For a trader blessed with a large, flashy account, the key to making rational trading decisions is to treat the money in their portfolio like any other number. They use a different approach to managing their money, which allows them to trade like a pro with the comfort and objectivity of a practice account. Have you ever had great success trading on a demo account, only to lose all of your money in the first month when you moved to the real thing? The explanation for this disaster is simple: with the actual account, you let the money rule your actions and thoughts instead of having unwavering control over them in the demo account. Do not give in to this negative influence. To counter this, just keep in mind that the numbers are just a bunch of zeros on a computer screen, and follow the four rules we discussed before. Get control of your financial situation and stop letting it control you. In light of your recent run of trading losses, I can see how this may come out as the excessively enthusiastic language of a motivational speaker. But I can tell you from personal experience that the money in your trading account is the single most important factor in determining your success or failure as a trader.

No matter what you believe, you are correct.

I don't mean to sound like Tony Robbins (though I do admire him), but the way you think really affects how well you trade. Whether you think you have what it takes to be a successful trader or not, you're likely correct. Believing in your own abilities and persuading yourself of them is the first step in achieving your goals. The only way to be consistent and disciplined in trading is to "fake it till you make it," as that's what other traders do. Allow me to explain it in simpler terms. Who among us believes that a hedge fund manager or even a millionaire trader sits at their computers all day, actively trading? Imagine you had a substantial trading account; would you risk it all? Absolutely not, and I'll tell you why... Day trading, as any trader worth their salt can tell you, is both the most stressful and difficult method to earn money. Day trading, in its most basic form, is more about skill than chance since the market doesn't provide many high-probability trading signals per week. Regular retail traders don't have the resources that hedge-fund traders possess because of the amount of research they perform. They look at the larger picture and use price activity on charts to find possibilities. They don't trade irrationally, hopping in and out of the market as one line crosses over another. When you're a tiny retail trader, you have it made since price movement is the great equaliser, the real money on the charts. The actions of the hedge funds are exposed in a literal sense. From that point on, you may trade with remarkable discipline, consistency, and self-control while analysing price activity. There is no other method to achieve success in retail trading except this exact formula. I can tell you this since I've been there.

"Fake it till you make it"—where does it fit in? Very basic...

You need to treat your little trading account like a giant account when you trade! Given a substantial account, how would a hedge fund manage it? Gradually. Uniformly. With great merit. This is the information I provide, and this is how I conduct myself. When you deal, you're not after quantity, but quality. All that's really required is a couple of excellent deals every month. Waiting for the perfect trade to form, or for one you've already joined, can require you to display crocodile-like patience for days—if not weeks. This methodical and deliberate process, in any case, is what produces the desired outcomes. You may get wealthy as a smaller retail trader by using price action and practicing strict self-discipline. You won't be able to quickly turn a tiny account into enough money to live on. Because of this, you have to act it out until you really pull it off. For at least a year or two, use your $1,000 account only for transactions with a $10 to $50 risk. After you've shown yourself that it's possible, you may as well have doubled it. A year or two from now, $1,000 in profit might not seem like much, but it's actually a 100% return. Now add a few zeros to that $1,000 and tell me whether that amount is meaningful. If I may be completely honest with you for just a second... Most traders fail because they don't understand this one basic thing... No one can trust you with a larger account unless you prove yourself capable of trading a smaller one for an extended period of time. Therefore, it makes very little difference how big the account is. What really counts is this: how well you can trade disciplinedly; and your ability to consistently trade. You have achieved a simple yet highly successful trading strategy, like price action. Trading at the end of the day, daily map A trading strategy characterized by low frequency. Financial planning.

Put everything in its place.

Have you forgotten the strong desire you have within you? The one where you're free from the tedium of commuting and an obnoxious boss while running your business from a tranquil beach and making a tidy profit each week? Please do not give up on that dream. Under no circumstances should you ever consider throwing it away. As living proof, I can say without reservation that it is indeed possible. It is possible for you to do what I have done.

Trading is really a mental activity, and you must understand and truly embrace this fact. As a result, you will learn more than just how to read price charts and how to place trades in my trading course. The most important thing is not these factors but rather your understanding of when and how to execute your chosen trading system.

The realization that trade entry is not the most challenging barrier to trading is what separates competent hedge fund managers, whether they have innate knowledge or have learned it through hard trial and error. How you deal with the ideas, feelings, ambitions, and fears that come along with trading is when the real test begins.

The international financial markets have been an integral part of my life for a considerable portion of my adult years. The core of my being is, in a nutshell, trading and investing. What keeps me going is the information I provide in my trading course, member area, and on my blog. They are the source of my joy and the reason for my being. So that they, too, may taste the joy that I feel every day, I am deeply dedicated to sharing my story with prospective traders. Freedom from a supervisor who doesn't care about your well-being or has strict timetables is a wonderful feeling. The joy of making money as you relax on a beach or sip coffee in a cafe is what fuels my desire.

That thrill is something I wish for you to feel. If you can only change your perspective on the funds in your trading account and keep in mind that you are in control of your own emotions and behavior, I promise you, it is within your reach. You will be heading in the correct direction after you regain that power.

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