Trade Like a Hedge Fund: 20 Successful Uncorrelated Strategies and Techniques to Winning Profits

by James Altucher

Book Overview

Learn the successful strategies behind hedge fund investing

Hedge funds and hedge fund trading strategies have long been popular in the financial community because of their flexibility, aggressiveness, and creativity. Trade Like a Hedge Fund capitalizes on this phenomenon and builds on it by bringing fresh and practical ideas to the trading table. This book shares 20 uncorrelated trading strategies and techniques that will enable readers to trade...

• Format: Hardcover
• Language: English
• ISBN: 0471484857
• ISBN13: 9780471484851
• Release Date: March 2004
• Publisher: Wiley
• Length: 240 Pages
• Weight: 0.98 lbs.
• Dimensions: 0.9" x 6.3" x 9.1"

Customer Reviews

Worth twice the price with only 10 strategies

nb - This is not an investing book. It is a tool chest for traders looking to expand the number of high-probability, non-correlated opportunities they get every day. As a trader, one of the hardest things to do is sit on your hands day after day after day waiting for your strategies to trigger. Mr. Altucher has put together a nice arsenal of ideas that has allowed me significantly increase the number and frequency of my positive-expectation trades. One small gripe is the physical quality of the book itself: Some items on the charts cannot be seen due to low-contrast b & w printing. A few illustrations are fuzzy and the paper seems inexpensive. If you already make a living trading your own account, this book can help you make a better living.

Well worth the money

On it's surface this is a book about 20 specific trading systems. But if that is all you get from it, you probably missed the big picture I believe the author was trying to convey. Like every book, there is good and bad. My review will be in the same order. In fact there are variations on most of the systems presented. I found some of the variations/systems to be interesting. I will be trading my own variations of his variations with my own money. Frankly I would not feel comfortable trading some of the systems presented and I will not. But those are my preferences and need not be yours. I am sure there is at least one system in the book that would suit your style. Given the potential profits the cost of the book is trivial. Blindly following a system might make you money for the short to medium term. However the real strength I found in the book was to spur my imagination to modify his systems to suit myself, thereby turning them into my systems. Since they are now "mine", I am free to change them as conditions change going forward. Now the downsides. First there is little in the book on money management. In some of his examples he uses 100% equity to put positions on. I doubt anyone in their right mind would ever consider doing this. Continuing on the first downside there is little risk management expressed. For at least one of the strategies, you stay in until you make a profit or you eat your losses after 20 days. Staying in any position for 20 days should have you in a profit at some point, no matter why you entered it (making me wonder just how good the system is). But if the market never moved to your number in that time, it is likely you have lost quite a bit of money along the way. Yes you almost always win a relatively small amount, but when you lose, YOU LOSE BIG. Even with the imperfections, I heartily recommend the book. However I do not recommend you follow it blindly. It is definitely not a beginners book. Before you trade these ideas, you really need some experience. You need to know how to manage your money and how to maintain some grace under fire. In other words if you aren't very disciplined you might end up paying a lot more to the markets than you paid for this book. But since you might be taking the other side of one of my trades....I won't be offended if you don't take my advice.

Trading Tool Box

This book is like a wolf in sheep's clothing. This is quantitative finance not technical analysis. Floating in a wasteland of books about trading using technical analysis and supposed "insider" techniques, this book delivers what the others pretend to deliver validated trading techniques. Before purchasing another compendium about the latest "rocket science", check out this collection of situational trades that are tested (on a distressingly small(mostly 4 years)) data sample and proven to produce profits. Even with Altucher's minimalist writing style, I feel that he waxed too poetic about the nature of the causes behind the anomalies. After all, does it matter how they work if in fact they do? Lean on the observations and if you still feel compelled to divine a reason, go for it, just make sure that it doesn't interfere with your research.Some of the systems have painful drawdowns and need additional tweaking or a strong constitution to make them work.Some of the trading techniques were a little loose for my tastes suffering from a few flaws. Examples include too small of a sample size or the possibility that on occasion the number of trades take would exceed capital and therefore leaving a distorted return # (see technique 13 and think of LTCM or 9/11). Even with the flaws this book is a non-stop idea generator.

The Meat and Potatoes of Trading

When I was on the board of a not-for-profit organization, I asked one of the major contributors for what amounted to a 25-fold increase in funding. He politely declined, telling me, "Stick to the meat and potatoes issues."Well, "meat and potatoes" is what you get with Altucher's book. It's chock-full of techniques and mechanisms successful pro's use to earn ongoing, market-beating profits for their clients. From Page One, it's clear this is a no-nonsense read. Altucher doesn't waste the reader's time spewing self-aggrandizing war-stories, nor does he find himself mired in personal biases or widely-held market fantasies. Rather, he gets right down to the business of trading, taking a realistic, "whatever works" approach, including methods based in both counting (statistical analysis) and what is popularly referred to as "technical analysis." There is discussion of trading gaps, spreads and "the tick," moving averages and bands, and other lesser-known techniques including buying bankruptcies, taking advantage of option expiration day, and deletions from indexes. Each is clearly explained, using real-world examples, and all are augmented with very well done charts, graphs and data tables. Throughout, Altucher debunks a number of market myths and he kindly includes a short chapter on "what doesn't work."Mind you, this book is more for seasoned investors than it is for rookies, though aspiring novices need not be discouraged from buying it and studying the techniques. It's about "trading," which is significantly different from longer-term, buy-and-hold "investing," and not to be confused with risky "day-trading." To make best use of the material, one should have a reasonable market vocabulary and it wouldn't hurt to have a few math skills, but if not, you'll still be able to make plenty of sense out of Altucher's plain speaking.The principal criticism of "trading systems" is that once they're made known, they won't work anymore, or for very long thereafter. This is quite true. I've heard some say about Altucher's book, "Gee, how could he do this? Once the word's out, we won't be able to trade these again." Wrong. What Altucher offers is NOT a "no-brainer-get-rich-quick-doing-things-my-way" trading system designed to make the author rich by doing nothing more than selling books to the unsuspecting wannabe. If that's what you want, don't buy this book. What it is, and why you should buy this book, is a collection of proven professional techniques that, when applied thoughtfully and within reason, can over time help to make one a very successful trader.That this book has been bundled with Niederhoffer's "Practical Speculation," and that Altucher mentions this and its predecessor "Education of a Speculator" first among all books in his reading list is telling. Niederhoffer has indeed written the Old and New Testaments of Market Speculation, and in "Trade Like a Hedge Fund," Altucher has written the Concordance. The bottom line? If you're a seasoned invest

Insider Tips That Won't Land You in Jail

James Altucher is a professional money manager and a contributor to TheStreet.com who has assembled a collection of "20 successful uncorrelated strategies and techniques" for trading the markets. His first book effort is one of the most practical trading guides I have encountered.What sets "Trade Like a Hedge Fund" apart is that we don't have to take the author's word that these strategies are successful. Included in every chapter are the specific rules for each strategy and the tested trading results over the recent past. I particularly like the fact that he has tested the results across broad market indices and individual equities. For example, Altucher creates his own version of the famous "Turtle" trend- following system and tests it on the S & P 500 Index, the NASDAQ 100 stocks, and a basket of uncorrelated stocks. This very much helps display the robustness of the underlying trading concept.Among the specific strategies disclosed and tested are a unique method for trading the spread between S & P and NASDAQ stocks; an intraday method for trading the Cumulative NYSE TICK; a short-term trading system that makes use of Bollinger Bands; a technique for allocating money to bonds; and a straightforward method for arbitraging preferred and common stock of companies.Where I think this book is strongest is in illustrating how a professional hedge fund manager thinks about the markets. Many of the strategies are designed to take advantage of extremes in the market, where inefficiencies are most likely to be present due to traders' panic and overconfidence. Altucher's creativity in searching for these inefficiencies stimulates the reader to engage in a similar search. Reading the chapter on the NYSE TICK, for example, I soon developed my own promising variation on the author's strategy.Are there weaknesses in the book? I found the text to be clearly written and well-illustrated with charts and tables. The systems were designed and tested with the Wealth Lab program, but the specific code for each of the systems is not included in the text. An exception is the pairs trading system, which is one of the most creative strategies in the book. The strategies are geared more for swing and intermediate-term trading than "day-trading", with the TICK system a notable exception. My sense is that creative researchers could adapt some of Altucher's ideas to shorter-term trading--particularly the pairs trading technique and the strategy for buying market "crashes".Altogether, "Trade Like a Hedge Fund" belongs to a genre of books inspired by the work of Victor Niederhoffer (who Altucher acknowledges in his introduction). The focus is on scientifically-tested trading concepts, not discretionary, subjective ones. Where Altucher may differ from Niederhoffer is in his willingness to adapt traditional technical analysis tools (such as Bollinger Bands and gaps) to quant trading. As a matter of disclosure, let me say that I have corresponded with Altucher a