Trading pullbacks & hedge funds

[clylbw]

Hi,

I would like to ask about trading pullbacks and hedge funds. Firstly, I wonder whether it is a good idea to trade pullbacks.

My setups for pullbacks would yield profitable trades, having taken into account the possibility. But the average dollar profit would be smaller than that of my normal trend following trades; the R/R ratio would also be lower with my normal stops.

I could tackle the R/R by using a smaller stop, but trading pullbacks would mean having positions for a greater part of the day, which could be tiring. Moreover, the profit can be petty despite all the work. On the other hand, a gain is a gain, and sometimes it feels such a pity, not grabbing what is being offered by the market.

Sorry for all these ramblings . Given the above circumstances, what do you think about trading pullbacks? Is it still worthwhile?

Following are questions from a friend regarding hedge funds. Since I know little about this area, can anyone please offer some help?

1. Investment period. I have heard that for most hedge funds, investors can only exit at the end of a quarter or a semi-year. Is there also a minimum investment period? That is, does an account have to stay in a particular fund for some period before it can be withdrawn?

2. Guaranteed returns. Do any hedge funds offer guaranteed returns for certain periods? If so, do they charge higher fees, or something like that, for compensation?

Thanks indeed.

 

[joeMcnicholl]

Hello clylbw

I have been trading for a long time,my son come across the site and told me about it. My answer to you question clylbw.Trading pullbacks. Everyone likes a barging, But buying strength and selling weakness, has served me well over the years.

Joe

 

[fxmarkets]

Maybe combine the best of both worlds with this setup detect a shift in trend wait for the break, then enter on a pull back.....? maybe 1/3 bars of your timeframe. some trends will go and not pull back ,perhaps they do further up the line from the break too far maybe for it to appear value/low risk opportunity when they do pull back 1/2 bars or so leaving you to have to let it go, buy strength but on a pull back maybe. I suppose it depends on how early you detect the move.

have a look if you can at eur/usd last friday 10.10 am us time / 3.10 pm uk example of a move where you had 3 mins to get on, (long )around 1.2405/07 no pullback with that one. but at 11.27 us time you did have a slight 5 point pullback from 1.2440 to 45 again 3/ 4 mins to get in. 3/4 bars (short trade). maybe if a pull backs going to happen once a potential trend has started or been detected then its going to be within 3 or 4 bars. ? is it worth waiting for 5 points? at the expense of waiting and missing the opportunity. All down to how you feel whats right for you mate.

Perhaps best to observe market action and see what you see with it.


What timeframe do you work with ? you could always put up a tick chart and use that to observe potential strength /likely hood of pullbacks once you have perceived your trend, set an rsi on the tick chart, just an idea. Some say entry is not be all and end all but you may aswell get best value for yourself .

Fx Markets.

 

[clylbw]

Thanks indeed.

It looks like I have not made myself clear; my apology. I already trade trends; generally I am able to get in and out at fairly good places. What I wanted to ask is, in addition to these trend taking trades, is it a good idea to trade pullbacks too, given the circumstances of R/R and the lengthened exposure to the market?

And, anyone any idea about the hedge fund questions? My friend is quite eager to know about those matters. Cheers.

 

[JumpOff]

Thanks indeed.

It looks like I have not made myself clear; my apology. I already trade trends; generally I am able to get in and out at fairly good places. What I wanted to ask is, in addition to these trend taking trades, is it a good idea to trade pullbacks too, given the circumstances of R/R and the lengthened exposure to the market?

clylbw, are you asking about getting out of your trend position to trade the pull back in the opposite direction, then putting your trend position back on when you have evidence the pullback is done?

Or are you leaving the trend position running, and adding a hedged (doesn't cancel the trend trade) position in the opposite direction for the meat of the pullback?

JO

 

[TWI]

Following are questions from a friend regarding hedge funds. Since I know little about this area, can anyone please offer some help?

1. Investment period. I have heard that for most hedge funds, investors can only exit at the end of a quarter or a semi-year. Is there also a minimum investment period? That is, does an account have to stay in a particular fund for some period before it can be withdrawn?

2. Guaranteed returns. Do any hedge funds offer guaranteed returns for certain periods? If so, do they charge higher fees, or something like that, for compensation?

1. This is not true, it varies fund to fund. Quite often there is a minimum investment period and quite often there is a redemption period but more and more this is coming down to monthly redemption. You may be asked to give it anywhere from a minimum of 1 month to 18 months before you can redeem.

2. No, I have not heard of guarantees on return, (unless they are unleveraged and linked to bond yields in which case they are not worth it as costs will be higher) . Most common is 2% management fee annual and 20% profit share. The ones with the best long term track records are asking for 3%+ and 50% but 2&20 is most common.

 

[TWI]

As for pullbacks, if you are in an uptrend and the price pulls back and you still believe in the trend then this is the best time to buy, it is when the weak longs are running for the exits. I think Nikkei will show plenty of this sort of action over the coming years.
Buying pullbacks is psychologically harder than buying breakouts but both work if you get your risk management right .

 

[clylbw]

Many thanks.

clylbw, are you asking about getting out of your trend position to trade the pull back in the opposite direction, then putting your trend position back on when you have evidence the pullback is done?

Or are you leaving the trend position running, and adding a hedged (doesn't cancel the trend trade) position in the opposite direction for the meat of the pullback?

JO

Hi JO,

It is the first situation that I would like to ask about.

 

[JumpOff]

It is the first situation that I would like to ask about.

So, I'm guessing you have been evaluating these things:
How accurately can I see these turns as they happen?
Am I getting the sweet spot out the bulk of the run?
Am I able to judge/guess in advance how strong the pullback is likely to be?
Are my re-entries with the trend sharp?

and if all that is positive
Does the extra profit gleaned from this start/stop justfy the extra risk (stop+spread+commission) and hassle of having to micro manage it? I sure don't have any answers about this. But it is an interesting question. I talked about this last year here:
http://www.trade2win.com/boards/showpost.php?p=151359&postcount=268
(there's even a diagram.... )
JO

 

[clylbw]

Thanks really JO ; that is exactly what I am trying to figure out: whether it is worth taking the trade when a pullback setup presents itself.

One more question if I may. About the 4th option you have mentioned; I assume one can only hedge using related but different instruments, e.g. options, or with a 2nd account? As far as I know, brokers do not normally allow for multi position holdings of the same instrument withing a single account. Cheers.

 

[JumpOff]

I assume one can only hedge using related but different instruments, e.g. options, or with a 2nd account? As far as I know, brokers do not normally allow for multi position holdings of the same instrument withing a single account. Cheers.

That's my understanding. Some of the forex bucket shops allow you to mark the order ticket 'hedge' so that it doesn't cancel the position you already have on. If you are trading futures, you could trade a different month, i guess. I think some brokers allow you to have multiple accounts with them, like one for you, one for your husband or child. You can trade those independently. I expect they can all be managed from the same screen..

JO