This is not the big edge that Hedge funds have. Certainly, most can afford the highest power computers, servers, etc. Bottom line is you can be quick as lightning, however, if your strategy does not have an edge, it doesn't matter. Again when hedge funds are successful over prop. traders it is generally because the level of expertise of the Fund manager is far superior to the prop. trader (ie. he's got a legitimate edge and knows how to exploit it). As such, either he has made enough money on his own to be able to start a hedge fund ( i really don't consider anyone with less than a number of millions actually running a hedge fund), or he has been able to articulate to investors his edge and has been able to attract capital. These investors are multi-millionaires, billionaires, or sophisticated institutions, they are not stupid. If you can attract money from them, you've probably got something legtimate. That is why the majority of hedge funds are more successful than the majority of prop. traders. Simply because they are more advanced in the evolutionary scale of trading (don't mistake this for a superior raw level of intelligence).
Yes, I have been to the SAC headquarters in Stamford. Didn't strike me as anything that out of the ordinary for a suburban office and such a successful hedge fund.
Surfer is not sucking balls, etc. He is a friend and I appreciate his comments. Anyway, as you state, edges come and go. To be truly successful, you must be first of all be correct in ascertaining that you in fact have a legitimate edge (most fail at this stage) and be proactive to read the writing on the wall when that edge becomes saturated or no longer exists as in the case of US Statistical Arbitrage. Anyway, I hire day-traders because they are there to be hired. Why wouldn't I want to big up money off the ground if it's there. I hire them because there is little greater business than owning a casino. Anyway, on the rare chance that one of them actually has talent and exploits a legitimate edge, it's a home run for me and that trader. Incidentally, I have found someone like that. I am not bashing anyone. Rather, I am probably one of the most honest people you will encounter on the street. I comment and banter because I like it and am very opinionated. I think I have the level of experience to be taken seriously. Nonetheless, certainly, I acknowledge that everyone is entitled to their own opinions and at the end of the day, you know if you have a good opinion based upon the level of your bank account. It's a great business and I truly love it. The greatest game ever invented and I truly feel priviledged to have made my career in the markets and I don't feel like i've ever really worked a day in my life. All the best..Neal.
Incidentally, I'll give you a legitmate edge in my opinion that many on this board can exploit. The ECN rebates are a tremendous edge. Not only do you get the market-maker edge from buying the bid and selling the offer, you get paid to do it! Take advantage while you can. I recommend black boxing only however. Too much competition for discretionary traders from high frequency black box trading of the strategy such as ourselves. Best. Neal.
That's not an edge. That's a component rule of the game that you choose to exploit. Your black box is your edge.
I beg to differ my friend. The edge is getting paid to trade. However, you still have to be able to exploit it profitabily and correctly, (ie. via a black box). Incidentally, the strategy with the edge can be exploited on a discretionary basis and probably has some legitimate juice in it, just making the comment that it's more effective when black-boxed. Not a pre-requisite to profits however.
Alright, let's see who agrees with you. If everyone has access to something, the edge is diluted and becomes a component of the game, the edge is something proprietary or developped or inherent to someone's persona.
The caveat being that the provider of the 'edge' (ECNs) are greatly outstripping the exploiters of the edge (few day traders). Hence, the demand/supply equation of the 'edge' causes it's legitimacy.
Ok I do apologize for straight out calling you not a trader. I did not mean it as an insult, just I consider any type of hedge fund, mutual/pension fund and institutional trading very different from day trading and trading for oneself in general. I did correct myself in a previous post. [/B]The caveat being that these traders that I hire do not 'guess' at the market. They have a legimate edge. What is this legitimate edge that I refer to? It could be anything from a liquidity providing edge as in Statistical Arbitrage, an edge whereby many of the other players in the game are non-profit motivated (as in some commodities markets), a high barrier to entry edge (such as in International Statistical Arbitrage), Stat. Arb. in South Korea for example, or any other form of edge whereby they are exploiting inefficiencies or anomolies in the market.[/B][/QUOTE] Yeah I know, learned bout this stuff in school. Very old and very common. But hey, it works. There are high barriers to entry when it comes to any type of arbitrage which mainly consist of speed, technology, capital and simply connections (bank to bank). Yeah I know, it's not that simple, but from some true life examples that I remember, it's like free money thats only available to a select few(happens in day trading also) [/B]My preference is to exploit the edge quantitatively. Yes, as was discussed here many times, I fall into the catagory of hiring a very, very high % of Quants. Finding the next great discretionary trader (like a Soros, etc.) is like finding a needle in a haystack. Not a viable endeavor.[/B][/QUOTE] Even after the numerous times it has been proven otherwise, Wall Street still think that academics and books smarts help make a good trader. [/B]Anyway, these times in the equity market are well within the range of normality. I don't give a sh*t that traders were receiving mana from heaven and making $1 Million+ in the late 90s. That was fantasy land. Traders today as you correctly stated will not make money (the type of traders most refer to here on the boards).[/B][/QUOTE] You know, the fantasy land times did not just end, they ended very abruptly along with the end of the bubble burst. It has been getting worse and worse every year, and right now it is not very good, nor is it very normal. But then, you do not day trade so how in the world would you know? [/B]The reason for that is unlike the late 90s, now you need a real 'edge'. Being a great technical analyst, fundamental analyst, market feel, etc. is not an edge.[/B][/QUOTE] You know that last statement really makes me wonder about what type of trading do you really do. Especially to hear you say that market feel is not an edge, that is just laughable. Look, forget about your quants for a second and try to accept that it is just a MARKET. Think back in the day, think to the beginnings of market exchanges for simple goods such food and cattle. That's all it really is, buyers and sellers, supply and demand. And to win in this game you have to be a smart buyer and a smart seller. Many different ways to deal with your inventory and great market traders have a great psychological feel, a sense of street smarts that can exploit others' mistakes and ignorance in doing their buying and selling. Thats the core of it. I know all about the statistical and quant approaches and they do have merit, since it is, after all, human psychology, and statistics are very applicable to human psychology. But to act as if, that is the ultimate edge to market trading is just silly. If you can feel the core of the market, what do you need all the comlicated models for? [/B]I would bet big that if i let someone trade (i will not be doing this so don't even ask) absolutely for free, no commissions, no costs, nothing, they would not make money and would in fact lose a substantial amount. Of course, I am referring to traders that do not possess a legitimate edge. [/B][/QUOTE] I do not even want to think about how much more I would be in my account if all my commissions were ever refunded. I also wonder how many more traders would still be around. In conclusion, I do not mean to put you down at all, but please, you do not have any real experience regarding being a day trader. It's just hard to pay serious attention to your posts about the day trading industry, when you have zero acquaintance with it. Now if you post about the state of global hedge funds, I would just read and not say much.