Brokers even decrease leverage as an individuals account grow, at 500,000 most don't even give leverage unless you specifically ask for it.
A hedge fund is likely trading billions so, they surely don't have access to leverage which is why their percentage gain per month is so low, combine that with the inability to trade smaller time frames due to liquidity issues and things start to make sense.
And also the topic is trading for living so naturally one has to look at long term returns and not just streak of luck in few weeks/months.
And when large fund trades they usually do it in clips.. I see clips as small as 1lot..
So making this assumption imo is mistake.. if u don't believe me talk to any sell side broker and ask abt their hedge fund clients.. there are plenty 1man and 2 shops too - many times without investors money and trading with just partners capital.
I am aware that hedge funds, trade intra-day, and HFT however without leverage their growth would be minimal in terms of raw percentage.
If you take away leverage from retailer, no-one would even make 2% profit a month.
Due to 2 reason trading on the lower time frame would mean higher spreads and trading on the higher time frame would mean you must wait for large moves to occurs to get a profit of any significant
Without leverage, a retailer would need to have 1000 USD approx to place a MIRCO lot trade, in other words without leverage a retailer would need to make 100 pip for a 1% gain. a currency pair probably have a FEW 100 pips move a month of average.
Then take into consideration miss trades, losing trades and it very clear why the percentage of hedge funds are quite low in comparison to retailers despite their advantages. ( no leverage )
Before European brokers were forced to have max leverage at 30, many brokers had disclaimers up saying after 500,000 USD leverage would have to be requested on special conditions.
In essence, as long as a hedge fund bankroll is over a certain figure, their percentage gain per month would be extremely low unless they somehow acquired leverage, then this comes with another problem as leverage means issues getting fill as the size of your lot would increase significantly.
Also yes, certain individuals may be managing a small portfolio for the hedge fund and therefore they may not have this problem but say they have 1million out of a 50 million bankroll even if they made 100% the hedge fund still only make 2% profit as a whole.
No leverage = mininal growth
Leverage( rarely given ) = large positions = trouble getting fill.
If you want real account protection please look at this thread https://www.forexfactory.com/showthr...8#post12254648
In any case, small hedge funds use strict risk managent too. last reply ...
P.s. trust your own analysis, ignore people on forums who just make assumptions.
This thread is a joke. You would know the answer to how much capital you need once you know your strategy.
No offense. Have a nice day.
What are you talking about? Hedge funds have no leverage??? I suggest you do some more research, what you are saying is factually incorrect.
at the moment you make so many mistakes, you even take a total fake or arbitrage account as your goal, and you did not know about and even with help from experienced traders you cant see it.
you really need some years without trading real money (or better mini cent accounts), that you are at a level to survive at least with breakeven... or your end is 100% sure. its only a question of time when you lost all your money when you trade with such a low experience level. you decide your future ... dont be a good example why a trader is failing.. you collecting so many mistakes....
try more listen and thinking about topics, read about the basics and dont guess so much in trading in about other people, judge what is reality.. dont dream. dreamers cant see fakes and scams, because they want believe its real.
and If they had access to it, they would face serious liquidity issues, yet somehow I am completely wrong, that's forex factory for you.
Maybe that was what you meant but it is not what you wrote. But even in this case your conclusion as to why the profit % is lower is wrong.
Big funds dont need to make 10% monthly to make it worth while. They make most of their money off of volume commissions and account management fees. Account management fee is fixed yearly fee and volume commissions depend on trading frequency and trade sizes.
Liquidity is not an issue with these funds, they do their business in completely different spheres than retailers do. They also have scalable strategies that can handle the large amounts.
It seems like you are full of assumptions without any facts to back up your claims. You think you have more knowledge than you actually do. Not a good thing in this business.
Retails are capable of making what we make because of the amount of leverage we have access to, to think that a hedge fund has access to the same amount of leverage as a retailer is, and is able to properly utilize it without liquidity issues as a retailer seem far fetched
I have no idea why this is even a discussion, A hedge fund can't make 10% per month because their bankroll is too large.
Think of it as the law of diminishing returns ...
learning before earning, you cant do step 2 before step 1.
what spheres ? don't make it too complicated lol
"In a large sample of hedge funds, 71% of the funds trade derivatives"
of course liquidity IS an issue when you place big orders in the market.
even if you were wrong, don't worry.. I could not care less.
As far as capital is concerned the most important aspect is money management.
I just want to highlight the huge change in mindset needed when you are trading for living and when it is just a side thing. you can't just multiply the return you got in your small (i.e. not drastically life changing amount) account and think you should do that in your "trading for living" account. Most people do not comprehend this fully.
In fact wall street banks create products just for this - i.e. to allow hedge funds more leverage.. for e.g. CDOs were created so hedge funds can bet on bonds with even more leverage than was possible before.
Bellow a 6 digit equity, the pressure is constant to perform, as a retail, full time trader, if depending solely on the trading profit.
Easy to sweep this aspect on the side, until someone try making it full time; then it will be clear.
One can't base full time trading on 2-3 months good result, and can't easily take 30-50-70% DD anymore on equity marked for trading for a living, for many reasons, a major being that if that 20-50% DD suddenly can mean end of full time trading bcos unable to meet the monthly expenses anymore...vs lose half if a 200$ account, is really not a life altering issue.
Survival become a priority.
For funds, even more so, cos their existence highly depend on the investors, most being a lot more risk averse than a 200$ retail
A final note.
Funds do use leverage. But dont really have to. Their goal isn't the highest % return, but a good return that attract capital. Unlike retail traders, funds earn very well based on AUM ( assets under management).
A luxury that no retail trader enjoys, not even prop traders.
A fundamental difference, what should not be dismissed.
Hedge funds use strict rm to keep the client's happy.. hedge funds make money mostly on management fees so why scaring their clients with a 50% drawdown lol
nobody would invest in a fund with 50% dd
to them it's all about keeping the dd low.. and clients are happy.
100k is just not enough to trade with strict rm and make a living.
this year I'm up around 5% and I risk 5%/trade.. imagine if I was risking 1% . no big deal if I was a hedge fund, I would still make money on fees. but as a retailer,it's almost impossible to make a living trading..some years are just break-even years and IMO things get only worse.
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