What is the FX Trading Techniques Used by Hedge Fund?
Hello everyone. Just want to ask professionals some basic questions here:
- Do hedge fund trade major FX?
- What kind of trading techniques do they use? Is it Technical + Fundemantal + Experience? or depend largely on algorithm trading looking for arbitrage?
- Does trading really makes a lot of money? If it does, why investment banks don't usually take positions?
I've done a few FX trades like in March right after the Japanese Tsunami I moved corporate cash into the Yen from USD because of Yen insurance pay outs and the purchase of raw materials. So in my case it was fundamentals. I would however like to trade FX regularly. Anyone could give me some ideas of firms that trade FX regularly and would hire someone who has done primarily corporate finance. Thanks in advance.
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Investment banks for the most part can no longer take positions in trades, trading can be highly profitable, and most hf use algo trading
come again?... "investment banks for the most part can no longer take positions in trades"?.... so that whole 'market making' thing is out the window? (sarcasm)
Ok to be clear, especially in spot FX (which you're most likely referring to), banks DO in fact take positions (how else do you think their spot desks make money?) There's no real bid/offer to speak of so positioning the book one way or the other is a necessity.
Simply not true. Spot, forwards, and options traders can take directional, interest rate, and volatility bets respectively and it is no big deal. Spreads are too small and any bank that is respectable in FX dealing has an algo that makes more money making markets than any of the human traders will make. FX trading at BBs is almost entirely principle trading and I would love to see Dodd-Frank try and smack down a market that does >$13T in daily turnover. Simply won't be possible.
I'm not sure where you are getting that information from about most hedge funds using algos, but considering the first clause you posted was an obvious falsehood I'm going to stay with the trend here and choose not to believe it. Buy side clients might use the algos to process their trades, but whether a discretionary manager or a black box is on the other side of the trade is ambiguous.
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