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"Should you have this in your library? Most definitely, it...maps out exactly how to turn theory into profits." — Gary B. Smith, TheStreet.com
Product Description
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 and invest like never before. With detailed examples and up–to–the–minute trading advice, Trade Like a Hedge Fund is a unique book that will help readers increase the value of their portfolios, while decreasing risk.
James Altucher (New York, NY) is a partner at Subway Capital, a hedge fund focused on special arbitrage situations, and short–term statistically based strategies. Previously, he was a partner with technology venture capital firm 212 Ventures and was CEO and founder of Vaultus, a wireless and software company.
The gap trade is the bread and butter trade for many day traders and hedge funds. Read the first page
Concordance
Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
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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 about his ideas, but this review was not solicited by him or his editor (who happens to be my editor as well). The best thing I can say about the text is that it has given me ideas for my own research and trading. I can't say that about many trading books.
Brett Steenbarger
www.brettsteenbarger.com
First, there are not "20 Successful Uncorrelated Strategies". "Technique 19" is simply a list of what the author believes doesn't work. "Technique 20" is a reading list of books the author likes; there are probably hundreds of Wall Street listmanias listing the same books. The other 18 present absolutely nothing new or interesting, most of them are simply "buy the dip" strategies.
Second, this book should rather be called "Trade Like James Altucher", unless you believe there are no longer any hedge funds that have discretionary traders or are willing to use options and go short. There is almost nothing in this book with regards to real money or risk management either. I suppose no one would have bought with that title though.
This is the only good sentence in the entire book: "Table 3.1 shows some recent large bankruptcies that were liquid enough to trade after filing Technique [sic] 11" (p. 49).
But what disappoints me most about this book is not that it is content free, but that it wastes the time and money of those who really are interested in learning. This book, I speculate, was meant to exploit the members of TheStreet.com and its children. Like another reviewer said, my copy is available for burning. I recommend Perry Kaufman's book instead, it may be twice the pirce, but has a thousand times the content.
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.
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