Wednesday, July 14, 2010

Book Review: Trade Like a Hedge Fund by James Altucher

This book bears endorsements from several people, including Jim Cramer. But it lacks the warning: "Careful, geek stuff", which should be printed in big red letters on the cover.

I really like the book. There are a lot of quant strategies which can be used by almost anybody. Doesn't matter if you run ten thousand dollars or hundred million. The catch is: investing world is changing all the time. Some strategies aren't working anymore. Some need adjustments. To use this book for trading, you need to be a geek (or hire one) and run backtests for strategies you are planning to use. Most of strategies also require significant computational power to search for candidate stocks.

The best feature of the book: author is trying to provide reasonable explanation why this particular strategy might work. Some are based on psychology. Some on the way mutual and hedge funds trade during specific periods of time, like end of month, options expiration week, end of quarter. Some are based just on technical indicators.

One system which probably was changed by publication of this book (or maybe quant traders forced this change): Wednesday Reversal became Turnaround Tuesday. Is it tradeable? I'm going to run backtest soon and find out.

I am currently running an experiment: trading two variants of "four down days" system. This is a link to the article describing them. Planning to run them till the year end.

The most important chapter of the book: "TECHNIQUE 19 What Does Not Work?". It describes strategies which either never worked or worked in past but don't work anymore. You should be aware that any strategy described in the book (as well as any other trading strategy) can suddenly stop working.

Full disclosure: I received the book as a gift from author.

Seeking Alpha Certified

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