The best time to trade against hedge funds

Cumbersome hedge funds are prone to making mistakes, says John C Burford. Swift-footed swing traders can take advantage.

I will update the gold picture this morning, because the market has provided a stark illustration of what happens when hedge funds get it wrong - and they do that quite often.

Hedge funds are among the biggest players in the market, so we need to keep track of their activities. As I have pointed out, they are largely trend-followers. They are momentum traders and use trading programmes that track the momentum of the market.

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(Contracts of 100 Troy ounces)Row 0 - Cell 1 Row 0 - Cell 2 Row 0 - Cell 3 Open interest: 398,264
Commitments
169,08351,76630,361159,979287,600359,423369,72738,84128,537
Changes from 03/18/14 (Change in open interest: -22,362)
-14,2415,256-2,338-4,314-22,627-20,893-19,709-1,469-2,653
Percent of open in terest for each category of traders
42.513.07.640.272.290.292.89.87.2
Number of traders in each category (Total traders: 280)
12475735158212177Row 8 - Cell 7 Row 8 - Cell 8

John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.