Hedge funds use sophisticated strategies — long/short, global macro, arbitrage — to target absolute returns regardless of market direction. They are only accessible to accredited investors and charge high fees.
Answer: Buying stocks expected to rise AND shorting stocks expected to fall. Long/short reduces market beta by simultaneously holding longs (upside bets) and shorts (downside bets).
Answer: Macroeconomic trends across currencies, rates, and commodities. Global macro funds like Soros' Quantum Fund trade around big-picture economic views on countries and asset classes.
Answer: Buying the acquisition target and potentially shorting the acquirer after M&A announcements. After a deal announcement, the target trades below the offer price — arbs profit from the spread as the deal closes.
Answer: Income >$200K or net worth >$1M (excluding primary home). Accredited investors meet SEC income or net worth thresholds — qualifying them to invest in unregistered securities like hedge funds.
Practice this with $10,000 in virtual cash in Tradecraft, free paper trading with real market data.
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Educational content only, not investment advice. Tradecraft is a simulator; no real securities are bought or sold.