Whoa! What an article for this explains Jim Simons Trading strategies are used in deep detail. Here are the highlights but thanks to NYC Contact for sending this
quantifiedstrategies.com/how-jim-simons-made-66-a-year-by-using-quant-strategies/
From this article:
We know they use this process when they started:
Find a pattern that seems like an anomaly.
The pattern must be statistically significant. It must have many trades and signals.
Don’t override the computer (you obviously can’t simulate or backtest that).
“There’s no data like more data”.
Don’t ask why. There are so many variables to explain an outcome, and most traders underestimate the vast variables that influence asset prices. No one really knows why. Thus, it doesn’t make sense to ask “why”.
Presumably, the win ratio is pretty low at about 51%.
Simons and the Medallion Fund conceal their trades. If an asset shows an anomaly at 11 AM, they conceal their trades by not buying precisely at 11 AM.
They use leverage because of their extreme diversification. Leverage is the main reason for the returns.
Author’s interpretation of this article
My lessons and takeaways, in just keywords, are these:
Trade often
Trade many markets to get uncorrelated returns
Diversify to different markets and time frames
Many data points are required to make a meaningful trading/investment strategy
Aim for a “market neutral” portfolio
Don’t worry about “why”
Scale in, scale out
Math trumps intuition
The logical strategies are arbed away
Mean reversion is the lowest-hanging fruit
Leverage bites
Most quant traders fail
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