Jim Simons on Trading Strategies and Backtesting

Jim Simons, an acclaimed mathematician, has developed an effective model for backtesting and predicting performance in the stock market. He began by bringing in a code cracking specialist, but was not able to get far as the specialist was more interested in fundamentals.

After bringing in more mathematicians and a computer specialist, Simons and his team developed models that worked.

These models were built by finding anomalies in the data, such as a commodity’s tendency to trend, which could then be used to predict performance.

This system is now extremely elaborate, using a combination of machine learning, predictive analysis, and cost minimization.

Simons’ team must also understand and minimize volatility in the assembly of positions to ensure that they do not distort the market too much and make a loss. This process requires sophisticated applied mathematics.

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