Don't forget that James Simons was actually a pretty good pure speculator before he went quant. That is most likely why he has done so well where most quants haven't.
That's easy to answer. Really smart people fall in love with their own ideas and tend to have trouble admitting when they're wrong. Deadly attributes when trading. Dummies like me just say, oops, screwed the pooch again. Time to get out and live to fight another day.
An interesting turn of events at one of those firms is likely to become widely known next week. Stay tuned.
Intelligence in trading is like Horsepower in a race car. More is always better, and you certainly need enough to be competitive, but beyond a certain point there are other factors that become more important. How does one explain Entrepreneurialism? For whatever reason, some can see financial opportunities and are motivated to grab them, and others cant see them and/or are not so motivated. If you find someone who is very intelligent who also has a genuine interest in entrepreneurship, as demonstrated by starting a business, buying or selling real estate properties, etc, I think that person is much more likely to succeed at trading because it better suits their nature. You have to be motivated to "grab the money" and not get caught up in things just because they are interesting. What I see with super intelligent people is at the end of the day they just can't do the boring tasks that make money, because it is not stimulating enough for them. I have seen these would-be traders many times. They usually become obsessed with some technological or mathematical aspect of trading that is only tangentially related to actually making profits, and they never get from point A to point B. I think the great traders who are extremely intelligent will find they need to get their intellectual stimulation in some other way. If you look at the successful immigrant groups, they often seem to start out by running "dull normal" business that require a real profit minded, cost conscious eye to turn a profit. Sometimes you talk to these people and you know they are far more intelligent than their business, yet they are not distracted and they diligently do what is required to make money. it is not ego gratification, it is a practical need focused on the bottom line. This to me is the mindset the highly intelligent person needs to take towards trading. Everyone else does too, yet less intelligent people in my opinion are less likely to be prone to this type of distraction, because they do not see the possible extensions, abstract relations, etc that are interesting but not profitable. Someone who has passed the mental horsepower threshold but is not brilliant can get an edge by finding and focusing on whatever competitive advantage that they can create. For example, out of the box thinking, entrepreneurialism and conscientiousness are very useful in any business. Intelligence without independent thought is a rapidly depreciating commodity.
Nicely put. All I can say is machines are essentially stupid and the myriad subtle qualities of a good trader will be a very special emotional, psychological and human combination that enables them to weigh information on a number of levels second to second.
If it really works over time in all market conditions, you would have to pay a fortune for it - if it exist! lol
Academia is chuck full of people that are misguided and simply wrong. They are narcissistic and nobody can tell them that so don't waste brain cpu cycles worrying about them as competition, just be glad that they have nice retirement accounts to provide us with somebody on the other side of our ongoing efforts... this site is owned by guys that made $100 million in their own lifetimes from trading but academics come on here occasionally with all sorts of proof that it's impossible, LOL...
automation is nothing more than applying the rules in a trader's head into a set of commands the computer executes independently. it is no more, no less, complicated than setting manual stop limits based on setting alerts, based on basic formulas like: if AAPL hits $250.00, buy. if AAPL hits $250.25, sell. any einstein can figure that out. so can any computer. programming it to do so is an entirely different matter. let's see joe schmo learn how to use sterling, or read a futures chart, or AAPLs latest S1 filing. and no, joe schmo hasn't a hope in hell, because joe schmo has no idea why AAPL is $250 per share, or why gold went up, or oil went down, or why the yen is crashing, or the euro is doomed, or why the usd is inflating, or why interest rates are inevitably going to rise, or why the bond market will crash, or any number of basic economic theories that any "trader" has to know and understand to be able to discern a trading decision on a time relative basis. so there. i'll take james simons over simple simon any day.
If you take a profitable trend following system working off the daily or weekly charts, it can easily be automated, but there is not much point to it. It only takes a few seconds to manually enter an order for a strategy that only triggers at most 5 trades per year per market. As an individual trader coding my own strategies in Tradestation, I can demonstrate un-optimized profitable trend following strategies that are profitable over 30 years of futures data in 90% of markets. I would guess that they are not that much different from the trend following strategies used by Abraham et al. If I were a trend-following hedge fund manager working off the daily charts, I wouldn't go 100% automated. There will always be some element of discretion related to opening positions on thin trading days, adjusting position size due to unexplainable divergences between different markets, etc. My holy grail is that elusive, consistently profitable, unoptimized intra-day strategy that works across varied markets, which I believe is the main point of your post! I am still searching! I do believe, however, that the answer probably involves simplicity, cutting your losses, and letting your winners ride. If anyone has found the grail, please PM me with a hint or two! My suggestion to those searching for the same grail is to develop a profitable system that works off the daily charts (backtested with 30 years of data), and then use the proceeds to pay for your investigations into an intraday system! Gavin