What is the most important mathematical idea in stock trading?

Discussion in 'Trading' started by Lloyd W. Coutee, Nov 17, 2015.

  1. James Simons (Renaissance Technologies)
    said "mathematics" is most important thing in stock trading.
    what would be the most important mathematical idea in stock trading ?
    statistics, fluid dynamics ?
     
  2. Doesn't he make most of his returns by betting heavy during a recession. Don't believe all the bullshit about using math and formulas and algorithms, it's all a front for something else.
     
    callmepaul likes this.
  3. Random Walk Hypothesis (Louis Bachelier,The Theory of Speculation,1900)
     
    marketsurfer likes this.
  4. It's the mindset, not a particular idea.
     
  5. kut2k2

    kut2k2

    Frederick Foresight likes this.
  6. Most likely, faster "front-running".

    Unless you've a mind to try "out front-running the front-runners", you might as well give up on the concept.

    There is money to be made without trying to "beat the HFT big boys to the punch for a tic or two" on a gazillion trades.
     
    Last edited: Nov 17, 2015
  7. cjbuckley4

    cjbuckley4

    Probability, statistics, linear algebra, optimization.
     
    bellman likes this.
  8. allmepaul said: The Dangerous Mathematical Con of Hedge Funds and Financial Advisers

    http://www.psmag.com/business-econo...ical-con-hedge-funds-financial-advisers-79212

    He makes some good general points about overfitting, but he stops thinking when he gets to the point about having to disclose number of trials. How is anyone (much less the SEC/FINRA/NFA) going to prove or verify that someone did more trials than stated?

    Also, I get annoyed when people start throwing Renaissance as an example around. Neither he nor anyone else outside of Renaissance knows what they have done or are doing.

    Finally, as has been discussed in other threads, the investment industry is awash with PhDs. If he thinks 2 PhDs is not enough to verify the statistical robustness of a backtest then how many does he think you need? 3? 100? Perhaps he can use his PhD to come up with the optimal number?
     
    Last edited: Nov 17, 2015
  9. Bry

    Bry

    calculating where your stop loss will be placed-THAT is the most important math in trading...and it takes about 3rd grade level ability
     
  10. Turveyd

    Turveyd

    Watch CNBC ( Still a thing right ? ) and do the exact opposite if there saying sell, but and vice versa!

    MM ( Money Management ), ohhh no that's just setting the stop loss, 3rd grade level ability again, nothing to talk about there.

    I used to do well, no math's, used to download 400+ Stock Tickers end of price and volume into my little system, monitor 20ema move, volume spikes, big movers, flag the 1's I was interested in.

    I'd trade the entire US Session, then spend 4 - 6 hours per night, going through 100+ charts in detail to find the trades for the next day, long days, vowed never to go back to stocks again!

    Remember...........

    Over all Market condition, if Bullish say!

    Scan all the sector charts, put 2/3rd of your money long in bullish sectors and 1/3rd in bearish sectors.

    Obviously find good candidates in those sectors, yep this is why it was a FULL time job!

    Flip if bearish ofcourse, used to do me well!
     
    #10     Nov 17, 2015