A Brilliant Mathematician and Quantitative Trader (Jim Simons)Shared 5 Simple Rules That Will Teach You How to Beat The Stock Market
(1) You don’t need high winning rates to make money. A 1:2 or 1:3 risk/reward ratio with small losses can lead to large returns. Profitability is determined by the frequency and magnitude of wins and losses, not just the win rate. A small edge can be profitable in the long term.
(2) No trading system works all the time, profitable trading is based on math: risk management, position sizing, positive expectancy models, and cutting losses. However, discipline is necessary to avoid emotions interfering with a good system.
(3) Trading systems must be consistently followed with discipline to be profitable. Even the most successful systems have drawdowns and losing streaks. All traders face the temptation to override their plan, but profitable trading in the long run requires discipline.
(4) Backtesting historical price data can provide an advantage in trading current markets, as emotions and opinions of traders create repeatable patterns. By identifying and trading these recurring price action patterns, one can gain an edge in the market.
(5) Look for trading signals in all liquid assets, avoid illiquid stocks, futures and options. Diversify your watchlist and trade different signals that backtest well to increase your chances of making money in different market conditions.