Applying mathematic to stock trading

[Parttimer]

Hi Guys, something interesting I was watching the other day. It was about a gentleman called James Simons who started a company called Renaissance Technology. As of Forbes last listing his nett worth was $13b. This guy is a mathematics graduate and set up his stock trading business by only using mathematical models to trade stocks. All his key guys are scientists. Interesting to hear him say that fundamental analysis was consistently beaten by their mathematical stock trading. Watch him on Youtube.

[Rams]

i really do not think his success has anything to do with maths...he is just a good manager who manages some clever sales-people.There is no magic formula in trading. He is a hedge fund manager, so sort of a broker who makes money irrespective of market movement...Trade the ALSI on 15 minute and you will understand....

[Chopchop]

Have you read hedge fund Wizards? There are some interview of hedge fund managers that consistently outperform the market and a few of them are using mathematical modelling to do it.

[#4]

Its all about mathematics! Either simple maths (risk vs reward) or more complex algorithms involving probability (as a mathematician myself, probability theory is always the hardest to master IMO). In fact, if it wasn't for mathematicians, you wouldn't have any instruments to trade with other than underlying stocks.

[Rams]

Totally agree....but Simons success is not due to his mathematical abilities......

[Parttimer]

Hi Rams, I disagree with you on your last point unless you know something different. Watch his interview on Youtube. He clearly states that they initially started as fundamental traders but soon realized that they could not consistently produce those returns. Hence they started using mathematical models to consistently deliver results. That's what he says unless you believe that he is lying?