Jim Simons Trading Secrets 1.1 MARKOV Process - YouTube

Tutorial  

• 04:35 📈 Jim Simons' Medallion fund has consistently delivered impressive returns, proving the effectiveness of quantitative trading strategies.
• 06:09 🔄 Markov process, as used by Simons, involves a random sequence of events where future probabilities depend on the current state, not the past.
• 09:55 📊 Transition matrices can be created from historical data to calculate probabilities for consecutive market moves, aiding in strategy development.
• 14:31 🔄 Strategy example (using approximately 12 years of SPY daily data from Jan 2010 to April 2022): The probability of an up day after five consecutive down days is 66%, leading to a back tested strategy with a 46% return and 5% drawdown.
  • Definition of up day: close price of a day being higher than close price of previous day.
• 17:24 📉 Combining Markov processes with other tools and conditions can enhance trading strategies, as demonstrated in the course's Q5 strategy, inspired by mean-reverting principles.
• 19:59 🧠 Data analysis skills, along with tools like Markov processes, empower traders to derive probabilities, create efficient strategies, and adapt to various market conditions.