Trading Nest

Jim Simons

1938–2024 · Quantitative, all markets · Known for: Renaissance Technologies' Medallion Fund

Strategy you can use

Mean-Reversion Quant Starter

A retail-sized, testable mean-reversion model in the spirit of Renaissance's scientific approach: many small statistical edges, strictly backtested.

Style
Statistical / quantitative
Timeframe
Daily (swing)
Markets
Liquid large-cap stocks & ETFs
Level
Advanced

1. Setup

  1. 1Universe: liquid large caps trading above their 200-day SMA.
  2. 2Signal: 2-period RSI below 10 (short-term oversold in an uptrend).
  3. 3Backtest at least 10 years including costs before going live.

2. Entry rules

  1. 1Buy at the close when RSI(2) < 10.
  2. 2Spread capital across many signals rather than one big bet.

3. Exit rules

  1. 1Sell when price closes above the 5-day SMA.
  2. 2Time stop: exit after 10 trading days regardless.

4. Risk management

  1. 1Cap each position at 5–10% of capital.
  2. 2Track live results vs backtest; pause if drawdown exceeds historical max.
  3. 3Account for commissions and slippage.

Common mistakes

  1. Over-optimising on past data.
  2. Going live without out-of-sample testing.
  3. Believing you can replicate Medallion's returns.

An educational interpretation of publicly known principles, not the trader's exact proprietary method. Backtest and paper-trade before risking real money. Not financial advice.

The story

A mathematician and former codebreaker, Simons founded Renaissance Technologies and hired scientists rather than finance professionals.

The Medallion Fund, open only to employees, is widely reported to have produced among the best long-term returns in history using statistical models.

Lessons for traders today

  • Data and testing beat opinion.
  • Many small edges can add up to a big one.
  • Retail traders can't copy Medallion, but they can adopt its scientific approach.