systematic structure of trades
What is the Systematic Structure of Trades? The systematic structure of trades, as referred to by Jim Simons, means that trading decisions and execution are governed by predefined, algorithmic rules derived from data analysis, not by human judgment or interpretation of news.
1. Systematic vs. Discretionary A discretionary trader makes decisions based on intuition, news, or chart reading. In contrast, a systematic trader relies on a rules-based system to enter and exit trades. Simons prioritized building systems that could execute thousands of trades automatically and consistently, without emotional bias.
2. What "Structure" Means in This Context Structure refers to clearly defined components of the trading process, such as:
; Entry Rules: Specific statistical or technical conditions that trigger a trade.
; Exit Rules: Predefined criteria for closing a trade, such as price targets or volatility levels.
; Position Sizing: Algorithms that determine how much to trade based on risk or expected return.
; Risk Controls: Built-in safeguards like stop-loss limits, diversification thresholds, or correlation filters.
3. Why It Matters A systematic structure allows for repeatable, testable, and scalable trading. It removes emotional decision-making, enables performance measurement, and supports ongoing model refinement.
4. Simons' Application Jim Simons used massive datasets to identify short-term predictive patterns and price inefficiencies. His firm traded on these patterns using a fully automated and disciplined structure; ignoring news or economic forecasts in favor of statistically proven strategies.
Summary When Simons refers to the systematic structure of trades, he means a data-driven, rule-based architecture that:
; Operates without emotion or speculation
; Can be tested, refined, and repeated
; Leverages statistical edges found in historical data
; Trades at scale using automation and precision