This is how Jim Simons made $31.4 billion Corona Del Mar, CA   Howdy Chris!   Jim Simons passed away last week.   He was the head of the best trading firm ever, and is the reason why I became so heavily involved in machine learning.   Sure, you can go on Forbes and see that his net worth was $31 billion. What you may not know is that unlike Warren Buffett, he didn't really hit stride with trading until he was 50.   That's why I say it's never too late to get started.   While he was always tight-lipped about how they made money, I'm quite certain I reversed engineered their basic concept from various books and interviews.   It's the fact that stocks mean revert around the performance of their index.   For example, Apple (AAPL) stock was under-performing the NASDAQ 100 this year by over 10%. A popular Twitter "chartist" was pointing this out, and thought that meant AAPL was a "sell" when in fact history has shown these as buying opportunities.   See for yourself: The above graph is the 20-day spread in performance between Apple and the NASDAQ 100 ETF (QQQ).   What you can do is buy AAPL when it's down, and sell short QQQ. Then you make a profit as the spread goes to zero. You don't have to worry about the direction of the market.   But what Jim did was look at the spread over a day or two. That way the trades are faster and there's less likelihood of a black swan like Enron. // Quick aside: The main strategy at Ren Tech specifically looked at 30-minute bars so they could scale in and out of trades all day. They also used the S&P 500 as their main index to compare to.   In addition, they used custom options from Barclays so they never had any asymmetric risk from short selling. It also gave them 6:1 leverage which is why they were at 66% annual returns before fees. They also thought the options could lower their tax bill. Despite Simons paying millions to politicians, the IRS still got their meat hooks in him. //   What I've revealed is the basic concept of mean reversion to the index, along with hedging.   While this isn't the approach I'm taking because it requires leverage, it's a valuable input to some of the new discoveries I'm making.   It's also a terrific reminder that even late bloomers can rise to the top.   So if you feel stressed about not having enough for retirement, it's not too late at all. Heck, we have PBers in their 80's.   Trade smart,   Dan "Prince of Proof" Murphy                                 Portfolio Boss, Inc. 260 Newport Center Dr, Suite 100 Newport Beach, CA 92660   Don't want to stay in the loop with Dan? We'll be sad to see you go, but you can unsub to no longer receive emails.