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Research Article #24 - The Robot James Summarized Lessons
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Research Article #24 - The Robot James Summarized Lessons

A Deep Dive into James's Top Lessons from Publicly Available Content

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pedma
Jan 22, 2024
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Research Article #24 - The Robot James Summarized Lessons
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👋 Hey there, Pedma here! Welcome to the 🔒 exclusive subscriber edition 🔒 of Trading Research Hub’s Newsletter. Each week, in this series, I share my personal trading experiences and journey, offering you the behind the scenes into how I manage my own portfolios, my trading performance, new research for trading strategies and general content aimed at helping traders with the experience I’ve accumulated for the past 6 years.

My mission is full transparency by building a public track record of my performance. As I navigate through the markets, I'll be sharing every step of the journey – the ups, the downs, and everything in between. It's not just about trading; it's about growing together as a community.


Introduction

Hey everyone!

I've spent almost 6 hours this weekend reviewing a lot of content shared by The Robot James and compiling all the key ideas he shares publicly in a single article.

The Robot James is one of the most respected figures in the small niche of online quantitative trading. He has a vast amount of experience in both theoretical and practical applications, which is most important. If I had to highlight the single most important lesson, it would be this:

Mostly, I look to get paid to do useful things in uncompetitive places: “Doing useful things that suck”

This is going to be a rather extensive one, but I hope to add some value with all the ideas that will be shared below.

I hope you enjoy!

Pedma


Index

  • Competing at The Correct Tables

  • Finding Edge and Testing it

  • Designing Simple Processes to Ensure Robustness

  • Risk Management

  • Compilation of Examples of Trading Approaches


Summarized List of Key Lessons

  • Keep analysis and strategies as simple as possible.

  • Recognize the complex interactions within the market.

  • Be grateful for the insights provided by the market.

  • Prioritize actions that can improve your chances of making money today.

  • Don’t spend time trying to solve potential future problems or overthinking long-term strategies.

  • Doing Useful Things in Uncompetitive Places

  • Instead of seeking comfort in high-demand, expensive trades, traders should consider selling 'comfort' trades to others.


Competing at The Correct Tables

One of the fundamental truths about markets is that they are highly competitive and new traders must compete with the smartest people in the business for good prices. Good trading requires buying assets that are undervalued and selling the ones that are overvalued.

Since there’s no beginners market to start practicing trading at, the newer trader will often end up with less favorable trades leading to small losses and fees, which will accumulate over time.

Traders need to have realistic plans based on their skills, experience and tools. They should focus on what they can do today and not on future aspirations.

One of the ways to be better positioned for success, is to instead of directly competing with top traders, newer traders should find a niche with less competition. Take the example of a tech startup, you don’t want to be competing with Microsoft, but perhaps you want to find an unique and less attractive market segment where you can compete at.

Focusing on useful but unattractive opportunities is another way to avoid competition. Strategies that are useful but unappealing to many due to their inherent risks will reduce competition. One should avoid trying to outperform the market in highly competitive areas such as macroeconomic analysis, financial modeling, high frequency trading or trying to use complex predictive models.

But competing at these smaller markets is no shiny task either. The problem with this idea is the difficulty in scaling. These smaller markets may have mispriced opportunities but don’t allow for much money to be placed. There’s this idea of scaling horizontally (finding many small, inefficient markets and betting on all of them) is appealing but practically difficult. Scaling horizontally involves a lot of work, with each market needing individual oversight, adjustments and maintenance. This complexity is why small markets often remain inefficient.

Here’s a list of practical tips in regards to competing at less competitive tables:

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