Trading Strategies at Mercor Capital: The Best of Both Worlds

Mercor Capital's investment philosophy is underpinned by a dynamic fusion of two key methodologies:

1. Systematic, algorithmic trading: Harnessing the power of quantitative models to capture persistent market inefficiencies

2. Discretionary global macro strategies: Employing fundamental analysis and strategic flexibility to navigate evolving market regimes

This synergistic approach enables us to capitalize on the strengths of each methodology while mitigating their limitations, empowering us to deliver robust risk-adjusted returns across market cycles.

Systematic Trading: Harnessing the Power of Machines

Our systematic strategies, developed by our quantitative analysts and engineers, leverage advanced mathematical models, computer science, and artificial intelligence to construct robust trading algorithms. By removing emotional biases and executing with ruthless efficiency across diverse market conditions, these strategies aim to capture subtle statistical edges.

However, this is no "black box" approach. Each algorithm is the product of:

1. Rigorous research and backtesting

2. Continuous refinement and optimization

3. Adaptive evolution to changing market dynamics

Through disciplined iteration, we strive to identify persistent market inefficiencies while remaining agile in the face of ever-shifting conditions. This systematic component forms a key pillar of our investment methodology, complementing our discretionary macro strategies to deliver superior risk-adjusted returns.

Global Macro: The Art of Discretionary Investing

On the other side of the coin, we have our global macro strategies. If systematic trading is the science of investing, global macro is the art. It's where we take a step back and look at the big picture, the grand chess game of economies, politics, and social forces that shape the financial markets.

The global macro approach is inherently discretionary. It relies on the judgment, experience, and intuition of our traders to navigate the ever-shifting market landscape. There's no precise formula or algorithm that can capture the complexities of geopolitical risk, monetary policy, or shifting investor sentiment.

At Mercor Capital, our global macro strategies are built upon three key pillars:

1. Fundamental Analysis: This is the bedrock of our investment process. We dive deep into the economic data, poring over GDP reports, inflation indicators, central bank minutes, and a host of other inputs to form a robust understanding of the underlying drivers of the assets we trade. It represents 90% of our time as traders and this how we generate trade ideas.

2. Technical Analysis: Once we have a fundamental view, we turn to the charts. Technical analysis is just a little part of our process. We only use technical analysis for what it is, a tool, but we will talk about that in more details in the following chapters.

3. Risk Management: This is perhaps the most crucial piece of the puzzle. No matter how good your analysis, there's always the potential for the unexpected. Black swans, fat tails, regime shifts - these are the things that can make or break a portfolio. Our number one goal at Mercor Capital is to stay in the game, we don't seek to avoid bad luck, but to survive long enough for luck to turn in our favor.

The Barbell Strategy: Combining Opposites for Strength

At first glance, systematic and discretionary investing may seem like odd bedfellows. One is all about rules and algorithms, the other about flexibility and judgment. One seeks to eliminate the human element, the other embraces it.

But it's precisely in this contrast that we find strength. By combining these two approaches into a sort of barbell strategy, we create a more robust and antifragile portfolio than either could achieve on its own.

The concept of the barbell strategy was popularized by Nassim Nicholas Taleb, the famed author of "The Black Swan" and "Antifragile". The basic idea is to combine two seemingly opposed investment styles - hyper-conservative on one end and hyper-aggressive on the other - to create a portfolio that can weather a wide range of market conditions.