Why Should You Use a Trading System?

Thursday, 23 April 2009

The trader must execute the system "automatically," without any ambiguity about the implementation.
Mechanical system traders are objective, use relatively few rules, and must remain unemotional as they take their losses or profits. The most prominent feature of a mechanical system is that its rules are constant.
The system always calculates its key variables in the same way regardless of market action. Even though some indicators vary their effective length based on volatility, all the rules of the system are fixed, and known a prior.

Thus, mechanical system traders have no opportunity to vary the rules based on background events, nor to adjust position size to match the markets more effectively. This is at once a strength and a weakness.
A major benefit for system traders is that they can trade many more markets than can discretionary traders, and achieve a level of diversification that may not otherwise be possible.

You can create different flavors of trading systems that use a small or limited amount of discretion. You. could, for example, have specific criteria to increase position size. This could include fundamental and technical information.

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