“Life is unfair: not even the mighty river gets to flow straight to the sea.” JC
Mechanical trading systems (MTSs)
Reflections on rules-based trading
Strong bullish markets like those from 2009 until 2012 and hot markets like those after 2013 when indexes made new highs after new highs by definition produce a new wave of retail traders who bring more enthusiasm to the markets than fresh, original ideas which will work. Most of the systems offered at this web site reflect concepts which are 40-100-year old time-tested schools of thought, concepts which worked longer than the years new traders of today will be in business.
Rules based trading increases the chances of long-term success, but without discipline, adequate capital, access to new capital and proper money, trade, profits and asset management the chances will drop down back to near zero.
MTSs help traders not only with developing confidence, but also with updated statistical relevance and additional probability calculus. No software trading system is effective without the extra work needed for traders to maintain mental fortitude.
Trading systematically may improve somebody’s bottom line by increasing focus and discipline but will never eliminate his destructive impulses or deep-rooted negative habits completely.
The best income diversification comes not only from trading different asset classes, time frames and capital allocations, but also from employing several unrelated MTSs.
MTSs may remove profits from the markets on your behalf but can never remove your ego 100%.
An advantage of MTSs is that they may be applied to small or large accounts without restriction with the difference that large account holders may afford to add discretionary trading to their routine while small account holders - if they are to grow - may not.
Another advantage of using MTSs is in making the rules-based trader learn to trade defensively which is an absolute must do before he engages in trading aggressively.
The greatest benefit of trading with the help of MTSs which are equal makers of wins and losses by definition is psychological: you may wittily say you get to keep the wins and your system keeps the losses. You may congratulate yourself for winning and blame the rules, the system and the markets for the few brief, inevitable loss sequences the number and dollar amount of which is known in advance.
