Stick to the Rules

"Systems traders know exactly
when to exercise their discretion."

This is a cheeky remark, because systems traders never exercise discretion in their live trading - that is what distinguishes them from all other traders.

Systems traders delegate their routine day-to-day trading to their computers. This is so they can avoid the temptation to get involved with the 'decisions of the moment'

Their computers come up with all the 'buy' and 'sell' orders that are needed according to the system rules, which have previously been programmed in. These orders are then sent off to the broker without the trader's intervention.

By keeping away from the routine daily operation, the trader is obeying the most important rule of commodity trading - stick to your system.

All traders who do not operate fully in this way are called discretionary traders. Discretionary traders reserve some decisions for personal approval - for example a trader might wish to be able to alter orders before they are sent to the broker.

All sorts of problems arise when you second-guess your system in this manner. You no longer have a system that you will be able to understand or repeat in future. That is the first step to disaster.

There is no room for discretion in the systems trader's method - that is why he goes to such lengths to ensure his system is complete before it is traded.

 

Modus Trading
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Copyright David Bromley 2006
All Rights Reserved.

 

 

 

 

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