OK. I�ll go first.
What do you mean when you say you have a system?
A Vegas casino pit boss once lamented not having received �a nickel for every gambler that has a system.� Don�t cry for that guy. The house rakes 70% of the slot take� and I hear there are lots of slots in Vegas. So, you ask, do you actually have a point or is this just going to be another chap stick discussion? Well, be patient while I put on some lip gloss and try to describe this�in well defined terms. (pipgod � stop typing and finish reading this! You too, hobbit! )
In viewing and contributing to several financial forums covering various asset classes, so far, every single one has a section dedicated to mechanical system trading. There also seem to be many threads dedicated to discretionary traders using only Candles, S/R, Fibbos, etc. My observations of those threads suggest that there are at least two distinct groups of participants. There are those who devise mechanical methods of assessing a market instrument and their �followers�, who attempt to implement the method. (I refer to them as mechanical minions.) There are also discretionary traders who seek to follow the markets path with less rigid guidelines. There are also a few who �just have to be me�, but for simplicity, let�s work with just those first two groups.
I noticed something interesting while reading babypips forum posts. There seem to be traders who speak of systems and traders who speak of systematic trading. Both approaches have their merits, but it�s important to know what type of trader you�re talking to and what his concept is, so that you can discuss a topic or answer a question [U]using the same language[/U]. What do I mean? Well, when a question is posed, everybody just says, �the way I trade, blibbity-blabbity�, or �with my system, blah, blah, blah.� Often it is abundantly clear that the participants have diametrically opposed views of market interpretation and the resulting thread becomes meaningless. Comprenez-vous ce que veux dire je? (Was sagtest du?)
Personally, when I think of a �system�, I am thinking in terms of having a clear reason for entering a trade and a clear guideline for exiting the trade before taking any action. That�s all. In my mind, I want to find clearly identifiable patterns in prices that have in the past led to reasonably predictable results. I also want to know the most effective time frame to use since not all set ups are reliable in all time frames. I do not want to enter a trade simply because one moving average crossed another or the MACD turned this way or that. The difficulty with this approach is that it can be time consuming and it is vulnerable to human error in interpretation.
I have used mechanical and �black box� systems in the past. They are generally devised with a complete set of rules for entry and exit. When the signal generation process is mechanized (not automated), the trader can cover more ground and possibly more instruments. Also, if the rules are followed verbatim, the responsibility for P/L can rest squarely on the shoulders of � of � some guy in Oregon who sold me that piece of � of � fine software!!! :mad: (You can see where I�m going with this.) In defense of mechanical system traders, there is value in measuring markets objectively and in using a generated signal to prompt an “action/no action” decision. For me, I feel I must take responsibility for each decision no matter how the signal was discovered.
slaps face Wake up! We�re almost done.
�System� just seems to be a popular catch-all term for many different approaches. The point of this ridiculously long winded post is that in order to discuss a question or term in a helpful way you need to know how the inquirer views the topic. When you post a question, post your rationale behind the question. How did you arrive at this point? What led you to ask in the first place? If you�re answering someone (and trying to be helpful), frame your answer within the bounds of the inquirer�s understanding. Seems simple. Your comments are welcome.
Anyone heard of something called �leverage�? Just wondering�