Posted on February 26th, 2008 at 9:53 AM
During a seminar over the weekend, I was asked why traders tend to focus so heavily on rules-based trading systems. Why would a trader turn themselves over to a system and discount the mental agility that they had gained by learning to read the market without the system? This led me to recall a paper on this exact subject by Jack Schwager. I thought this would be an appropriate place to discuss six key points of the benefits of mechanical trading.
- Eliminates emotion.
- This is one of the largest challenges for traders to overcome. By using a proven system, traders are then restricted to only trade when the system illustrates the opportunity. The benefit of this is the fact that we remove one of the largest uncertainties in our trading (our emotional reactions to pleasant or unpleasant situations).
