Systematic Trading
Definition
A trading style where written rules define which trades you take, where you enter and exit and how much you risk, and your job is to carry those rules out the same way every time.
Example
“His systematic rules say buy one cent over the pullback high, with the stop two cents under its low.”
Detailed Explanation
In systematic trading the rules make the decisions and the trader executes them, often still placing each order by hand. Because every decision is defined, a systematic strategy can be tested on past charts or paper trades, measured in R and improved one rule at a time. The main risks are rule drift, where the trader overrides the rules when nervous, and overfitting, where rules are tuned until a backtest looks perfect but fail live. Systematic trading differs from algorithmic trading only in who places the orders: in algorithmic trading, software runs the rules. Most beginners find it the easiest style to learn and measure.
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