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a bunch of numbers and make trading decisions for me. That is why I keep large, hand-drawn charts, so I can get the feel of the market and maintain sufficient flexibility to react to the current price structure. Keeping my own charts provides me with what fighter pilots call situational awareness, being cognizant of what is occurring all around you so you can plan and rapidly execute the appropriate offensive or defensive maneuver. The same comparison applies to playing blackjack. What is currently happening on the table, and do I exploit a perceived weakness and attack or is it time to pull back and retreat? In effect, trading a system makes you a robot, and that's not a place I would like to be. |
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Neal: You are bound to upset a lot of software vendors out there who sell back-testing programs. |
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Phantom: I'm sure that some readers of this book have developed trading systems and have profitably traded them over a large sample size of trade and are probably snickering at my opinions on trading systems. I'm just saying that mechanical systems do not fit into my psychological framework. If mechanical systems fulfill your psychological requirements and you are able to take every trade without the slightest deviation, and you are consistently profitable, then more power to you. |
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Neal: What about combining a system with trader savvy? |
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Phantom: Personally, I don't see how you can combine the two. Being a system trader is like being pregnant; either you are or you aren't. There is no gray area. Once you start injecting subjective judgments into the decision process, then your system becomes worthless because the hypothetical trading results of your back-test are predicated on taking every trade without second-guessing the trading signals. For most individuals, I feel it is probably impossible to take every trade generated by a mechanical system. Markets are so dynamic and chaotic that systems will "work," then |
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