Mechanical Trading Systems work for many traders, including me. If you’ve read many of my postings you know that I use 5 different mechanical systems with various timeframes. All successfully accomplish what I intend them to do – provide a systematic way to profitably trade trends in a specific timeframe for a specific market or markets.
Psychologically, systematic trading works for me as it does for many traders. In one of several articles by Psychologist Brett Steenbarger (www.brettsteenbarger.com) related to the benefit of trading rules, he offers insight into why mechanical systems work. In “Trading by the Rules”, Steenbarger reveals:
If I had to give one piece of advice to most traders who are struggling with their P/L, it would be to trade tested systems or patterns and trade them systematically.
A disproportionate number of successful traders – about half – reported utilizing mechanical trading systems. Of the unsuccessful traders, none were mechanical traders.
Successful traders that were not mechanical traders revealed in interviews that their trades were based on patterns that they had carefully researched.
Furthermore he contends that by reducing trading to a set of rules, traders lessen their ambiguity so that they can function in relatively automatic mode. Among the benefits of this, one I truly experience is that rules reduce much of the stress associated with trading. If “the system” is calling the shots, then I have “no choice” but to follow it. Assuming I believe in my system and want it to (and me) to succeed, I must follow it exactly as it was designed. This faith in the system creates peace of mind and reduces second-guessing.
Mechanical trading cannot ensure success in trading – nothing can. But it clearly helps increase one’s likelihood of success.
