Trading system

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A trading system is a regular, repeatable method for engaging in the buying and selling of securities, futures, options or other investment vehicles.

A trading system may employ any regular method for making decisions, and it is not limited to mechanical or numeric parameters. A trading system could be time or environment based, for example buying or selling a position one hour after a market's open, or buying an energy related futures contract on the first hot summer day of the summer. Trading systems may also take into account fundamental factors directly related to the target market, such as the price of feed for cattle futures, or the result of a company's meeting with analysts when considering a stock purchase.

Many trading systems are mechanical in nature, employing technical analysis of a market's price motion to determine when to enter and exit positions. Mechanical trading systems can be computerized to aid in discovering trade opportunities, as well as to automate the process of initiating and exiting positions in the market.

Trading systems can also be hybrid mechanical and subjective methods, employing market analysis and research to determine what to buy and sell, and then using technical indicators and mechanical constructions to validate and time the actual trading transactions.

Trading systems also encompass the management of capital and decisions beyond the entry and exit of individual trades. A complete trading system may also include regular methods and rules for controlling the overall risk to a portfolio, the amount of risk allowed trade by trade, and parameters to govern times of day, week and year for trading.