The System-Rules Spectrum

The world of futures traders in Chicago is filled with all types, from old-school gun-slingers to new-school quants.  In between these extremes are many evolving players and methods, from former pit scalpers turned upstairs electronic position traders, to fundamental analysts turned automated technical system traders.  The CME and CBOT trading floors and culture have always been a great place to learn the craft because of this diversity of ways to "make a small fortune in commodities."

Underneath this diversity, though, is a more important spectrum, the underlying theme of how one makes trading decisions.  I call it the System-Rules Spectrum and mark the extremes as "100% Mechanical" vs. "100% Discretionary."  I use this as a teaching tool for new traders to help them see that no matter where they lie on the spectrum, the successful trader comes into this business with the idea that he or she must have clear, written rules for their trading method.  And to create those written rules, the trader has to do more than research on markets and methods.  The trader has to explore his own personality to discover what type of trading suits.  In essence, the trader needs to fit her preferred style of trading with the best method and timeframes for that style.

If staring at a screen all day and making many trading decisions works for you (you are profitable and not constantly feeling stressed), then you've found a good fit that is difficult for most to master.  If you are more quantitative or have wider timeframes in mind and would like your trading ideas to execute automatically because you find that choppy, intra-day trading drives you crazy, then it sounds like a more mechanical strategy is best for you.  If you are like me, you're a hybrid trader who wants both mechanically-generated signals and the discretion to ignore or over-weight those signals at any time.  I trade from weekly and daily charts, watch fundamentals as much as possible, but have yet to build an automated trading system that will give me signals in the dozens of currency, commodity, and equity markets I watch.

Another trader friend of mine, John Joseph, CTA for Sema4Group, is a 100% mechanical automated trader.  He found that this his style-method match was on the quantitative end.  Not surprising since he is mathematician.  John left academia because he liked the math of trading better and saw that he had quite a knack for building mechanical, automated trading systems.  Because he still likes teaching, Joseph also built Next Dimension Creative Technologies (NextD Systems, for short) to help others build their own trading systems.  I am finally going to take a NextD workshop to learn how to build my system on June 13^th and 14^th when Joseph comes to Chicago to teach his annual "Building Automated Trading Systems with Confidence."

To register or learn more, go to www.MirusFutures.com/NextD.htm.  And move fast because there are only five seats left!

As a special bonus to all who sign up between June 1st and June 8th, I am giving away a tuition voucher for my Masters of PROP (Probability, Risk, & Optimal Profit) Trader Training.  This free voucher is a $500 value and can be used by the NextD workshop participant or can be given to a trader friend.  And, the Masters of PROP Trader Training can be delivered via webinar or phone, so no extra travel is necessary.  Join me as I learn system trading from the master system builder himself, John Joseph, on June 13th and 14th in Chicago.  When you register, make sure you tell the folks at Mirus Futures that Kevin sent you so you get my complimentary training gift.

See you Wednesday for my next topic in this series, "The Golden Rule of Trading."

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