| Subjective | Objective |
| Many rules | Few rules |
| Emotional | Unemotional |
| Varies "key" indicator from trade to trade | "Key" indicators are always the same |
| Few markets | Many markets |
Why Should You Use a Trading System? 5
must be specific, and cover every aspect of trading. For example, the rules must specify how to calculate the number of contracts to trade and what type of entry order to use. The rules must indicate where to place the initial money management stop. The trader must execute the system "automatically," without any ambiguity about the implementation.
Mechanical system traders are objective, use relatively few rules, and must remain unemotional as they take their losses or profits. The most prominent feature of a mechanical system is that its rules are constant. The system always calculates its key variables in the same way regardless of market action. Even though some indicators vary their effective length based on volatility, all the rules of the system are fixed, and known a priori. Thus, mechanical system traders have no opportunity to vary the rules based on background events, nor to adjust position size to match the markets more effectively. This is at once a strength and a weakness. A major benefit for system traders is that they can trade many more markets than can discretionary traders, and achieve a level of diversification that may not otherwise be possible.
You can create different flavors of trading systems that use a small or limited amount of discretion. You. could, for example, have specific criteria to increase position size. This could include fundamental and technical information. You can be consistent only if you are specific. This discussion really begs the question of why to use trading systems, answered in the next section.