What is Systematic Trend Following?
Systematic trend following is trend following with formulas. To understand systematic trend following we first need to understand what systematic is.
When someone says Systematic what does it mean to you? When someone says Systematic Trend Following what do you think of? The dictionary defines systematic as:
“acting to a fixed plan or system; methodical”
So systematic trend following is methodical trend following.
In trading there are many styles. Some are discretionary and some are systematic.
Systematic Trend following repeats the same process on silver, APPL, QQQ, or whatever markets it trades. It follows a system. Instead of looking at charts the systematic system looks at price and uses formulas to calculate signals. Many systematic trend following systems in today’s time are computer based. Computers are programmed to make the calculations and then they output the signals. This is the type of systematic trend following system we use in our trading. We don’t argue with the system we just follow the system.
So to be a systematic trend follower you need a plan and system for identifying directional movement of price. Systematic does not necessarily mean automated. It just means that you will do the same thing on every trade.
You can calculate it on a piece of paper or on your computer. It can be with a super computer or a three dollar calculator. The method of calculation is not what makes it systematic. It’s the fact that you are using the same calculation in your system over and over.
How do we make sure we trade the same on every trade?
The human body is an amazing creation. If you think about your body you don’t have to tell your body to breath. You don’t have to tell your heart to pump blood thru your veins. Why, because your body is a self-running system. As long as you have water and food then your body (system) will continue to run.
When we talk about systematic trend following the food and the water is price. As long as we feed the system with price then it will run on its own.
How does it run on price?
It takes price values and makes calculations based on that price data. Once it makes the calculations it outputs the trading plan for each day. This allows the trader to trade the same way every time on every trade.
If volatility is high the system will output a reduced position size. If volatility is low then the system will calculate a higher position size.
The Systematic Trend Follower follows trends in the markets with formulas not feelings. Emotions are not part of the equation.
Can anyone become a systematic trend follower?
There are some things that the average person can’t do. If you have ever been on a private jet then you realize how nice it is to fly on a private jet. You drive to the airport, walk onto the runway, get on the plane, and the pilot takes off. It is nice, but everyone can’t fly on a private jet.
In some ways that is similar to a systematic trader. The big boys that are systematic traders have their systems in computers. These computers trade for them based on their preprogrammed system.
This is the private jet of trading systems.
Just because someone can’t fly in a private jet does not mean they can’t fly. It might be a little more work involved, but they can still fly.
Just because someone can’t buy or pay someone to build them a computer based systematic trend following trading system doesn’t mean that they cant be a systematic trend follower.
You might miss some exact entries or exits. You might have to do some manual daily calculations, but you can still be a systematic trend follower. You can still make money following the trend.
The key to a systematic trading system is the formulas behind it. A system that is built on formulas can trade any market the same way. The formulas are the brains behind the system.
All of our systems are systematic trend following systems. They calculate trends based on price. Updates are given daily before the market opens. We offer a two month free trial with all of our systems. Click here to find out what we have to offer.