CHOOSING THE SYSTEMATIC WAY

It is not a choice between “which is better,” investing based on fundamentals or technical trading. They are two very different methods chosen for completely different reasons. The fundamental investor may be looking for a cheap price or good value on a piece of merchandise with the idea of holding it until it returns to value, or appreciates in value. You don’t want to overpay for real estate or stocks because it cuts into your returns.

The systematic trader is foremost a trader. A trader doesn’t hold a position based on value, but decides whether the price is relatively too high or too low, whether it is in a long-term or short-term trend, extremely volatile or quiet. For each of these technical qualities, the systematic trader has a clear rule to follow. The rules are based on common sense and then tested using historical data to be sure they actually work. We will learn how a spreadsheet or special computer program may be used to validate the rules. You will find that many of the rules that are based on charting methods have been handed down from one generation to another.