TECHNICAL TRADING AND VALUE

A technical trader may also be influenced by fundamentals. A long-term trend follower—one who buys a stock when the trend is rising—is really tracking the increase in the value of the stock in an objective way. If Mrs. Hathaway was long Cinergy (a public utility) in 1997 based on a 100-day trend, she would be taking advantage of the Fed policy of lowering rates even though the reason for rising prices might not be important to her, and she may not have seen the close relationship between Cinergy’s stock price and interest rates.
The fast systematic trader could even profit if the stock or futures market were above value. He or she could be in a trade for a few hours or a few days. The value of a stock isn’t very important for a fast trader, only its volatility and short-term direction. Even when stocks were trending higher, as they were in 1997, the impact of the long-term trend on a one-day trade was very small. You could buy or sell and still return a profit. Value, or fundamental information, is of minor importance for short-term traders.
We choose systematic trading because
• It provides discipline.
• We can backtest (check the rules using historic prices) to see if the trades would have been profitable.
• We have confidence by knowing what results to expect both risk and return.
• We can monitor current performance to decide if the method is still working as we expected.