Brett at Traderfeed posted recently about A Few Trading Psychology Observations he had made, in the form of eleven bullet points. Here’s a response, also in the form of eleven bullet points, from the POV of an intermediate- to longer-term mechanical systems trader.

* Almost all the model building done by a systems trader on an intermediate- to longer-term timeframe is aimed at understanding or figuring out market action – that allows the system trader to build better systems.

* Systems can be optimized to work in one market regime, with a signal or overlay allowing the system to switch when regimes change, or the systems can be optimized to work “overall” regardless of the particular regime in place at the moment. The significant downtime that systems traders have (since they’re not watching the market every minute) allows them to step back and take a look at longer-term market patterns.

* Sound planning, i.e., BACKTESTING, is the basis on which the systems trader approaches the market. Not only are the plans based on sound market analysis, the plans are EASY TO STICK TO, because the system trader has REASONED CONFIDENCE in its backtesting.

* Most of a systems trader’s time is spent developing, i.e., “practicing.” The actual trading takes up very little of the system trader’s time.

* Building systems, and trading them, is the antithesis of a “passion for trading,” and epitomizes a “passion for markets.” What else can be said about a process where 90% (or more) of the time is spent developing, and 10% (or less) is spent trading?

* Trading a system is about being “right” in a STATISTICAL SENSE. It matters not to the system trader if they’re “right” THIS TIME; they just need to be “right” enough to meet their pre-set absolute benchmarks.

* To the system trader, views on the market are somewhat academic; modification of trading stance is based on system output, and modifications of systems are based on evidence, not feeling.

* It’s easy to tweak a system to be more aggressive with fewer trades (or less aggressive with more trades). The beauty of backtesting is that allows the system trader to decide which choice is more likely to meet their benchmarks.

* Systems are about ideas, not about people.

* Systems focus on responding to what IS happening in the markets. Systems are positive and inductive/statistical ways of looking at market action, as opposed to many macroeconomic pundits’ normative and deductive ways of examining the markets.

* System development and testing never stops. It usually is carried out when markets are closed, and the time spent actually trading is miniscule compared to the time spent thinking about the market, the systems, the backtests, etc.

Trading mechanical systems isn’t for everybody, that’s true, but I personally have found it to be most definitely for me.