Systematic Advantage #7 Allows for testing an idea before it’s traded
Systematic trading allows traders to evaluate their investment ideas or strategies before deploying them in a real-life trading environment. To do this, the idea or strategy is translated into a set of instructions or algorithms, which are then tested against historical market data. This process allows traders to evaluate the strategy’s profitability, risk, and response to changing market conditions.
Such testing allows traders to make more informed decisions and improve their trading performance while minimizing losses. In addition, through backtesting with historical market data, they can identify potential issues with their strategies and refine the rules before starting to trade.
In essence, systematic trading supplies investors with a method for analyzing and verifying the effectiveness of an investment idea or strategy before committing capital.
