Systematic trading is a way of defining trade goals, risk controls and rules that can make investment and trading decisions in a methodical way. Systematic trading includes both manual trading of systems, full or partial automation using computers. Although technical systematic systems are more common, there are systems using fundamental data such as those in equity long:short hedge funds and GTAA funds. Systematic trading includes both high frequency trading and slower types of investment such as systematic trend following, it includes passive index tracking. The opposite of systematic trading is discretionary trading; the disadvantage of discretionary trading is that it may be influenced by emotions, isn't back tested, has less rigorous risk control. Systematic trading is related to quantitative trading. Quantitative trading includes all trading. Suppose we need to replicate an index with futures and stocks from other markets with higher liquidity level. An example of systematic approach would be: Identify, using fundamental analysis, which stocks and futures should be used for replication.
Analyze correlations between targeted index and selected stocks and futures, looking for the strategy which provides a better approximation to index. Define a coherent strategy to combine dynamically stocks and futures according to market data. Simulate the strategy including transaction costs, stop-loss orders and all other wanted risk controls. Apply the strategy in the real world using algorithmic trading for signal generation and trying to optimize the P&L, controlling continuously the risks. Following the ideas of Irene Aldridge's, who describes a specific HFT system, a more general systematic trading system should include these elements: Data management A signal generation system A portfolio and P&L tracking system A quantitative risk management system A routing and execution subsystem The key point in systematic trading is the use of backtests to verify strategies and alternatives. It's a basic point in backtesting to have robust access to trading data. Systematic trading should take into account the importance of risk management, using a systematic approach to quantify risk, consistent limits and techniques to define how to close excessively risky positions.
Systematic trading, in fact, lends itself to control risk because it allows money managers to define profit targets, loss points, trade size, system shutdown points objectively and in advance of entering each trade. Risk modeling Quantitative trading Stock picking Security analysis Stock selection criterion Algorithmic Traders Association
Charles Duane Baker III is an American businessman and former U. S. government official. He served in several departmental roles in the Richard Nixon and Ronald Reagan administrations, including Under Secretary of Health and Human Services, he is the father of Massachusetts Governor Charlie Baker. Baker was born in Massachusetts, he was the son of Charles D. Baker, Jr. a prominent Republican politician from Newburyport and Eleanor Baker. His grandfather was named Charles D. Baker, was a United States Attorney and member of the New York State Assembly; the young Baker had two sisters, Caroline R. Baker and Nancy B. Kobick, he attended Baldwin High School in Baldwin, New York, graduated in 1945. He went on to attend Harvard College, graduated in 1951 with an A. B, he spent 1946 to 1948 in the United States Navy in aviation, returned from 1951 to 1953. In the Navy he achieved the rank of lieutenant, he returned to Harvard, receiving an M. B. A. from Harvard Business School in 1955. He married Alice Elizabeth "Betty" Ghormley of Rochester, Minnesota on June 4, 1955.
They moved to New York, where he became a buyer for the Westinghouse Electric Corporation. They had three sons, Charles Duane IV, Alex. While at Westinghouse he moved to New Jersey in 1957. Baker moved back to Massachusetts to serve as vice president of United Research, an economic research firm, from 1961 to 1965. In 1965 Baker became vice president of Harbridge House, a management consulting firm, part of whose client base included the United States Department of Defense, Department of Health and Human Services, Department of Transportation, he was United States Deputy Under Secretary of Transportation, Assistant Secretary of Transportation for Policy and International Affairs, Under Secretary of Health and Human Services. In 1985 he became a professor at the Northeastern University College of Business Administration