Trading Systems As A Determining Factor in Trading Performance
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Studies on individual investors and professional fund managers indicate that one reason professional fund managers perform more consistently is their reliance on trading systems for making investment decisions. It could be hypothesized that a trading system is a determining factor in producing higher performance. This research sought to validate that hypothesis by investigating the effect of trading systems on individual trading performance, measured by investors" trading decision accuracy rates. In particular it examined the positive relationship between the extent of investors" reliance on trading systems and their performance level. A trading system is a collection of technical trading rules that could enhance an investor"s decision accuracy and predictive power in buying or selling a security or a commodity future contract. For optimum performance and profit, a trading system helps an investor buy or sell a security at some specific price at a particular time. Performance is the net profit gained for an investor after liquidating all his or her holding positions.