MECHANICAL TRADING SYSTEM

Disadvantages:

• More decisions mean more stress.

• Smaller per-trade profits means few vehicles exhibit enough volatility and liquidity to be profitable.

• Must fight tendency to overtrade or risk losing discipline and/or consistency.

Nondirectionally Biased Mean Reversion Day Trading

Typical duration of trade: minutes to hours

Example: RSI crossover

Advantages:

• Can capitalize on virtually any trading environment—trending, choppy, or mean reverting.

• No overnight margins and ability to “clear one’s head” at close of each trading day.

• More trading opportunities.

• With proper money management, each trade should risk small percentage of working capital.

Disadvantages:

• More decisions mean more stress.

• Smaller per-trade profits mean few vehicles are volatile and liquid enough to be profitable.

• Must fight tendency to overtrade or risk losing discipline and/or consistency.

• Off-floor disadvantage: loss of the bid/ask spread and/or higher commissions. Because such costs are fixed, as time frames are shortened, the viability of these strategies becomes marginalized.