Algorithmic / Systematic Trading · Guide · 3 min read
What is systematic (rules-based) trading?
Writing down your rules for entry, exit and size, and why it helps.
Systematic trading means following a fixed set of written rules for entering, exiting and sizing trades, instead of deciding on impulse.
Parts of a rules-based approach
- Setup: the condition that must be true before you consider a trade.
- Entry and exit: exact rules, including the stop-loss.
- Position size: how much to trade, based on risk.
- Review: a record of every trade, so you can check whether you followed the rules.
Where algorithms come in
Algorithmic trading uses software to apply rules, for example to scan many stocks for a setup. Automating the screening does not remove market risk.
Benefits and limits
Rules make decisions consistent and easy to review. They do not guarantee profits, and a rule that worked in the past can stop working.
This guide is educational and is not investment advice.
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