The financial industry is built around the idea that good judgment is the key to making money. Listen to the right analyst. React to the breaking news. Call your broker before the window closes. Every recommendation, every alert, every market update is premised on the idea that acting on informed human judgment is how you profit. The best traders in the world have reached the opposite conclusion.

The markets have long been positioned as action oriented. Do something. React to the latest news. Call your broker. Listen to an analyst. All of these activities hinge on short-term human judgments for what to do next. The quest for some type of human judgment seems to drive the majority of market players. But what does all this action do for you if your number one goal is to profit from the market?

The best traders are systematic. Their rules are written down. Once their rules are established, assuming they are based on sound trading rationale, they are followed religiously. What happens if a news story breaks? If the news is not part of the trend following system, you do nothing.

That last sentence is the hardest part for most traders to accept. A dramatic news event hits the wire. Every instinct says to act. The systematic trader checks whether the event changes the signal. If it does not, they do nothing. The discipline to sit on your hands when the world is screaming at you to move is not passivity. It is the direct expression of having a system that works and trusting it enough to follow it.

What the Best Systematic Traders Have Said

The case for systematic trading has been made by some of the most successful traders and researchers in the industry. Their words are worth reading carefully.

“We have a pretty strict definition of a systematic trader. They basically follow a set series of rules, established in a computer program, that tell you when to buy or sell, how many, as well as when to get out.” — Michael Garfinkle, Commodities Corp

Garfinkle’s definition is precise for a reason. A systematic trader is not someone who uses some rules some of the time and overrides them when they feel wrong. They follow the rules. All of them. All of the time. The computer program is not a tool for generating ideas to be filtered through human judgment. It is the decision-maker. The trader’s job is execution.

“Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion.” — Bill Eckhardt

Eckhardt’s observation cuts through one of the most persistent myths in trading: that the entry is where the edge lives. His research found that exits matter more than entries, and that even random entries paired with a good exit criterion produce surprisingly good results. The implication is direct. Traders who obsess over finding the perfect entry signal are focusing on the wrong problem. The system’s rules for getting out, both on winning trades and losing ones, determine whether the approach works over time. For the specific exit mechanics built on this insight, see the full TurtleTrader rules.

“Well, it may sound odd for someone who has written books about trading to say this but I really don’t enjoy the process of trading. And by that I mean the actual decision making while the markets are active. Do I buy? Do I sell? Do I add to my position if it’s going against me? Do I get out? Do I double up? All that churning turmoil, emotional turmoil is something that I don’t particularly enjoy. What I do like is the puzzle element of it. Trying to solve the market puzzle. How can you come up with a set of rules that can so call ‘beat the market’? And that’s what I find fun. So I decided a while ago the best course for me was to get out of the decision making process and automate the whole procedure through system trading.” — Jack Schwager

Schwager’s honesty here is rare. The author of the Market Wizards books, who has interviewed the greatest traders alive, admits he does not enjoy the emotional turmoil of real-time decision making. His solution was to remove himself from it entirely through automation. That is not a confession of weakness. It is a recognition of how human psychology works under pressure, and a rational response to that reality. The system makes the decisions. The trader builds and maintains the system. The emotional turmoil is replaced by the intellectual pleasure of solving the puzzle at design time, when the pressure is off.

“Systematic trading is going to be better for everyone in the long run. Our methods will work on lots of different markets. The ones that are hot today, the ones that are not hot today.” — Jerry Parker

Parker’s point is about robustness. A good systematic approach does not depend on any particular market being in favor. It applies the same rules across all markets and lets the trends come wherever they come. The system does not need to predict which markets will move or when. It is positioned across enough markets, with correctly sized positions, to capture the moves that do occur regardless of where they happen. That diversification, built into the system rather than dependent on discretionary judgment, is what makes the approach durable across decades and market regimes.

The Compounding Math That Makes This Matter

What does a systematic approach compounded over 25 years look like? Imagine the last 25 years and two investments of $1,000 each. Investment one generated 25% for 25 years and investment two generated 15% for 25 years. Does it seem like a big difference? It is a huge difference.

• $1,000 compounded at 25% for 25 years = $264,000.
• $1,000 compounded at 15% for 25 years = $32,000.
• $1,000 compounded at 7% for 25 years = $5,400.

Great trend following systems shoot for 25 to 100% returns per year.

The difference between 25% and 15% does not feel dramatic year to year. Over 25 years it produces a gap of more than $230,000 on a single $1,000 investment. The difference between 25% and 7%, the kind of return a passive index investor might expect, is more than $258,000. These numbers illustrate why the systematic trader’s pursuit of consistent, rules-based performance is not academic. The compounding effect of a better system, applied over a long enough time horizon, produces wealth differences that dwarf the short-term noise of any individual year’s performance.

This is why avoiding judgment matters so much. Discretionary decisions introduce variance. Some are right, some are wrong, and the pattern is rarely consistent enough to compound at the rate a disciplined systematic approach can achieve. The system removes that variance. It applies the same rules in the same way across every trade, every market, every year. The compounding does the rest. For more on how the trend following approach is structured to compound over time, and for the full story of how the original experiment proved these principles work, see the TurtleTrader story.

Frequently Asked Questions

Why do the best traders avoid real-time judgment?

Because real-time decision making under financial pressure is subject to emotional interference that consistently produces poor results. Fear, hope, and the desire to avoid admitting a mistake all distort judgment in ways that are predictable and well-documented. A systematic approach removes the trader from the decision at the moment it is hardest to make correctly, replacing human judgment with rules designed when the mind was clear.

What makes a trader truly systematic?

Following a defined set of rules for every decision: when to enter, when to exit, how large the position should be, and when to get out. As Garfinkle describes, the rules are established in advance and followed consistently. A trader who uses rules most of the time but overrides them when they feel wrong is not systematic. The override is where the edge is lost.

Why are exits more important than entries according to Bill Eckhardt?

Because research showed that random entries paired with good exit criteria produced surprisingly strong results, while good entries with poor exits underperformed. The entry gets you in. The exit determines how large a winner becomes and how small a loser stays. Over many trades, the exit rules have a greater impact on overall performance than the entry signals.

Why does the 25% vs 15% compounding difference matter so much?

Because compounding is exponential. A 10 percentage point difference in annual return produces a gap of over $230,000 on a single $1,000 investment over 25 years. Year to year the difference is modest. Over a trading career it is transformative. This is why systematic traders focus on building an approach that can consistently outperform, rather than accepting average returns from passive strategies.

Does a systematic approach work across different market conditions?

Yes. As Jerry Parker notes, good systematic methods work on lots of different markets, the ones that are hot today and the ones that are not. A robust trend following system does not depend on any particular market being in favor. It is positioned across enough markets with correctly sized positions to capture moves wherever they occur, making it durable across changing conditions over long periods.

Trend Following Systems
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