Summary of the System Trading Basics Course

Summary of the Fundamentals of Systematic Trading Course

I am Takeshi Nishimura of Fairfield Co., Ltd., a securities analyst and seminar lecturer on systematic trading. In this course, we will explain in simple terms and with plain expressions so that everyone watching can understand “systematic trading” from the basics. Please stay with us until the end. This time’s theme is the “summary” of this course. Now, let’s get into the content.

Please review today’s “summary” based on what you have absorbed so far in the course.

Systematic Trading Systematic Trading is an investment method based on the premise that a profit can be made if you buy and sell when certain patterns appear, backed by historical performance. And the greatest appeal of systematic trading is that you can backtest to verify whether a method would have been effective in the past before incurring losses by actually applying a trading method.

However, the basic idea of systematic trading is to find a method with even a slight edge from past statistics and to slowly accumulate profits by repeating that method many times. Therefore, even if backtests show a long-term profitable method, in the short term you may experience a cycle of wins and losses.

To ensure you can continue trading even after short-term losses, money management becomes important.

As an example from the course, with a fund of 1,000,000 yen and 5 assets vs. a fund of 10,000,000 yen and 50 assets, the results differed significantly.

In systematic trading, when focusing on individual securities, about 2,000,000 yen is typically required. For those just starting, this may be somewhat risky. In this course, we mainly discussed stocks, but for those who prefer a less risky entry, the “Nikkei 225 futures mini” is recommended. With “Nikkei 225 futures mini,” you can start systematic trading with a small amount, around 300,000 yen.

Moreover, it is possible to achieve relatively stable performance in both rising and falling markets, so it is a product we can recommend for beginners to start with.

Finally, although not covered in this course, I will talk about “adjusting the trading rules.”

Reviewing trading rules is not simply because “the results are a little poor, so let us revise the system.” Even if you try to find trading rules with as little drawdown as possible, it is common that those rules also produce low yields.

Ultimately, you balance drawdown and return by what you can tolerate, so when events that have never occurred in the past happen, such as breaking the past maximum drawdown, it is an appropriate time to revisit and adjust the trading rules.