For example, here are a few simple procedures (or methods (M1-Mn)): M1) Obtain Final Universe M2) Calculate and Sort Hotlist M3) Monitor Volume Mn) ... An example of a simple system (S1) might consist of the following assemblage of methods: S1a) Perform M1 S1b) Perform M2 S1c) Perform M3 S1n) Perform Mn
I would tend to agree with that. While the terms are closely synonymous, with regards to trading, the above distinction can be clarified. A system is comprised of methods or rules. You might for instance have a method for entries, a method for exits, and a method for risk management. All such methods can be incorporated into a system. Much the same way as a program system is comprised of instances or sub-routines.
Here is my thesis: Strategy=rules with procedures; Procedure=Sequences of rules; Method={a set of strategies(=rules and procedures) for analysing prices, analysing volume, decison-making logics, what-if analyses, etc.}; System={a set of methods individually and collectively designed for entry, exit, reversal, stop-loss, profit taking, sizing, risk/money management, limitations, secrets, myths, etc. }; We usually call stop-loss strategy/method, seldom call it stop-loss system. A method itself alone cannot be (back/forward-)tested to provide a complete view/ statistics of system performance. Neither with an incomplete system. Usually system would be fully/ highly mechanical/objective, with most operationally defined rules, no matter how(ever too) rigid. Method can be either mechanical or nothing mechanical at all (i.e fairly flexible/subjective), even with some unwritten intuitive rules on-the-fly. Proprietary trading has a relatively high degree of subjectivity for its trading methods. Just 2 cents, or less!
I tend to agree to your description. Some use the term "methodology" for discretionary decision making. A system can be coded and objectively tested. It never leaves the user in doubt about what to do in any given situation. No room for interpretation, gut feel, intuition, x-factor, self-deception and delusion. Very nice when one has systems that are profitable.
POLONIUS: What do you read, my lord? HAMLET: Words, words, words. W. Shakespeare, Hamlet, Act 2, scene 2, 191-192 Neatly captures the essential difference between "Trading System" and "Trading Method", methinks.
Dear OddTrader, If that is your 2 cents worth, please do'nt come near me with your 5 cent package. I am on overload already and trying to recover. Anyway, here is my half a cent worth. If you are a consistently profitable Trader then whatever you are doing is producing consistent profits and you will be amazed just how little you focus on the things that DO NOT matter, whilst giving 100% attention to the things that really DO matter. The perceived difference between method and system is the sort of discussion that can fill a misdirected and searching mind for hours whilst the price continues to print out wave after wave of consistent opportunity before their very eyes. regards f9