The Machine Analogy, 11/15/09
The Machine Analogy - Trading Systems as Machines
Part of the allure of automated trading is the idea of a factory floor full of machines whose input is price data and capital and whose output is more capital, i.e., a money factory.All those machines on the factory floor have tolerances and beyond those tolerances either output decreases, errors increase or both.
Trading systems are no different than mechanical machines and a large part of system design is determining tolerances and including automated governors that kick in when tolerances are exceeded.