Economic systems are unavoidably affected by expectations, both present and past, since agents’ beliefs strongly influence their future dynamics. Therefore, even without being skeptic as much as Taleb, one could easily claim that we often misunderstand phenomena around us and are fooled by apparent connections which are only due to fortuity. Actually, randomness enters in our everyday life although we hardly recognize it.
Recently Taleb has brilliantly discussed in his successful books, how chance and black swans rule our life, but also economy and financial market behavior beyond our personal and rational expectations or control. Other groups have successfully explored similar strategies in minority and Parrondo games, , in portfolio performance evaluation and in the context of the continuous double auction. Following this line of research, we have recently investigated how random strategies can help to improve the efficiency of a hierarchical group in order to face the Peter principle – or a public institution such as a Parliament. In fact, noise has a great influences on the dynamics of cells, neurons and other biological entities, but also on ecological, geophysical and socio-economic systems. But not only physical systems benefits from disorder. The chapter also elaborates on discretionary trading, including verification quantification risk and reward performance profile and the extensibility of trading strategy.In physics, both at the classical and quantum level, many real systems work fine and more efficiently due to the useful role of a random weak noise –. Those factors along with a consistent set oftrading rules essential to the management of risk and to the creation of trading profit are covered with relevant examples. The factors because of which a properly tested and validated systematic trading strategy helps in the pursuit of trading profit are its verifiability, quantifiability, consistency, objectivity, and extensibility. The benefits of a trading strategy, the historical simulation, and strategy optimization are discussed in detail. This chapter presents the benefits of systematic trading strategy, along with some drawbacks, of trading with a computer-tested automatic trading strategy. A systematic trading strategy means acting methodically according to a fixed plan that is designed to achieve a profitable return by going long or short in markets on organized financial exchanges.
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