Systematic Investing

Imagine two investors looking at the same market chart. Both are studying price, using historical data, and trying to make informed decisions. From a distance, their approaches may look nearly identical. Up close, however, they may be solving two very different problems:

1. The first – let’s call him Kramer – is trying to account for what the market will do based on recognizable past patterns and personal knowledge.
2. The second – die-hard fans of the “Seinfeld” TV show already know his name will be Jerry – is focused on what the market is doing now and applying a pre-defined set of rules to decide how to respond.

In investing, this distinction – prediction versus reaction – helps separate discretionary technical analysis from systematic trend following. In “Seinfeld” lore, it’s also what distinguishes a man who chases schemes and hastily launches consumer products like the manssiere from one who stays disciplined to a single profession and adapts based on what is making audiences laugh right now.

The distinction matters because a signal is not the same thing as a process. Seeing something on a chart may suggest an opportunity. A repeatable process goes further by answering questions about what action to take, whether to take a step or a leap, timing, a plan for reducing risk, etc.