What Makes a Good Trading System?

There isn't one to begin with!

A trading system has clearly defined rules that describe the instruments to trade, when to trade, how to determine entry price, how to determine initial stop loss, how many lots to trade, how to take profit, how to trail profit etc. The trader will stick to the system to the tee in his trading.

Trading is just like that. I believe because of limitations of language, there is so much that successful traders wish to tell us but it just ended up in cliché phrases such as fear and greed, the trend is your friend, triple Ms etc. "Trading system" is one such phrase. There is even this distinction between discretionary trader and system trader which I eventually found to be invalid. Ok, here comes the tough part again - Why?

Beliefs
Believe it or not, one's personal belief is always reflected in his trading. Whether or not he believes in trend, in trailing stop losses, in everything is reflected in the price, in technical analysis, even in the instruments that he trades. I remember vividly that there was this real-life documentary that talked about training people from all walks of life to be traders. One of the trainee happens to be an staunch environment activist. In the documentary, he refused to touch any company stocks which companies' activities are detriment to the environment. This is an extreme case but this is the extent that it can go to. So it is not possible to have THE trading system.

Study of the market
Trading also involves the study of the evolving market. I believe trading involves consistent study of the market to find better entries, better ways to take profit etc. Therefore, how could a system exist? Even if it exists, it will need to include the rules for tuning the system in the evolving market. Then, it would not be a "system" any more, right?

Automated trading and backtesting
I strongly believe the notion of "system trading" came about because of computers in trading. Particularly when they are used in automated trading and backtesting. Computers can be easily programmed to do things for us when the activities can be laid down sequentially, preferably as rules. Trading systems fit the bill. I have got a friend who developed trading programs that yielded couple thousands of percent profits as shown in the backtesting results with very small drawdowns. I have seen it with my own eyes. But still he was careful to not use them in live trading because he said he "doesn't know when they will break".