Systematic trading (also known as mechanical trading) is a way of defining trade goals, risk controls and rules that can make investment and trading decisions in a methodical way.

Systematic trading includes both manual trading of systems, and full or partial automation using computers. Although technical systematic systems are more common, there are also systems using fundamental data such as those in equity long:short hedge funds and GTAA funds. Systematic trading includes both high frequency trading (HFT, sometimes called algorithmic trading) and slower types of investment such as systematic trend following. It also includes passive index tracking.

The opposite of systematic trading is discretionary trading. The disadvantage of discretionary trading is that it may be influenced by emotions, isn't easily back tested, and has less rigorous risk control.

Systematic trading is related to quantitative trading. Quantitative trading includes all trading that uses quantitative techniques; most quantitative trading involves using techniques to value market assets like derivatives but the trading decision may be systematic or discretionary.

Systematic trading began with the growth of computers in the 1970s. The Designated Order Turnaround (DOT) system used by the New York Stock Exchange to electronically route orders.

In the 1990s, various trading strategies were developed by major banks, including statistical arbitrage, trend following and mean reversion. High-frequency trading strategies that combined computing power, speed, and large databases were gaining more popularity due to their success rates.

After 2000, millions of trades were executed by the largest hedge funds in mere seconds with their black box systems.

Suppose we need to replicate an index with futures and stocks from other markets with higher liquidity levels. An example of a systematic approach would be: