Comfort, not theory, keeps mechanical rules in use

Two acceptable design paths

A mechanical-trading-system is a single testable procedure that turns rule inputs, market state and execution constraints into entry, exit or abstention signals over the system holding period. That procedure may be specified from an underlying-theory, a market story stated before testing and used to justify why a rule should exist. It may also be specified from rules that have no such story. Both design paths are treated as acceptable.

Idea-generation is the pre-test step that converts a theory or an unexplained pattern into rules that can be evaluated together. Any underlying-theory used in design is supposed to be stated before testing, not invented after results are already known.

Stories that arrive too late

An after-the-fact-explanation is a reason invented after a price move that was not part of the original testable procedure. After-the-fact market narratives are treated as easy to construct and of little use for real-time rule decisions.

If a trader already relies on fundamental criteria, those criteria can stay inside idea-generation because they support willingness to follow the later procedure.

Comfort is part of staying with the signals

A trading-psychology-process is the set of comfort and confidence checks that decide whether a trader can keep following that same signal procedure when results turn adverse. Comfort with the traded rules is identified as a neglected part of algorithmic decision-making and as especially relevant during long drawdowns.

Insufficient comfort with a mechanical procedure is described as a reason a trader may stop using it during a drawdown even if the procedure itself has not failed. That stop is drawdown-abandonment: stopping a still-intact procedure because discomfort, not a broken rule set, ends execution.

What a favorable test still leaves open

Four combinations are listed after a historically favorable test: a theory present or absent, each paired with later live success or later live failure. A pre-test theory can fail to yield a usable rule on one hypothesized side of a move while still supporting a rule on the other side.

Ideas that initially appear implausible can still become usable procedures, and favored theories can fail once tested.

Editorial reading of the design problem

Editorial note: a usable mechanical-trading-system is still unfinished if the trader cannot stay with it. The open design step is whether any underlying-theory is needed for comfort, not whether an after-the-fact-explanation can be written later.