Discretionary vs fully Systematic

[newwurldmn]

Sounds like you have rules for ignoring or changing your rules.

80% of the time I follow the rules. But 20% of the time I don't. I have to justify why I don't.

 

[PPC]

You have a re-evaluation rule,

 

[Dollardogs]

Hi!

I'm new to ET and this is my first thread. I have no financial background, started trading part time in 2020 and haven't reached consistency yet. I was wondering how you guys decided what kind of trader you want to be?

I started with a buy & hold mindset and realized after a short amount of time that I want to be a more active trader. I currently trade a trend following long intraday/swing strategy with a focus on US growth stocks. My strategy has systematic and discretionary aspects. After marking up charts and manually collecting Data, I'm now taking deep look into backtesting. The goal is to back up my discretionary trading with statistical data over time, so that I can have more conviction in my A+ setups.

I'm kind of blown away with the newly discovered backtesting possibilties and systematic aspects of fully statistically backed edges. I found out that there are traders out there that fully act on a system that practically eliminates all discretionary actions. Some days I find myself fighting at the "borders" of my system and I act more discretionary, sometimes with success, sometimes not. Now I'm a bit torn apart and ask myself if I might be more successful on the systematic side of trading. Did some of you guys undergo a similar process? Did these changes lead to a different mindset in regard to trading? Were you able to fully embrace the systematic approach from the start on? Was it easier to abide your rules, did you discipline improve?

I guess the most logical way to find out would be to trade a fully systematic strategy on a paper account for a few weeks and see how I do & feel. Any other suggestions?

I don't know if there is already a specific thread on this topic but am looking forward to your answers!

Sounds like we're in a very similar place. My background not in finance. I also started trading part-time in 2020 but haven't found consistency yet. I also think I know exactly what you mean by "fighting at the borders" of your system. Although I've built a pretty detailed system, I still find myself on too many days convincing myself today's scenario is something my system hasn't yet "accounted for," and that leads to some discretionary judgment (which either works or doesn't) followed by an updating/expanding of my rules after the fact. That dangerous habit has led me to seek out a more systematic approach where I have less and less say over things, and yet there always seems to be these moments where interpretation (of single trigger candles, or larger patterns) is needed, and that's where things usually go awry for me. I still have a long way to go, I've come to realize, but I do think backtesting and writing out your plan IN DETAIL holds one more accountable and thereby improves discipline. As others have said, you won't obey a system you don't believe in, and that's where thorough backtesting comes into play and can really help your discipline improve. One question for you: are you trading multiple things? For relative beginners like ourselves, I'm a big believer in really getting to know a single instrument, only trading one thing and backtesting it in a way where you get used to all its main scenarios, its quirks, etc. This is all very general, but hopefully helpful in some way.

 

[Dollardogs]

You have a re-evaluation rule,

Is there a rule for re-evaluating rules?

 

[murray t turtle]

Hi!

I was wondering how you guys decided what kind of trader you want to be?

I started with a buy & hold mindset and realized after a short amount of time that I want to be a more active trader.

Now I'm a bit torn apart and ask myself if I might be more successful on the systematic side of trading. Did some of you guys undergo a similar process? Did these changes lead to a different mindset in regard to trading? Were you able to fully embrace the systematic approach from the start on? Was it easier to abide your rules, did you discipline improve?

Any other suggestions?

I don't know if there is already a specific thread on this topic but am looking forward to your answers!

%%
YES;
P+L helps.
SEE if you can beat a benchmark like buy + hold one share of SPY or SPLV, VOO,QQQ .
Except for buy every month for 30 year$ most sy$tems so badly underperform.
Good thing about trading or investing;
all most impossible to as bad as lotto\ = as stupid tax on people at cant do math.
Rather than pshchobabble it, research it............................................
US money has included, silver, gold, copper coins , tobacco, beaver skins, buck skins[aka bucks]pennies, half pennies, copper pennies the size of half dollars-rare, wampum\
dimes , half dimes, silver half dollars, silver dollars, Fed Reserve notes,[ silver certs, no longer redeemable in silver]
Even though SPLV is an underperformer, good beginning low vol /good volume learn ETF, not in that one now. Wisdom is profitable to direct

 

[virtusa]

What is a discretionary rule based trader? Isn't it either/or?

No it is not. It can be part rules and part discretionary. If you are good, this combination cannot be beaten. The discretionary part is the correct analysis of the results of the rules. In certain things the human brain is unbeatable. A discretionary analysis can be too difficult to program in rules. The (well trained) brain can manage that information much faster, more flexible and much more accurate. But not every human has a brain that is capable of doing that. In fact the large majority is unable to do the discretionarty part efficiently.

 

[virtusa]

80% of the time I follow the rules. But 20% of the time I don't. I have to justify why I don't.

Not following the rules 20% of the time, is also a rule. At least if you know why you skipped the rule.

 

[virtusa]

Why have rules if you are not going to follow them?
At what point do you break your rules?

Because the discretionary part tells you why to break the rule, or rather replace the rule by another rule.
Some (discretionary) rules can overrule other rules. You don't break rules. The rule is to overrule a rule by a discretionary rule.
A discretionary trader tries to put everything in fixed rules; only when that is impossible he switches to discretionary rules. For me "discretionary" means "logical".

 

[deaddog]

No it is not. It can be part rules and part discretionary. If you are good, this combination cannot be beaten. The discretionary part is the correct analysis of the results of the rules. In certain things the human brain is unbeatable. A discretionary analysis can be too difficult to program in rules. The (well trained) brain can manage that information much faster, more flexible and much more accurate. But not every human has a brain that is capable of doing that. In fact the large majority is unable to do the discretionarty part efficiently.

I'm probably one of those whos brain isn't capable of doing that.
I know from my experience that I get into less trouble when I follow my rules.

 

[deaddog]

Because the discretionary part tells you why to break the rule, or rather replace the rule by another rule.
Some (discretionary) rules can overrule other rules. You don't break rules. The rule is to overrule a rule by a discretionary rule.
A discretionary trader tries to put everything in fixed rules; only when that is impossible he switches to discretionary rules. For me "discretionary" means "logical".

Can you give me an example of a logical rule that isn't one of your rules.
Maybe my rule set is larger than most. I hope that my trading plan answers the question "What do I do now?" If you have discrectionary rules it sounds like you are not sure.