Hello Laissez Faire,
I tend to favor discretionary trading more and more. Its more favorable I think once experience is gained.
Pro Trader vs Amateur Trader
- Thread starter lwlee
- Start date
I tend to favor discretionary trading more and more. Its more favorable I think once experience is gained.
Hello,
Could you elaborate on that statement? From what I've read by you over the years I've had the impression that you're mostly into price action (Al Brooks?), but I think I saw another post of yours recently where you stated you're were now into algorithmic trading? Did something change?
People may have different views of what discretionary trading is. What I generally think of when I say discretionary is that there's an interpretative element and that's where I think the flaw/danger is with the discretionary approach.
If you define an up trend as price being above a MA - that will always be the objectively verifiable. Or if you trade the breakout of the 30-minute opening range. There's no interpretation. In back-testing and live trading you should always get the same outcome assuming the rules are followed.
But if you're using more subjective measures such as trend lines, S/R, price patterns, etc., the outcome may be different even in back-testing and certainly in live trading. And you may find yourself taking trades you shouldn't be taking.
That said. My own approach is largely discretionary, although I'm trying my best to reduce the discretionary element.
Regards.
My view on discretionary entries, it would be good only if the system is based on a rigid method, if not than one cannot track or code this type of trading, because the results would waiver more than the results of a system that is based on strict rules.
IMO the term trader itself is a misnomer. A real trader is someone who is buying and selling without taking much risk. An analyst is someone who generates ideas on what to buy or sell and when. A portfolio manager is someone who determines how much risk to take, and where to allocate that risk.
Individual investors/traders are an amalgamation of those three roles, and are pretty sucky at them. Professionals in the field are highly specialized -- if you go to a hedge fund or investment bank trader, they don't know what is going to happen to the stock tomorrow or in 5 minutes or next year, but if you want to buy/sell they know where to find liquidity and can fill your order efficiently. The real speculators/decision-makers are the portfolio managers.
Does that include hedge fund managers as opposed to wealth managers. Where did a guy like Madoff fit in. Would you consider him a hedgefund or a wealth manager?
Here’s how you should see it:
1- individual investors (orgs, people, endowments, etc.) have unique requirements — their tax situation, liquidity needs, risk tolerance, etc. are highly specific
2- wealth managers work with individual investors to optimize their investment portfolio to their unique needs — wealth managers may sometimes don the title of portfolio manager but in this case they are really helping their client to manage their asset allocation given the unique circumstances of the client
3- investment managers typically run an actual strategy (active or passively) around a benchmark tied to an asset class — managers can be a hedge fund, mutual fund, or even a managed account that a wealth manager uses to pick stocks or specific securities
4- professional investment managers are mutual funds and hedge funds — and these firms have clear roles for analysts, traders, and portfolio managers — everyone else who picks stocks or manages money does not do so at the same “level” as those two
5- Bernie madoff was an investment manager (like a mutual fund) - he got away with what he did because his firm had custody of the assets (which is typically a big no-no)
I have from time to time put some money with what I would call portfolio managers. Their firms advertise as Investment council and portfolio managers. Not really impressed with either as they talked a good line but didn't perform.
How would you classify someone like Fisher? It doesn't seem to fit into either mutual fund or hedge fund.
How would you classify someone like Fisher? It doesn't seem to fit into either mutual fund or hedge fund.
Hello Laissez Faire,
Great questions.
I only discretionary manual trade because I make more money then my algos.
My algo still run and up 105% so far this year, but I make way more discretionary trading and its less stressful than algo trading.
I personally think algo trading is a waste of time for retail traders.
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The average fund manager can't outperform the indexes and 90% of traders fail.
You are making 105% with algos and a way more discretionarily. Nice!!