You know what blows me away about being a discretionary trader? How one slip....
- Thread starter Kovacs
- Start date
hah, illiquid you beat me to it lol, I know individual traders and firms that were down 500k+ trying to bottom pick swm.
I am the opposite good entry but tend to take profits too soon. If I walk away with an automated limit profit target and stop loss I do better.
But having said that I use a discretionary trading strategy based on guidelines. The best of both worlds is a discretionary trading strategy automated for execution once the entry is in place but subject to modification as the situation dictates, i.e. tightening or loosening stops, changing profit targets based on market action, partial profit taking versus letting it all run, etc.
Mechanical trading seems to have two advantages (our ATS isn't running live yet, so I don't have personal experience with the reality of it): 1) takes all setups without hesitating, 2) it doesn't suddenly decide to move stops, average losers, let winners turn into losers, read the news and change the plan, etc.
When I read a header like "You know what blows me away about being a discretionary trader?", it's hard not to miss what the motive is behind such a thread.
For the last twenty years, I was so fed up hearing all the fundies trashing the merits of technical analysis saying charts are useless that my constipation was literally cured when the market went over the precipice in 2008 and took most of them with her. Unsurprisingly, they claim what they see on the chart is too damn random among other things. Fair enough, but the reputation of fundamental analysis doesn't seem to be faring all that well since 2008.
Just as fundies making unsubstantiated claims about the techies, the mechanical traders think they have an "unfair" advantages over discretionary traders.
I HAVE NO PROBLEM ACCEPTING THOSE WHO AUTOMATED THEIR PROVEN SYSTEM THAT THEY HAVE SUCCESSFULLY TRADED THEMSELVES FOR MANY YEARS.
But here's my biggest gripe.
I DO HAVE A PROBLEM ACCEPTING THOSE WHO AUTOMATE SOLELY BASED ON COUNTLESS HOURS OF OPTIMIZATION (EG. BACKTEST / FORWARD-TEST) WITHOUT FIRST HAVING OBTAINED THE WORKING KNOWLEDGE OF TRADING.
Not necessarily. Of course, you can't entirely rule out the human factor but you CAN enter trades without hesitating and you CAN place hard stops at the time of your entry. It just takes many years of experience.
But what makes you think ATS will have a better result? Just because it takes the emotion out of trading does not mean it guarantees higher success. Are you not aware that the rate of failure is just as high among mechanical traders as discretionary traders? In order to succeed, you must have a good system in the first place, regardless of which particular camp you belong!