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Whats Your Trading Style ?: Mechanical /system Trader

There are two main types of trading styles: discretionary/subjective trading and mechanical/system trading. Discretionary trading involves the trader making decisions on which trades to make based on the information available at the time. While it allows the trader to adapt to changing market conditions, it is also susceptible to the trader's psychology and emotions. To be successful with discretionary trading requires strong self-awareness to avoid being influenced by greed, fear, or the desire to be right. The key is making decisions in the moment based on analysis rather than past outcomes.

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94 views2 pages

Whats Your Trading Style ?: Mechanical /system Trader

There are two main types of trading styles: discretionary/subjective trading and mechanical/system trading. Discretionary trading involves the trader making decisions on which trades to make based on the information available at the time. While it allows the trader to adapt to changing market conditions, it is also susceptible to the trader's psychology and emotions. To be successful with discretionary trading requires strong self-awareness to avoid being influenced by greed, fear, or the desire to be right. The key is making decisions in the moment based on analysis rather than past outcomes.

Uploaded by

Ajay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Whats Your Trading Style ?

February 5, 2020 by Bramesh
One of the choices that every new trader has to make is
whether to be a Discretionary/Subjective trader or
a Mechanical /System trader. The third stage is called
Intuitive trading which is called “ZEN” State which very few
traders are able to achieve.

In Today’s Article we will discuss on Discretionary Trading


The definition of discretion is the ability, the power, or the
right to decide or act according to one’s judgment. Traders
have to make decisions – use our judgment – to enter and to
exit the market.

Discretionary trading is decision-based trading, where the


trader decides which trades to make, based upon the
information available at the time.

Discretionary trading involves Decision, and our Decision is


highly influenced by our beliefs about ourselves and our
deepest (subconscious) fears and hopes. This is why most
traders repeat the same mistakes despite all the promises to
do better next time, How Many time you repeated the same
mistakes again  ?

For a discretionary trader it’s really about how well


you deal with uncertainty, what goes into your
1
judgment process when facing the uncertainty of
those probabilities in the heat of the moment.
The advantage of discretionary trading is that it is adaptive to
current market conditions. You may have a great trading
system but if you know that it tends to perform poorly when
certain market conditions are present, then you can avoid
those trades. Or if you notice your strategy has a tendency to
perform very well in other conditions, you can increase
your position size slightly during those times to maximize
gains.

The drawback of a discretionary system is that many traders


are prone to second-guessing themselves. They may actually
be very poor at deciding when to trade and when not to, and
therefore a more systematic approach would be better.
Discretionary systems are susceptible to the psychology of the
trader; being too greedy or fearful can destroy the profitability
of a discretionary trading system in a hurry. You Spend
countless hours on tracking and analyzing pattern and we
think we are making a decision based on that stuff, but in the
heat of the moment what becomes more important is the
desire to be right, or the desire to not be wrong.

The skill most needed for a discretionary trader is self-


awareness. Expanding self-awareness means taking what
was once subconscious and making it something you are
consciously aware of. Self Awareness meaning being in the
moment and not getting biased with outcome of past trades.

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