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Discretionary vs. mechanical trading

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Mr J

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aramz said:
Any reply from Tech A or someone else would be much appreciated as i've always wondered what is required to take discrentionary trades to the next level....Cheers
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There's isn't really a next level, and skillful discretionary trading will outperform any system. Discretionary and mechanical have their strengths and weaknesses, and which is better depends on the trader. Not just in terms of performance, but also lifestyle.
 
Re: Example of my conservative trading strategy


Yes there is.
Well I haven't seen any that have demonstrated that they out performed T/Trader over the 5 yrs it was fully disclosed and active.IE 1200% over 5 yrs.
I would argue that the skilled systematic trader would have a far more leisurely lifestyle and likely more profit in the long run.
 
Re: Example of my conservative trading strategy


Don't think it is possible to generalize which outperforms.

Lets add another term, systematic, but even to confuse things, lets say a trader doesn't look at individual symbols as anything more than OHLCV, which are 5 numbers, and the history of these numbers. So 2 additional terms, systematic and numbers.

In Technical or Fundamental analysis, you could be non-systematic or systematic, but in T/A all you care about are the very real and actual numbers from OHLCV.

Can discretionary be systematic ? That's a more interesting question.

Benefits of purely mechanical ? You can quickly scan a large universe to have more opportunities than purely discretionary.

One-on-one, who is better as a result - don't care - find something that works for you.
 
Re: Example of my conservative trading strategy

weird said:
One-on-one, who is better as a result - don't care - find something that works for you.
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wise words ...just because something works for someone else it does NOT mean it will work for you also

at end of day it does not matter which way you trade , whatever style you use , whatever software one uses .if one cannot control there finances they may as well go home now.......
 
Re: Example of my conservative trading strategy

Can discretionary be systematic ?
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Should be!
I would argue that those who are profitable certainly do trade Systematically in a discretionary manner to skew their numbers.
 
Re: Example of my conservative trading strategy


Techtrader is a great system, but again fooled by randomness. Techtrader benefited from one the the best bull runs ever. That great, kudos. But to expect that in other periods would be asking too much

But... lack of public results make it difficult to compare. Certainly more leisurely, that's true. Weird also has some interesting points.

With regards to "discretionary", it is never clear whether this is a pure gut feel thing, or a rule based decision process, but not mechanical.

Whenever we compare small sample sizes of traders, whether discretionary or mech, we are likely to be fooled by randomness. There are also numerous different goals from trading, wealth-building, income, a mixture of both... some people just want excitement FFS. Also numerous personalities and psychological strengths and weaknesses that suit different styles.

It comes back to "what works is real". Definitive and inflexible statements that x is better, or y is best are bullsh!t TBH. It all depends

 
Re: Example of my conservative trading strategy

Techtrader is a great system, but again fooled by randomness. Techtrader benefited from one the the best bull runs ever. That great, kudos. But to expect that in other periods would be asking too much
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Wayne I couldnt agree more.

It was and is designed for exactly the period it traded in.Its a long only long term method.Now if I knew when the NEXT 5 yr bull run was coming Id have a few houses on it!
To expect a similar result in any other market(Than a longterm bull market) would be crazy.
But plenty lost over those 5 yrs and I reckon it outperformed most funds if not all.

I'm happy to be fooled by randomness every now and then!
 
Re: Example of my conservative trading strategy

Hi Wayne,

I believe Tech/A applied a filter in real time to TT, to what he probably would have included in backtesting, if the historical data presented itself in the period.

From a mechanical trader point of view, I agree with Tech/A, the more a discretionary system can be made systematic the better, only because we can test with modern technology , i.e. a computer.

However some of these discretionary patterns are perhaps too complex ... and this complexity allows for many interpretations.

However, I do not doubt there are gifted folk, and also learned folk from hours of paper backtesting, and also lucky folk, that trade exceptionally well from discretionary trading.

I have an open attitude to these things, just not the time.
 
Re: Example of my conservative trading strategy

You're taking my post out of context, probably my fault for not elaborating.

Well I haven't seen any that have demonstrated that they out performed T/Trader over the 5 yrs it was fully disclosed and active.IE 1200% over 5 yrs.
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That isn't even 100% per year. Great performance sure, but do you really think discretionary traders out there can't achieve better? I don't really want to go into this, as in my mind it is completely obvious why a great discretionary trader would outperform any system. All I will say that the human mind can analyse and adapt to whatever is happening. Any system requires rules, a trader does not. The trader can use all of his experience and knowledge to find opportunities a system cannot.

I would argue that the skilled systematic trader would have a far more leisurely lifestyle and likely more profit in the long run.
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I mentioned lifestyle for exactly this reason - some prefer automatic trading so they don't have to do much/any screentime. Now, which is more profitable is subjective, because we all have different capabilities and situations. Some people may require discretionary skills, others may lack the ability to program, others may lack discretionary skills and some will excel at producing systems.

weird said:
Don't think it is possible to generalize which outperforms.
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I didn't. I said that it will come down to the trader, with the exception being that skillful discretionary trading will outperform any system. This is true, for now. I also intentionally mentioned system in the singular.

Benefits of purely mechanical ? You can quickly scan a large universe to have more opportunities than purely discretionary.
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Sure. Skillful discretionary trading is quality, while mechanical is quantity. Like I said, both have strengths and weaknesses, and obviously the ability to apply a mechanical system to many markets simultaneously is one of the strengths.

One-on-one, who is better as a result - don't care - find something that works for you.
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My point.

WayneL said:
With regards to "discretionary", it is never clear whether this is a pure gut feel thing, or a rule based decision process, but not mechanical.
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I believe it is based upon rules we form subconsciously with experience.
 
Re: Example of my conservative trading strategy

thanks for everyones input, by the way. Im struggling to find the time to post anymore set ups or provide any more updates on what im doing at the moment, probably becuase i havent done everything, im looking into software that can help me with that. so far amibroker looks like the one everyone uses, and seems to be a fair price?
 
Re: Example of my conservative trading strategy

tech/a said:
I'm happy to be fooled by randomness every now and then!
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Well, yes. So long as people aren't fooled by being fooled by randomness. (Not suggesting you are, but so many do).

A bloke having a great day at the races shouldn't be fooled that he is a genius punter.

Continuing on in the theme of before:

Those of us trading for a living can't rely on mech systems. We have to know when to throw the "rules" in the bin and invent an entirely new and temporary set of rules to suit the current conditions.

No better example of that than recently.

BTW it's one of the reasons I like options. There are 101 ways to skin any cat.
 
Re: Example of my conservative trading strategy

Hi waynel,

Is there anything you can add constructive to any of my strategies, i dont want this to turn into another debate haha!
 
Re: Example of my conservative trading strategy

Mr J said:
I believe it is based upon rules we form subconsciously with experience.
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No doubt with discretionary, that the subconscious takes effect

One successful discretionary trader I know is able to verbalize his trades quite well, and if you watch over each trade, there is a pattern, so I would call that pretty close to systematic.

lukeaye is also appearing to be doing a pretty good job, and interested in his posts ...
 
Re: Example of my conservative trading strategy

lukeaye said:
Hi waynel,

Is there anything you can add constructive to any of my strategies, i dont want this to turn into another debate haha!
Click to expand...

That probably would start another debate.

I'm an options trader, The Greeks are more important to me than fine points on technical analysis. If I trade direction, it is for a swing.

My big tip is - expectancy x frequency = bottom line
 
Re: Example of my conservative trading strategy

yeah id have to agree with that two, but i want to be told things i dont know! haha thanks anyway.

yeah i love my options too.
 
Re: Example of my conservative trading strategy

lukeaye said:
yeah id have to agree with that two, but i want to be told things i dont know! haha thanks anyway.
Click to expand...

When being told or been given any information, the important , the really important, can never be said or repeated enough.

Anyway, will let this thread take it's course ... bol.
 
Re: Example of my conservative trading strategy

lukeaye said:
Hi waynel,

Is there anything you can add constructive to any of my strategies, i dont want this to turn into another debate haha!
Click to expand...

That's asking for a lot, since almost everything about trading is debatable!

Wayne said:
Those of us trading for a living can't rely on mech systems
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Why do you think that? I don't agree. Many ways to profit from trading, and I'm sure there are mechanical traders operating in many markets and quick timeframes that do far better than the average discretionary swing trader.

so I would call that pretty close to systematic.
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I completely agree. Our mind will naturally try to model the market, so completely discretionary trading is actually a very, very complex system. This ability to be complex is why it can potentially perform better than a simple 'mechanical' system, at least in terms of performance per trade. I say per trade as multiple mechanical systems can potentially be employed simultaneously across many markets, allowing for quantity to beat quality.
 
Re: Example of my conservative trading strategy

lukeaye said:
im looking into software that can help me with that. so far amibroker looks like the one everyone uses, and seems to be a fair price?
Click to expand...

If you are looking at coding your system to backtest then you will have to get/pay someone to code it or learn the Amibroker Formula Language and do it yourself.
 
Re: Example of my conservative trading strategy

i just bought the software, and now when i go to register it, windows gives me some error report, not happy! i have no clue what to do
 
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