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Confidence in discretionary trading


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Confidence in discretionary trading

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  #51 (permalink)
 datahogg 
Knoxville Tennessee USA
 
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Keab View Post
Sorry to hijack the thread but I don't suppose you could take the time to explain what you mean? I have dabbled in options analysis, have listened to SPotgamma and quickly get overwhelmed with all the buzzwords and technicality of it all. Are there a few core concepts you can somehow distil it down to in order to provide a (very!) basic understand of a core concept? No problem if not and happy trading!

Find a good book that explains option GREEkS, and then apply to the TOS platform.

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  #52 (permalink)
 Keab 
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chipwitch View Post
However, from a discretionary perspective, there is much more subjectivity. Something I can't quite put my finger on, to spell out in explicit detail. I can be looking at 5 different things looking for qualitative signals and have to make a decision to trade or not trade based on them. A systematic trader looks for signals that can be quantified. With discretionary trading a sense of "something is just not quite right but I don't know what it is" is one of those qualitative signals. Of course there is probably some algorithm that could be written to quantify what I concede I'm not smart enough to. BUT, it wasn't the point of the thread. The point of the thread is about a feeling. A feeling of confidence, and how it might differ for a trader than it does for someone familiar with the confidence of a more traditional career. My expectation was that they were one and the same. But, I'm beginning to discern that they are not. Confidence in ones risk management skills, not withstanding, confidence in trading isn't so absolute and certain. I think you will agree on that point?



I think you might be getting a bit lost in details ('the "feeling" of confidence versus actual confidence?) which might not be important.

As described, discretionary vs systematic trading is not so different, the latter are simply able to put their trading rules into definable terms. Discretionary traders do not.
You/they are not trading on things that are totally ethereal, unfixed and floating around. There will be similar rational thought processes that systematic traders follow that will have to be met in this more subconscious discretionary reasoning system.
There just might be (a lot) more of these processes and you just don't necessarily know what they are and can't write them on a piece of paper. It is not a 'simple' check list like a systematic trader, but there will be mental reasoning based on recognition of various factors like a systematic trader.

So in the absence of defined rules (it's discretionary!)it can't bear a resemblance to your existing tech career, or golf, or sport, where the end goal is clear and defined. As are the rules and parameters of the chosen sport/tech where the the skills and knowledge required to become skilled (and what you need to practise to become so) are defined and clear.


You stated in your initial post:
"I began to wonder if having the kind of confidence one generally has in their abilities in most careers is even possible with discretionary trading.....
Sure, I still get those trades that restore some small measure of confidence. But it comes and goes. Does that ever go away for you successful discretionary traders? At some point, does it just come, and not go?

So, this question is about the feeling of confidence. Do you consider yourself in possession of it in the same way a surgeon might feel about their career? Does a series of losses above some anticipated threshold shake your confidence?"

The feeling of confidence that you can have as a discretionary trader vs a traditional career (or sport) is fairly simple. As you don't necessarily know why you're entering trades your confidence will be tied to your trading results (as it should be!) as you never break any rules as such. Whether you can define what you're doing or not doesn't really matter as long as your trading results are consistent across time. Simple.

Same if you were playing golf/basketball/soccer. "Hey I don't know what I'm doing or why but I'm going round 9 under par so what does it matter/I've just shot six three pointers in a row and I don't know what I'm doing or why/I've just dribbled past 5 players and scored a goal and I don't know what I'm doing or why." Who cares about whether you know why? Your results show you that you're doing the right thing.

Whether you can ever have confidence in that approach will depend on your personality and how comfortable you are with not being able to define what you are doing. This is not the same as your tech career or with sport.

In the arena of discretionary trading the answer regarding confidence (or the 'feeling of confidence?') cannot be defined or reached or dealt with by anything other than consistent success over time. If this doesn't seem right/simple enough to you then switch it around a bit with this statement: "I am confident in my discretionary undefined trading and I lose money on a consistent basis." Does this make sense at all?

Aaaand I'm done. Happy trading!

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