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How mechanical is your discretionary trading?
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How mechanical is your discretionary trading?

  #1 (permalink)
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How mechanical is your discretionary trading?

For those of you who would classify your trading as discretionary, how much of your methodology is mechanical?

- Is every aspect of your trading discretionary?

- Do you have certain aspects which are discretionary while the rest is mechanical (eg: trade management, trade identification, position sizing, etc)?

- If your entire methodology is discretionary, then how do you analyse your stats in a meaningful way? There is no anchor to compare trades to each other so how do you know which aspects of the plan are working?

- Being a discretionary trader, do you rely on your understanding and intuition about the market while working within the framework of your trading plan? With that in mind, it is very possible that two almost identical trades would be managed differently or perhaps only one of the two would be taken for whatever reason. (again, how do you analyse your performance)

Im basically trying to get into the head of those that sit in one of the following camps:

1 - Discretionary traders who believe it is their knowledge and experience of the markets which provides their edge

2 - Mechanical traders who believe it is their ability to execute a system every single time which provides their edge

3 - A mix of both. Perhaps the way you identify trades is discretionary, but the way you manage them is mechanical.

Thanks.

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  #2 (permalink)
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  #3 (permalink)
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DarkPoolTrading View Post
- If your entire methodology is discretionary, then how do you analyse your stats in a meaningful way? There is no anchor to compare trades to each other so how do you know which aspects of the plan are working?

My methodology is discretionary. Everything of it. When I enter, why I enter, what price I enter.

I have two screens with a few charts with different indicators, I dont have setups in these charts I look for, I just look at them for getting an idea of what the market might be trying to do. When I have formed bias I look at the DOM for timing and confidence in the trade decides how much I put on. I trade between 1-5 units (its scalable, one unit can be 1 or 20 lots) and I like to put on one unit pretty fast just to be in and get a feel of the market. After that I manage the trade with size.

I dont know what an edge is, everyone on german forums talks about it and I never had one. I never knew something that noone else did. I just sit down and look at the market and hit it when I believe there is a chance to make something.

Regards

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  #4 (permalink)
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Discrentionary

100% discretionary day trader.

Countless and countless hours of screentime.
Instead of journaling emotions and psychology, I tend to journal more on price action.
Developing trade ideas and creating a playbook in context.

The only mechanical thing I tend to do in my trades is: risk management and size.
I would never..never..ever..never break a single rule in my risk management.

In my beginning years as a trader, I was a mechanical trader and did not how to "read the markets in context". The idea of backtesting a system and seeing good results tend to make a trader feel "comfortable and certain", well this definitely hurt my bottomline.

Ethan

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  #5 (permalink)
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all disco

Also 100% discretionary, but currently developing more tools and approaches that can take sharp things out of my hands and, where possible, influence my behaviour and habits for the better.

Travel Well
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  #6 (permalink)
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Very interesting replies so far. Not what I expected.

@ratfink, @EthanC, @Camp, do you set out a plan for the day before the session starts? Perhaps defining areas of interest? Or is it just a case of, you sit down and see what happens,....see where you feel an opportunity arises?

Would I be correct in presuming that two almost identical situations could arise but you would manage them completely differently depending on how you felt at the time? Or perhaps not even take one of them?

Thanks for the replies. Keep 'em coming

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DarkPoolTrading View Post
Very interesting replies so far. Not what I expected.

@ratfink, @EthanC, @Camp, do you set out a plan for the day before the session starts? Perhaps defining areas of interest? Or is it just a case of, you sit down and see what happens,....see where you feel an opportunity arises?

Would I be correct in presuming that two almost identical situations could arise but you would manage them completely differently depending on how you felt at the time? Or perhaps not even take one of them?

Thanks for the replies. Keep 'em coming

Then what did you expect?

I don't set out a plan for the day, my system tells me all the areas of interest, bull/bear conditions and entries that I need to know. And then I ignore it completely. So two identical situations can indeed be a hormonal coin flip at the moment and that is the real work in progress.

Due to life as lived getting in the way my trading hours are currently rare and inconsistent, although I'm not bothered about that at the moment as it's summer tosh. However, I do want to be trading and journaling solidly for a couple of months this autumn and then most of next year, which is why I've built ChartMinder.

Losing a stone in weight has also been part of the long plan, good to lose the right sort of pounds for a change.

My passion for software is also too great a distraction, although that's becoming a more accepted part of the plan now that my overtrading troubles have eased away and it's a lot easier to step away from the mouse. Which is why I'm building a behaviour modifying keyboard trader.

So I guess I do make plans, but they're longer timeframes than daily, now that is weird. Don't let the mice know.

And you?

Travel Well
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  #8 (permalink)
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ratfink
Then what did you expect?

I kind of had a feeling most people would reply that they anchored parts of their methodology to a mechanical rule set (perhaps their trade management for example. Im not really including risk management here because I feel that is a given). While the remainder of their method would be discretionary.

But I am clearly operating from my own personal bias. So clearly everyone else has to think the same way as I do right? lol
So that's why im finding this interesting. Hoping that more people begin to weigh in.


ratfink
And you?

My methodology probably waxes and wanes around 70-90% mechanical. I spend about 30mins before the session starts defining my areas of interest. There is a slight bit of discretion here. Once the session starts, I try to be 100% mechanical in how the trades are entered and managed (any lapses here are due to psychology issues which will always be a work in progress).

The reason I prefer to trade this way is so that I can analyse my results in what I consider to be a meaningful way because they were all taken and managed in the same way. If each trade is taken completely discretionarily, then im not sure how I would know which aspects of my methodology aren't working vs I was in a bad mood that day and took an emotional trade.

I can certainly see the benefit to being more flexible, and i've noticed the more experienced among us such as @tigertrader, @josh and many others include what appears to be a lot of discretion in their methods. Intuition develops over time no doubt. Once your market knowledge and intuition has developed to a high enough degree, I think a mechanical trader will be left in the dust. But I think it takes many, many years (decades?) to get to that level?

I guess im surprised and interested to hear from people who trade with a lot of discretion (and intuition), without the requisite (in my opinion) years and decades of experience.

Diversification is the only free lunch

Last edited by DarkPoolTrading; August 20th, 2014 at 04:44 AM.
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  #9 (permalink)
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DarkPoolTrading View Post
Do you set out a plan for the day before the session starts? Perhaps defining areas of interest? Or is it just a case of, you sit down and see what happens,....see where you feel an opportunity arises?

I mark S/R in higher timeframes and look in wich direction they are trending. But I dont use that information for my trade decisions directly, I use them to decide how much I put on.


Quoting 
Would I be correct in presuming that two almost identical situations could arise but you would manage them completely differently depending on how you felt at the time? Or perhaps not even take one of them?

I dont have an answer for that since I use a lot of information and the chance of a similiar situation is very very small. But if it would be the exact same situation and I would understand it in the same way both times I would probably trade it the same way but Im not sure. Of course there is some kind of system to the chaos since I use the same information inputs every day but I dont have rules when to trade, where to trade and how much to trade. All of that is up to me.


Quoting 
Thanks for the replies. Keep 'em coming

Np mate. Hope that helps...
Regards

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DarkPoolTrading View Post
I guess im surprised and interested to hear from people who trade with a lot of discretion (and intuition), without the requisite (in my opinion) years and decades of experience.

I just try to not make assumptions about anybody I meet on the internet ..

Travel Well
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