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Mechanical trading vs. discretionary trading
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Mechanical trading vs. discretionary trading

  #1 (permalink)
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Mechanical trading vs. discretionary trading

Hi Fellow Traders,

Please share your knowledge and experience about this topic.

Is it harder or easier to trade profitably with a mechanical, automated system compared to profitable discretionary trading?
Is it a natural evolution progress to first trade profitably in a discretionary manner, and then to trade mechanical systems, or they are so different that we could say that somebody could trade profitably a mechanical system even if he cant trade profitably in a discretionary manner?
Is it possible that someone could trade profitably a mechanical system but would unable to trade profitably in a discretionary manner?
How would we picture: if someone starts to trade profitably a mechanical system this probably would mean that at the same time he would stop trading in a discretionary manner because mechanical trading is a so much elevated process, a way more effective method of making money?

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  #3 (permalink)
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Is this a school project?

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  #4 (permalink)
Big game hunter
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Neither are difficult or easy . If by mechanical you mean taking signals generated by a set of variables derived from indicators or price patterns then played the same way at every occurence of the variables then you have to take what the conditions offer and play them through the cycles of the market , good or bad . Then you will know if its good or not . If by discretionary you mean guessing (?) what will happen next then its impossible to determine if that works because the variables are always different .

But please elaborate your definitions of discretionary and mechanical , thanks .

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  #6 (permalink)
Market Wizard
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I like to make discretionary calls as mechanically as possible using heavy duty heuristic rules. Does it answer your question !

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Arpad View Post
Hi Fellow Traders,

Please share your knowledge and experience about this topic.

• Is it harder or easier to trade profitably with a mechanical, automated system compared to profitable discretionary trading?

That depends on your skills.

Arpad View Post
• Is it a natural evolution progress to first trade profitably in a discretionary manner, and then to trade mechanical systems, or they are so different that we could say that somebody could trade profitably a mechanical system even if he can’t trade profitably in a discretionary manner?

I think that it would be difficult to develop automatic trading systems without a prior discretionary trading experience. Mechanical systems are rule based, and developing those rules requires some hands-on experience of trading the markets.

Arpad View Post
• Is it possible that someone could trade profitably a mechanical system but would unable to trade profitably in a discretionary manner?

Yes. The skills required are different.

Arpad View Post
• How would we picture: if someone starts to trade profitably a mechanical system this probably would mean that at the same time he would stop trading in a discretionary manner because mechanical trading is a so much elevated process, a way more effective method of making money?

No. This maybe true for scalping and HFT, but not necessarily the case for larger time frames.

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  #8 (permalink)
Market Wizard
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in Trading From Your Gut by Curtis Faith he goes in great detail of why you need both methods, good book.

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How do I mean automated mechanical and discretionary

Mechanical, I mean:
I could say fully automated instead.
Positions are opened and closed by a computer program, an electronic algorithm based on programmed rules. This algorithm works on its own, a human dont needed to press any keys. Sometimes you adjust the program, the algorithm, but the program could run unattended for several days.

Discretionary, I mean:
You have to sit in front of a monitor, and have to open your trades manually. Maybe closing of trades are done via NinjaTraders advanced trading management, but you have to look your charts and press Enter to initiate your trades.

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cory View Post
in Trading From Your Gut by Curtis Faith he goes in great detail of why you need both methods, good book.

I agree. Combo of robot with a live trader managing situation.

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