Time to drop some knowledge bombs!
As a seasoned discretionary trader, let me break down for you the Differences Between Systematic and Discretionary Trading.
Whether you’re experienced or not…
Get ready for real-life examples and some profound truths!
#Trading101
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SYSTEMATIC TRADING = ALL ABOUT THE RULES
σ No room for gut feel!
You follow predetermined criteria, removing emotion entirely.
But, of course, it does still require human judgment and discretion to adjust your trading rules.
Picture a personified ChatGPT robot executing trades like clockwork, with no freedom to deviate from your rules
#SystematicTrading
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σ The primary point here is that your decisions of (which assets, entry/exit/sizing, etc.) come explicitly down to what your rules allow.
Building on backtesting and simulations gives traders systematic trades like you the confidence to follow your rules to the T.
Less emotion, more precision!
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σ I see systematic trading, for the most part, as a solution to our entrenched human biases.
Delusion, fantasy, denial, and echo chambers are not best practices for investing decisions.
Yet, we all fall victim to these from time to time.
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DISCRETIONARY TRADING = ALL ABOUT THE HUMAN TOUCH
σ We use our experience, intuition, and market analysis to make decisions.
It’s like being a master chef, tasting and adjusting the recipe as needed.
#DiscretionaryTrading
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σ This manual approach may consider factors that are difficult to code or verbalize – like “gut feel”.
However, if pressed, the trade can still explain precisely why a given asset represents a good or bad opportunity.
As a discretionary trader, I still have very clear-cut signals in mind.
I only trade/provide trade ideas to subs on situations that offer a compelling risk-reward profile.
The juice has to be worth the squeeze.
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➠ EXAMPLE
σ Systematic trader Bob uses a trend-following system.
When his indicators give the green light, he’s in!
No hesitation, no second-guessing.
Just pure, unadulterated execution.
#TradingExample
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σ On the flip side, discretionary trader Imran (Hi) spots a potential breakout.
I am not simply relying on what the indicators are signaling.
I analyze the pricing of options, market sentiment, news, and my own gut feeling before making a move.
It’s an art form!
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PROS AND CONS
σ Systematic trading removes emotion but is not as adaptable to market changes.
Discretionary trading allows for flexibility, but it’s susceptible to emotional biases.
Know thyself, traders!
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σ Ultimately, it’s all about YOUR skills!
Got the patience for researching and testing?
Systematic trading might be your jam.
Can you absorb tons of visual info and make intuitive decisions?
Discretionary trading could be for you.
#TradingSkills
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σ To me, nothing compares to the adaptability of a discretionary approach!
We blend lightning-fast data synthesis with mechanical and emotional control.
Making us ready for any market curveball.
Sorry algos, you can’t beat us at everything (yet)!
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σ Never be afraid to apply your own judgment and intuition.
There is no one-size fits all approach to mastering the markets, folks!
As Jack Schwager, author of Markets Wizards notes:
“I have interviewed enormously successful people in each camp. You have to know which style fits you.
Just like you need to decide whether your natural trading approach is technical or fundamental, or long term or short term, etc.”
#TradingWisdom
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➠ And that’s a wrap on the Differences Between Systematic and Discretionary Trading.
➠ Don’t forget that right now, you can get a free month of everything Options Insight has to offer!
Just follow the link in my Twitter Bio & use code RV2023 at checkout.
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Cheers!
