Trading of Discretionary


There are two ways to proceed as a short term trader. Most of the profitable traders belong to either of these two categories. They are Mechanical Traders and Discretionary Traders.


Mechanical traders trade a purely mechanical system based on an algorithm. These trading systems are developed after thorough research and back testing. To develop such a system, you need to be an expert in statistics, programming and back testing. Back testing and developing trading systems are not an easy task. You need to have a thorough understanding of the market to develop such a system.
Most of the mechanical system traders will have different systems to suit different market situations. Markets always change and evolve. Continuous monitoring and fine tuning is required to maintain the effectiveness of the method. If you are not an expert in these fields you are not going to make any progress.


Another way is to become a discretionary trader. These types of traders use their feel and read of the market to make on going decisions. He uses some simple guidelines to analyze the market contextually. He relies a lot on his intuition and experience to make trading decisions.

It takes a lot of time, effort and focus to get hard wired for such methods. But it is not an impossible task if you are willing to take some effort. On the surface discretionary trading will look simple, but it may take some time to develop complex mental maps and achieve automatically so that you can trade without thinking.
Some traders use a combination of these methods to trade. I think it will do more harm than good. To get the benefit of a statistical edge, we need to take all the signals given by the system. Introducing discretion and avoiding some trades will simply destroy the edge.

Trading of Discretionary Trading of Discretionary Reviewed by Money99 on 23:04:00 Rating: 5

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