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Soultrader

Discretionary Trading vs Automated Trading

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I used to be 100% discretionary and adamant about it. That was before I began programming systems that work. I love charts/trading, always will. But in my experience, going with at least partial automation made my life a hell of a lot easier, less stressful.

 

A system I run on e-minis is completing its 3rd profitable trade of the day. 3 for 3 on the day. It excelled in the past months due to volatility. Not to say it doesn't have draw-downs, every system does, and so do discretionary traders.

 

It's to each his/her own as far as this topic goes. I was able to clean up the house and have a relaxing morning because the computer was programmed to look for what I would have looked for, and do what I would have done.

 

Computerized trading does work. Whenever the market has great volatility, someone will get hammered, and the media will get a hold of it. But you won't hear much from the systems traders who are successful, they have no reason to make themselves known.

 

It's easy to feel too stressed in your trading, like I was. If you are reading this and that's what you feel, decide whether it's worth it. Trading can drive you crazy, its such a head game. If you can quantify your edge and act with confidence based on statistics, its a little less crazy.

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I think another big reason for me to be discretionary is that I take responsibility for my trades. I know if I win it's my fault and if I lose it's my fault.

 

William Gallacher said that you never really learn anything using systems....I like discretionary trading as it forces me to use critical thinking and constantly adapt.

 

For me at least, I believe that true confidence cannot be acheived without knowing full well that I am totally responsible for every trade I make.

 

As much as I am in it for the money, I think that using discretion is what makes the process the most enjoyable.

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I like discretionary trading as it forces me to use critical thinking and constantly adapt.

 

Yes, well put Reaver. And since you're constantly adapting to the markets, you don't have to worry about your system no longer working at some point in the future (assuming you have a robust discretionary methodology to begin with).

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we are all taking a complex and dynamic stream of information and synthesizing it into a trade. to the extent that automated trading strategies can help convert your core trading tenets into entry and exit ideas, I think that can be a nice way to help you 'see' the bigger picture. Thus, I think writing automated strategies is quite complimentary to discretionary trading.

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I've always liked the idea of creating a program to do your work and then watch it print money, but outside of the mega I-banks and institutions with huge pockets, I wonder how many actually make money over the long haul being automated.

 

In the end, whether you are automated or not, there is still the human element involved - the human element of EMOTIONS.

 

The argument that automation removes that is simply not true. At the end of the day, when you are reviewing your statement, human emotions can get the best of you whether automated or not. A human will decide when to turn the program on or off and therefore, emotions will drive that decision sooner or later. It's easy while making money. As soon as there is a threat of drawdown however, things change. I believe that being in the market daily and watching the charts yourself gives you an advantage (no matter how slight) over the machine in seeing what is out there and how things are reacting.

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Torero said:

 

"Slippage and commissions will eat it alive. The feedback from traders in TS forums have confirmed this."

 

Can anyone tell me how these slippages happen? Does it mean that I place a StopLoss for a trade to define a Risk then this Risk will end up being higher that I wanted? What makes this happen usually ... please fill me in, this is new for me ...

 

Thanks.

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This is one of the most famous and well-known soap operas in the whole trading world

 

Stops vs. no stops

 

Scaling out vs. all in

 

Indicators vs. naked trading

 

the list goes on.

 

I have seen a lot of traders trying a lot of mechanical stuff, bot's, black boxes, ect

 

none has win consistenly on the markets.

 

But, I am willing to learn, you know, it's wise to have an open mind about everything. If anybody has some mechanical stuff that win consistenly, with average losses, 5 years in a row (a whole cycle according to experts) I am willing to take a look at it.

 

 

LOL Feb, with that attitude you will never see it!

 

If I go to the trouble of creating that system the last thing I will do is give you is "a look at it." I will be trading the french connection UK out of it with no help from you.

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In the end, whether you are automated or not, there is still the human element involved - the human element of EMOTIONS.

 

I agree, but there emotions more or less can be recognised also by software, for instance "key-reversals". If you test some of these and for instance combine it with lets say near "psychological" levels and ad of your choise "salt and pepper" you can come up with a strategy that with backtests can show you that: it worth trading this share using this strategy ... so why not put it on automatic mode ... with money management in view all the time ... This way you can concentrate on other aspects of the market that are more "emotional". :)

 

The argument that automation removes that is simply not true. At the end of the day, when you are reviewing your statement, human emotions can get the best of you whether automated or not. A human will decide when to turn the program on or off and therefore, emotions will drive that decision sooner or later.

 

I agree, should be supervised and turned on or off if required, but ... if for instance backtest shows that one of your strategies works on a share ... you automate it and ... let's say you make a rule to stop trading that day if your losses reashed a level ... and start again next day ... results of the backtest makes you go "deaper" in winnig ... and of course you freeze it ... on an other rule u make ... for example: 3 consecutive times stopped because of loss limit ...

 

It's easy while making money. As soon as there is a threat of drawdown however, things change. I believe that being in the market daily and watching the charts yourself gives you an advantage (no matter how slight) over the machine in seeing what is out there and how things are reacting.

 

Agree here to, you sould wach charts all the time and make modifications on your existing strategies ... or make new ones ... following the market ...

 

Summary: you can save time and money with automated trading in my oppinion ... true ... it needs a charting package that is flexible enough for all your thoughts ... and has reasonable fees ... do you know one for chance? :)

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