Discretionary or system trading

Petri RedelinghuysImprove Trading, TraderPetri

Discretionary or system trading

Recently I had the opportunity to have another robust debate over a beer with ‘John who trades the ALSI’. I think I may have mentioned him before. In any case, as per usual the conversation was around trading and the different types of trading. And of course, which is better. I side with discretionary trading, while John who trades the ALSI (and Simon for that matter) side with a more systems based approach. I’m really not going to get into the arguments for each because there is just too much to say, but I’ll sum up my view as briefly as I can.

The case for, and the case against

Discretionary trading is an ever-adaptive way in which we can interact with and react to the market based on the events and circumstances that are taking place right now.  I see systems based trading as the opposite to this – at the extreme a very rigid system based trading methodology that only gives signals when a certain set of rigid, predetermined criteria are met. My view is that discretionary traders are more successful (if they make it) than systems traders. I think discretionary traders have a better understanding of what drives markets and are more able to adapt to an ever-evolving environment than are the rigid system traders.

More importantly, I also think that discretionary trading is a lot more difficult to master than systems trading. And not just a little bit, a whole lot more difficult.

Curve balls

At some point of the conversation John pulled out his phone and pulled up a WhatsApp conversation he and I had months ago. So pretty much word for word the conversation read as follows:

John: Petri, if I gave you a system that required you to work two hours a day, traded five times a week and made 50% return on capital, would you take it, or try to do what you are currently doing?
Think before you answer.

Petri: Why not both 😛
I would do this: because it is more challenging
and it is really my personality talking
I rebel
and will take the difficult road
to prove to myself that I can do it

John: And there my friend is your issue. You are not trying to be profitable, you are trying to be right.
You want to prove you can do it.

I remember feeling like a lightbulb went on after that WhatsApp conversation.

I also remember feeling more determined that ever to take the step from being a systems based technical trader to discretionary-order-flow-tape-reader-extraordinaire. So I strengthened my resolve to keep pursuing the hard path and learning a new set of skills and pushing myself beyond my comfort zone.

Ironically, after having worked with a peak performance psychologist for three months, it turns out I have an issue with authority and rebellion. It’s not like I couldn’t have seen that one coming at all. But, the last year has taught me so much more about myself than I thought I could ever learn.

Perseverance and resilience

What’s more, although the day trading has not been easy, I believe it is starting to come together now. I don’t know what the right path is. And I don’t know the best way to trade. But I know, that I know how I want to do it, and how I want my life to be.  I just need to keep pushing myself beyond what I believe I am capable of, in order to achieve my goals and hopes and dreams.

Oh yes, I asked around on twitter if people would like to do a ‘meet up’ sort of event and drink beer and talk markets… and people seemed pretty bullish on the idea. So I arranged one in JHB and one in CPT during December. A ticket will cost you R100, which I will spend on buying you beer… should be fun!

Happy trading!

Petri Redelinghuys

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