Aditya's posts with tag: discretionary
Although I strongly believe the advantages by far outnumber the disadvantages, here are a few cons to discretionary trading:
1. You must be accountable for each of your losses. There is nobody else to blame but yourself when you make a mistake. Hence, ego sometimes is a big enemy to discretionary trading.
2. You must always be on top of your game. Your mind must be sharp at all times the same way a professional athlete must be in top shape whenever he's called out to perform. When you are not mentally fit to trade it's usually reflected in your P&L. And like a professional athlete, you must accept defeat and move on.
3. Discretionary trading is a lot more stressful than automated trading. You are the one who is in control of everything, from entry to exit. There is nothing automated in discretionary trading.
4. If you are sick or not fit to trade, you must take a day off; which means you are not going to make any money because nobody is trading for you.
5. If you get on a losing streak, emotions may become a factor and force you to make mistakes. Confidence is fundamental for discretionary traders. The moment you start to second guess yourself you are utterly lost.
These are only a few of the several disadvantages to discretionary trading.
I think it all comes down to your type of personality and what fits you best. I started off with mechanical trading and used to get very frustrated at my system. I felt I needed to feel more responsible for what's going on with my money and ever since I chose the discretionary path I've not looked back.
Discretionary trading is definitely my trading niche. It's a lot more fun and you learn an awful lot more about the markets simply because your focus must be 110% all the times, whereas with mechanical trading you are more focused on abiding by the rules often times overlooking what the market is trying to tell you.
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