Mechanical or discretionary
which best suits your personality?
There are basically two types of trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied systematically. On the other hand, discretionary systems use experience, intuition or trial to indicate the correct time of entry and exit. But what works best? Or, more importantly, one that best fits your trading style? These are the questions which we will try to answer in this article. We will first analyze the pros and cons of each system.
Mechanical systems
Advantages: This type of system can be automated and tested efficiently. It has very rigid rules. Mechanical traders are less susceptible to emotions than discretionary traders.
Disadvantages: Most traders are testing a system that incorrectly. The Forex market is always changing. The Forex market (and all markets) has a random component. Market conditions may seem similar, but they are never the same. A system that worked successfully last year does not necessarily mean it will work well this year.
Discretionary systems
Benefits: Discretionary systems are easily adaptable to new market conditions. These are business decisions based on experience. in this system traders learn to know which signals are more likely to succeed.
Disadvantages: They can not be tested or automated, since there is always a decision to make. It takes time to develop the necessary experience to trade successfully and follow operations in a manner discrétionnaire.Au early can be dangerous.
Now, who is the one who best fits your personality. For example, if you are a trader who has trouble keeping his trading signals, you might want to use a mechanical system, where your decision will not play an important role in your system. You take only the trades that your system reports.
If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also advised to follow the mechanical systems, because you just follow what your system tells you . No further action need be taken.
On the other hand, if you are a trader disciplined, then you are better off using a discretionary system, because discretionary systems adapt to market conditions and you are able to change your trading conditions when market moves. For example, you have a target of 60 pips on a long trade. But suddenly, the market begins to rise quite strongly, then you can move your target to 100 pips.
Can we say that a discretionary system has no rules? This is absolutely untrue. Discretionary trading systems means that once a trader finds its configuration, it then decides what to do. But every trader still needs certain rules that must be followed, such as the size of the position, conditions that must be met before thinking of entering the market, and so on.
Whether you choose then? Being a discretionary trader or dealer mechanics? there are some important points you should consider: You must ensure that the trading system you are using totally fits your personality. You must also have a few rules and above all have the discipline to follow them. Take your time to build the perfect system for you. It is not easy and requires time and hard work, but in the end, if done correctly, it will give you positive results. Before trading a real account, try on a demo account or even a small account.
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