Why people choose discretionary trading?

Question

Opal · Accepted Answer

There are clearly some advantages here. It allows traders to adapt to changing market conditions. In times of high volatility or big macro events, discretionary traders can pull out of the market quickly or step it up rapidly should they choose.It also leverages a trader’s experience and intuition. Obviously, a green trader at the beginning of their career is probably not going to be the best discretionary trader.But the opposite is also true. Being able to withdraw from the market at any point may mean a trader overrides their systematic stop losses and rules, thinking that they are getting out of a falling market faster, only to find that the market rebounds without hitting their stop losses and carries on without them in the position.If we think back to the ‘yen carry trade’ scenario in August, the market had a sharp fall, then rebounded immediately. Many people who got out quickly were relieved of their positions and missed out on the rebound.But trading is ultimately a pattern recognition game, and for the experienced trader, this can bring about asymmetric trades that may not appear on a systematic system.For example, a stock where the price is starting to creep higher yet the market has written the stock off due to profit warnings and disappointments and so little upside is priced in. This can offer a highly attractive risk/reward.Discretionary trading also allows for creativity. For example, many years ago I once had a 15-second auto refresh following an anonymous bulletin board user’s activity on the boards. Wherever he would pop up (until he was banned) the stock would rally sharply.No trading book will ever tell you to speculate on a random bulletin board account and try to front-run flow. Yet it was a highly profitable strategy for several weeks whilst his followers were jumping into every stock the account appeared at. And it worked until it didn’t.

Irma · Answer

People choose discretionary trading primarily for the control, flexibility, and the ability to leverage human intuition that rigid automated systems lack. While algorithmic trading offers speed, discretionary trading excels in complex environments where qualitative judgment is required. Key Reasons for Choosing Discretionary TradingReal-Time Adaptability: Traders can immediately adjust to unexpected news, shifts in market sentiment, or "black swan" events that an algorithm might misinterpret or ignore.Qualitative Analysis: Humans can synthesize information that is difficult to quantify, such as central bank rhetoric, geopolitical tensions, or company management quality.Creative Problem Solving: Discretionary traders can identify unique, non-repeating patterns—like front-running a specific social media influencer's impact—that standard technical indicators would miss.Psychological Satisfaction: For many, the "thrill of the hunt" and the personal challenge of making correct judgment calls are more rewarding than managing a hands-off automated bot.Lower Entry Barriers: It does not require programming skills or expensive server infrastructure, making it more accessible to those who prefer manual analysis on platforms like TradingView. Comparison: Discretionary vs. Automated        Feature                        Discretionary Trading                          Automated/Systematic TradingDecision MakerHuman judgment & experiencePre-programmed algorithmsFlexibilityHigh; can skip trades in "bad" conditionsLow; follows rules regardless of contextExecution SpeedSlower (manual)Instant (milliseconds)Best ForUncertain/changing market regimesConsistency in stable conditionsMany professional traders eventually adopt a hybrid approach, using automated tools to scan for setups while reserving the final execution decision for their own discretion.

Why people choose discretionary trading?

2 Answers

2 Answers

Why people choose discretionary trading?

2 Answers

2 Answers

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