Can completely discretionary traders every succeed?

"I am not saying that it is impossible for the discretionary, active trader to achieve long-term success. Rather, my case is that, if only a small fraction of traders are highly successful in a single year and if only a fraction of those can sustain that success across market cycles that are averaging 2 years in duration, then the ideal glibly described in advertisements and magazines—“trading for a living”—is an anomaly, just as “golfing for a living” or “playing poker for a living” is the strict exception rather than the rule. Of course, it is not in the interest of brokerage houses, publishers of trading materials, trading software firms, or commercial trading gurus to publicize this perspective. I’m sure my stance on the matter makes me a kind of Howard Beale of the trading world. No matter; if the long-term successes at trading step forward with their account statements to prove me wrong, I will be only too happy to admit my madness."

"No amount of psychology will help a momentum trader from 1999 suddenly make the transition to selling strength in 2001, buying weakness in 2003, and then fading all momentum in 2005. It is like asking a devout Christian to become a Buddhist, then a Muslim, and then an atheist. The human mind does not shift its worldviews so readily—a fact that makes happy evolutionary success, but creates untold grief in trading."

Brett Steenbarger has a couple of interesting articles on his website about his observations on discretionary trading:

http://www.brettsteenbarger.com/Micropsychology Modeler.doc

http://www.brettsteenbarger.com/Micropsychology Modeler2.doc

 

Of course a purely discretionary trader can be consistently profitable....obviously you have to have something guiding your decisions, but you don't have to hold rigidly to systems to make it (btw, I trade portions of my fund with discretion and portions systematically, so I would also argue that the same trader can apply two different approaches)

 

Reading Psychology of Trading, I knew that Steenburger guy wasn't a trader.

What a joke. Just because you developed some systems doesn't mean you are a trader.

"I raise this philosophical issue because I am at the point where I can no longer evade the evidence laid out before me. The factors that I thought yielded success in trading do not yield true success. I now harbor significant doubts that it is possible to achieve long-term success in the markets solely through intuitive, discretionary trading."

Another thought to entertain is that most sucessbul discretionary traders institutionalize themselves. They spread out over to hedgefunds, trust funds, prop shops etc.

 

Successfull discretionary traders are actually system traders who function on set of rules. The only difference is that the trading program is residing inside the persons head.

Automated or hybrid systems are also good. The bottomline is you make money consistently.

ozzy

 

Some systems are best traded discretionarily and some discretions are best systematized...

 

there are many times more discretionary, active traders than any other kind. enough said.

 

You didnt mention successful - what proportion of the 90% failures would you expect to fall into each camp?

 

How about a distinction like 70% rules and 30% discretion, where you may override your rules in congestion or for a counter trade until you had more confirmation? This would be what the discretion comprises, a base system, but not 100% mechanical. This is how I would describe my trading, and would say that the majority of profitable traders that I know trade similarly to this kind of breakdown.

 

I think the best traders are those in sync with the market and that can quickly adjust when they are not or wrong.

 

I trade both and that forces me to take choice #2...
My 80% discretionary trading is also a spin-off system layered on top of my mechanical system since I can catch my setup better than the computer.