Im just reading through some papers about ANN's http://works.bepress.com/bruce_vanstone/8/ In this paper there is a statement that got me thinking However, it is commonly accepted that discretionary traders produce better financial results [2]. [2]. Elder, A., Entries & Exits : visits to sixteen trading rooms. 2006, Hoboken: NJ: John Wiley and Sons. I personally have been a discretionary trader for my whole career and all the traders I have known to have made some big money are also discretionary. Not saying automated trading doesnt work - just havent met any. Also, if you look at all the trading jobs being advertised they are all looking for quants with programming skills. So which style of trader is better or more profitable?
Discretionary traders can be profitable for many years, because they are able to change with the markets. The strategy of a really good discretionary trader is more about great risk management then sticking to one particular type of trade. when you combine discretionary trading with automated execution tools...you really have a powerful combination because you have the best of both worlds.
and look who he references... Elder. Not a very good conclusion for an academic paper. Also, take a look at the results -- In sample buy and hold naive learner trounces his NN, yet he completely ignores the comparison OOS. Conclusion, not a very good paper to source IMO.
The best traders in the world are discretionary traders. But...the worst traders in the world are also discretionary traders. If you are not a very good trader, or if you can't control risk or manage emotions, system trading is the way to go. If you have a good feel for the markets and can anticipate well and manage risk, then discretionary is the way to go.