Monday, 7 March 2011

Discretionary or Auto Trading?

I am a discretionary trader. I look at the market and make my decisions to enter and exit based on my TP after taking CONTEXT into account. As a discretionary trader, I have a consistent win rate of better than 70% and make money most days.

I use an algo to trade. I don't look at the market at all. My algo, Flo, has been programmed to trade on my behalf. Flo takes all trades, regardless of context, and applies the rules I have programmed. Flo exits all trades based upon both scale out targets as well as rules that I have programmed. Flo's past performance tuning shows a better than 75% win rate and profitable every month. In real time, Flo's performance is less than her historical performance, still high win and profitable,  but Flo does not take all the context into account and therefore takes trades that I, as a discretionary trader, would not and she takes consistently bigger stops than I would on the same trades.

I am a Hybrid Trader. I use Flo to enter all the trades and then I decide whether to manage them myself or let Flo manage them with her algo. I have the best of all worlds as I do not have to focus as hard, can trade more than one market at the same time and do not have to be operating at 100% all one hundred percent of the time.

I've quoted from the book OUTLIERS before, where the author sites evidence that it can take 10,000 hours of practice to achieve mastery in anything - that is after you have learned the correct way of doing that activity in the first place.

Well, a well built algo such as Flo, correctly used, can achieve a number of things:
1. allows a less skilled trader to become CP quickly without having to put in all the hours
2. provides a historically proven and historically tested entry for trades that can be applied repeatedly
3. triggers all trades that meet your criteria consistently and immediately  during your chosen trading sessions
4. avoids analysis paralysis
5. avoids cherry picking trades - cherry picking is a road to missing CP
6. allows the trader to chose the degree, if any, of human intervention in any particular trade

The discretionary trader rules, but only after he joins that small group of CPers. 

I traded the ESTX50 future in the morning and the ES in the afternoon. A couple of nice trades. The afternoon ES Fib areas were not touched, as traders seemed anxious to exit once price was near those windows. Watching order flow helped.


  1. Tom, so how does one go about programming a 'Flo'? Seems I would need a fair amount of programming skills.

  2. Hi EL,

    Do you use the 117/127 fib only on the ES, or do you use it on other markets such as the 6E as well?

    Thanks for your great blog.

  3. Gary, many of the platforms have easier scripting languages.
    Anon, 19:07, ALWAYS!!!!