New Traders Post - Mechanical Vs Discretionary Trading Learning To Trade

New Traders Post - Mechanical Vs Discretionary Trading Learning To Trade

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I am regularly asked by our new traders which is better, Mechanical or Discretionary trading. Lets look at the pros and cons of both and then we will offer up our opinion.

Mechanical trading is really trading from a precise set of rules that are applied to cover every possible scenario to determine your entry point, position sizing and exit. There is no discretion with mechanical trading as the trader works to a predefined plan with the goal of flawless execution. In my opinion this is the perfect starting point for new traders as you have a plan and a clear and measurable system. There is zero discretion.

Discretionary traders are just that, discretionary. They rely on gut feeling and intuition to determine when to take their trades. This approach is very much subjective and difficult to measure. Discretionary traders usually develop their craft based over years of trading.

Clearly, as a new trader we need to keep things simple, easy and measurable. Ideally we want to be a mechanical trader. This helps to take much of the emotion out of our trading as all we need to do is execute according to our system rules.

As we develop our skills and experience, many traders add some discretionary trading to their strategy. This can include:

1.Adjusting around key levels;

2.not taking news trades;

3.avoiding the first trade of the day following a gap;

4.adjusting for swing highs/lows;

5.drop in acceleration or momentum;

6.waiting for the second break of a daily top/bottom;

So starting out as a new trader we definitely want to be able to measure and track our performance and eliminate subjectivity to our decision making processes.

Mechanical trading is a good starting point.

Have a great trading day and all the best.

Cheers

Shane fry
GMT Trading Coach
www.gmtfutures.com
shane@gmtfutures.com

About the Author:
Global Market Trader is a company forging the way forward in trading education and Mechanical trading. The company has the perfect mix of Professional trading experience over 16 years of system development and trading education.



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