{"id":1833,"date":"2010-01-11T17:03:00","date_gmt":"2010-01-11T11:33:00","guid":{"rendered":"http:\/\/www.niftylivecharts.com\/blog\/?p=1833"},"modified":"2010-01-11T17:03:00","modified_gmt":"2010-01-11T11:33:00","slug":"mechanical-trading-vs-discretionary-trading","status":"publish","type":"post","link":"https:\/\/www.niftylivecharts.com\/blog\/mechanical-trading-vs-discretionary-trading\/","title":{"rendered":"Mechanical trading VS discretionary trading"},"content":{"rendered":"
These are two different ways to trade the stock market. \u00a0Each \u00a0of them constitutes to have strengths and weaknesses. \u00a0F<\/div>\n
Mechanical trading is trading with set buy and sell signals. \u00a0When the stock does this, and this, and this you have to buy. \u00a0When it does that, and that ,and that you have to sell. \u00a0This system should be back tested. \u00a0You will want to make sure that the system actually works before trading with it.<\/div>\n
Many traders will start off by using this system and then switch to a discretionary system once they gain market experiences. \u00a0This system incorporates fundamental analysis as well as interpretation into a stock. \u00a0They no longer set rules exactly but now combine rules with their expectation of the company itself.<\/div>\n
Trading with a discretionary system has many strengths when compared to mechanical. \u00a0Since it incorporates Fundamentals into trading A discretionary trader may already have insight to what a company is likely to do beyond what technical\u2019s will tell you. \u00a0This gives the trader more vision when trading.<\/div>\n
Another advantage it has is its ability to adapt to any market conditions relatively fast. \u00a0This is untrue for other methods. \u00a0While a mechanical system may work very well during an up trending market it may work terrible or even produce a loss during a sideways trending market. \u00a0 This could lead to delays. \u00a0During these times you may experience a set of consecutive losses.<\/div>\n
So does this mean that discretionary systems are better than mechanical? \u00a0No, mechanical systems have many benefits. \u00a0They can be just as profitable as discretionary systems can.<\/div>\n
Mechanical systems are based on following strict rules and back testing. \u00a0Any trader using this type of system should understand its greatness and its flaws. \u00a0That is more than you can say for discretionary.<\/div>\n
When you trade discretionary you do not know that your system will work for certain. \u00a0There is no way to back test that type of trading. \u00a0It could be that your way of trading doesn\u2019t work and you will not know it until you lose $1000s of dollars.<\/div>\n
Another major reason why using mechanical systems can be great is that it takes the emotion out of trading. \u00a0You simply buy when your rules tell you to and sell when your rues tell you to. \u00a0A discretionary trader cannot do this.<\/div>\n
Because they have no set of rules, they have to interpret the company to help them decide what to do. \u00a0This could often lead to emotional trading which could result in losses.<\/div>\n
There is no way to say that 1 system is better than another. \u00a0They each have flaws and advantages. \u00a0 I will say this however. \u00a0When you are starting off it is much better to start with a mechanical system. \u00a0You do not have much market experience and as such will not be able to interpret company fundamentals.<\/div>\n","protected":false},"excerpt":{"rendered":"

These are two different ways to trade the stock market. \u00a0Each \u00a0of them constitutes to have strengths and weaknesses. \u00a0F Mechanical trading is trading with set buy and sell signals. \u00a0When the stock does this, and this, and this you have to buy. \u00a0When it does that, and that ,and that you have to sell. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[5221,5220,5219,523,917],"class_list":{"0":"post-1833","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-general","7":"tag-discretionary-trading","8":"tag-mechanical-systems","9":"tag-mechanical-trading","10":"tag-stock-trading","11":"tag-stocks","12":"entry"},"_links":{"self":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/1833","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/comments?post=1833"}],"version-history":[{"count":0,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/1833\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/media?parent=1833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/categories?post=1833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/tags?post=1833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}