This is a very relevant issue and I am sure many of us have often experienced this paradox.
Basically, this question concerns mechanical v. discretionary trading. And I think the key issue here is to avoid just thinking about each specific trade. Every trade is a probability play and our aim is to seek a strategy that provides a so-called positive expectation over a period of trades and time, not just on the next trade.
Many traders will rely on a mechanical approach and take every trade that the strategy presents. They know that some trades will fail but their associated risk/money management parameters will keep the losses smaller than the gains over time (even sometimes with a win/loss ratio less than 50%) and therefore they will net gain.
Other traders believe in following a technical strategy but allow themselves to “oversee” the set ups as they occur and decide whether to go ahead or not. I am also in this category. I always want to evaluate a trade set up according to the overall environment (holidays, Fridays, prior to numbers, elections, and so on) and also whether the presented target/stoploss set up makes it worth the risk. Even when trades are entered, a discretionary trader will monitor its progress and decide if it is working the way it was expected to. If the situation/conditions change during it progress then the target or stop may be tweaked or the trade exited partially or completely, or even increased. These are all factors that are difficult to build into a mechanical system.
One problem with such discretionary trading is that it is almost impossible to back test because you cannot say when or where you would have intervened. Therefore it is difficult to quantify how such a discretionary approach might have under- or over-performed compared with a mechanical approach.
But I don’t think that purely trading on gut feel is wise or likely to be consistent, but that is just my view knowing that my own gut feel would certainly not perform well in any circumstances!!
