I use a mechanical approach for the simple reason if I used a discretionary style id be constantly second guessing myself.
My own discretion comes from the markets I’m choosing to trade at any one time and partly in position sizing.
But it really is up to what fits best for the individual - I guess one trait of a more experienced trader is in knowing their weak points and so avoiding them
I avoid mine like the plague these days. For beginners what they think we may be good at, and what they actually are are often not the same thing.
However I also agree trading is an art, mechanical systems for me just make some sense out of all the chaos
Please don’t think that I am against mechanical systems. I have used them in the past and in a lot of ways the discretionary decisions I make in trading have an element of mechanicalism in that process.
However I see certain types of price action happening and I know it’s a great time to buy or sell.
Whatever works and whatever makes money I’m all for.
Here is a chart of the AUD Futures contract that I am currently trading. I am currently long.
However if you read what I have put on the chart I am seriously looking at pulling the pin on this trade for a break even trade as I believe that this trade will fail.
Definately not. Sometimes I get it right sometimes I get it wrong.
The bottom line is that if I exit at break even I have saved that capital to live and fight another day. The question is what if I leave that trade and it fails and I lose $200??
I never regret my decisions because I always have a strong reason and a conviction for either taking a trade or exiting a trade.
Because the setup is a loser
Psychology is a good excuse for trading coaches to convince you that you are the problem and you don’t make pips with a simple losing strategy.
Than you learn algo and you bust everyone.
If psychology would make the difference there will be many psychologists with 3+ years of trackrecord.
Every business con be frustrating, but a psychologist won’t turn a bad business into a good one.
I do agree that a losing strategy is a losing strategy regardless of psychology
I also think the idea you can or should lose your emotions is futile.
But are suggesting that psychology doesn’t play a part in trading and it’s a red herring?
For my own part I liken it to performance anxiety amongst pro sports players - it can become a total nightmare for some but without talent, or a system to begin with you ain’t gonna be successful in the first place
Psychology helps to endure DD, just like in every business that do not print money every month, it gives you the patience necessary to wait long term success.
Unfortunatelly 99% of traders are executing a losing strategy and they are not aware of it, and psychology won’t help them.
Psychology is needed for the 1% of traders that are running a winning strategy.
You dont’ have to be a genius to code a strategy.
I am not a programmer I am a chemist but everyone that studied a bit of high school programming is able to code a system with 2-3 conditions.
BTW coding a strategy is the simple and funny part.
Th difficult part is optimizing parameters in a robust way without overfitting.
Algo is not the Grail but I am waiting for a manual trader to show me 5 years of trackrecord, I would be superhappy with 3 …
I coded and tested a lot of stuff so i know what I ma speaking about when I say that 99% of strategies that make sense do not make pips, no matter the discipline and psychology of the trader.
My opinion is that it is ok the other way, that is , 80% strategy & 20% psychology. We are emotional because we are humans. It is the different emotions that is making us humans. My question is why blame yourself saying you are emotional while trading, instead, try to find a strategy & make it as mechanical as possible. If there are 3 conditions to be met before your entry according to the system, then tell yourself that you’ll be entering when all those conditions are met only, deliberately do this for many many days & soon this’ll become a habit. Even then it’s not working , then it’s the strategy which needs to be changed, don’t try to become emotionless.
This is almost like asking if the chicken or egg came first.
But frankly, strategy would definitely be the more important thing. I wouldn’t dissect them into ratios or percentages but having a strategy that you have back tested, forward tested, demo tested and spent a lot of time modifying and making sure it works would definitely come first.
Eventually when a newbie steps into the arena, even after having spent a long time testing their strategy, psychology will definitely have an effect on them. In fact, I would say it doesn’t only affect newbies.
But without a good strategy, having a strong mindset wouldn’t make you profitable either.
Having a winning strategy will improve that mindset and groom you to understand that your strategy does work and that gives you a positive energy stepping into the arena - when you know half the battle is won. The other half is actually sticking to your strategy and not letting off.
On top of the 100% mentioned, the remaining 10% comes from you knowing when your strategy is really not working and telling the mindset part of yourself to stop and restart. Redo your strategy and step back into the game.
You wrote: “There is actually no psychology required. Its the law, we just follow the rules …”
However, just following the rules requires discipline, and discipline requires psychology.
Personally, I believe trading is likely closer to 90% psychology. Strategies often fail but the mindset of a trader demands discipline, and thus strong psychology.
Following the rules requires discipline, risk tolerance and patience but FIRST you should verify that the rules are profitable, and 99% of wannabes dont’ do that.
The web is full of psychology beacuse every life coach, monk, or psychologist can teach it, while to develop a profitable ruleset you need a true trader.
First you have to design a profitable ruleset, than you have to execute it in a disciplined way.
I have no doubt that the results are probably there but lets face it the computer doesn’t watch the market on your behalf and then work out what is a good trade or a bad trade. Computers cannot think for themselves.
The parameters of the algo have to established as you say, through coding. So apart from letting the computer trade for you while you play golf what is the point of it all??
