What Style of Trader Am I?

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Don Dawson

06 Jul, 2009

in Getting Started and 2 more

Discretionary Trading
Discretionary trading allows the trader to make decisions about their trade based on all the information they have at the time of the decision. For example, if the market has had a strong rally and the trader gets a buy signal, he may elect not to take it feeling the market is overbought. Consistently profitable Discretionary traders still have a trading plan to follow. This can also be a system that tells them when to get into a trade, but allows them to manage the trade for exits at their own discretion. These traders usually like being in control of situations. They are not comfortable letting a machine or anybody else make their decisions for them.

System Trading
System trading is based upon strict rules that cannot be overridden by the trader. Meaning that if the system issues a buy signal, the trader "must" take the trade. There is no room for human input or thinking. Another name for this style of trading is "Black Box Trading." Many hedge funds and large traders use these Black Box systems to extract money from the markets on a daily basis. Today, we can actually design our own system and have trading software such as Trade Station execute the trade, place our protective stop and profit target all without any input from the trader. Most system traders are very analytical and come from mathematic or computer programming backgrounds. System traders have no problem letting the computer make all their decisions for them. They don't have to feel like they are in control of the trade. Being a system trader also means you truly believe that trading is a probability business.

By identifying our style of trading we are comfortable with, we have a much better chance of sticking to our plan during the bad times of trading. Not committing to a style will make us prone to switching from one to the other every time our strategy has a few losses. By doing this, we are assuring we will catch most of the losing streaks and forfeit the profitable trends where we stand to make good profits. So if you find yourself switching from strategy to strategy, ask yourself if you have identified the style of trader you are. This will go a long way in helping you become a profitable trader.

As the lyric in the song goes, "We must stand for something or we will fall for anything."

Until next time,

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Re: What Style of Trader Am I?

I also thinks this is a good article....I am a swing trader but having said that I successfully use swing trading methods to enter and exit share purchases . It works well for me because the days of buy and hold are long gone. Typical investment time frames for me tend to have recently been about twelve months. I get to pick up the dividend too. These days with all the volatility it suits me to be able to choose or target when I'm either in the market or in cash.

Nov 04, 2011

Rookie Member (23 posts)

I thought it a very good article. As someone who has recently moved from Swing Trading to Day Trading (in preparation for my imminent redundancy!) it validated many of my beliefs on the differences and merits of the two approaches. My only suggestion for the article would be if he could have expanded more on why he strongly recommends the Swing trading style over the others.

Jul 11, 2009

Member (74 posts)

I thought it a very good article. As someone who has recently moved from Swing Trading to Day Trading (in preparation for my imminent redundancy!) it validated many of my beliefs on the differences and merits of the two approaches. My only suggestion for the article would be if he could have expanded more on why he strongly recommends the Swing trading style over the others.

Jul 11, 2009

Member (74 posts)

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