Discretionary versus alert versus automated trading

TickCOM

Active member
113 16
Which type of strategy trading (discretionary/alert/automated) should you use ?

The answer depends on various, such as the time-frame traded, complexity of the strategy, risk, qty traded, personal preference.

Discretionary Trading.
The most easy trading type to start with, but can also be the most difficult and risky, as you learn as you trade implying it takes time and perhaps money to get started.
Experienced traders with new strategy use pen and paper only to start with, till they have verified the trading strategy works. Important to define a set of strict rules, and follow them on paper.

Alert Trading
When you have a promising trading strategy, you need to find a way to be alerted at the right moments, in order not to be monitoring the markets 24/7, most interesting opportunities happens in the Asian session, which is at night in Europe. You also need to be alerted when a good time to close a position, else you have to monitor the trade play out which can be for many hours or even for days. Alert trading makes more sense the longer time-frame used.

Obviously, such alert feature imply the trading strategy need to partial or in full be implemented in code.

Automated Trading
The full step will be to implement the trading strategy in code, for 100% automation. This require the strategy to be 100% implemented in code, not like with alert trading which only need a partial implementation. Full automated trading makes less sense the longer time-frame used. Does it make any sense to use fully automated in the daily time-frame, if you once a day can check the charts?

Mixing Automated with Alert
Many traders are good at finding the entry points, but not good at waiting for the trade to play out - or good at finding the right exit point, but not entry. A solution is to use a mix of alert and automated trading.
 
 
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