It all boils down to this: do I care about being right or about making money? Since I care more about being right than about making money, I am more attracted to discretionary trading
Indeed, the bias wanting to be right is precisely one of the (psychological) problems that need to be conquered in order to be become a successful trader. Left unchecked it can even affect systems development where one would then typically aim for a high win rate, typically at the expense of risk:reward ratio. Anyway, I wanted to just point out that there's a flawed premise/assumption in your statement above: That discretionary trading is about being right. It is not. It is about making money, and only that. In order to be a successful discretionary (or what I would rather call "manual") trader, you in fact need to be able to be wrong, you need to be able to lose, when neccesary, and quickly. Otherwise, you get exactly what you've been seeing for 12 years, single trades that wipe out all your good work.
I repeat: In order to be a successful trader, you need to be able to be wrong. And not only that, you need to be able to wrong and lose money. And not only that, you need to be able to be wrong, and lose money, and not feel bad. And not only that, you need to be able to do all that, and then reverse your position (if needed.) And not only that, you need to be able to do all that *quickly*. (Adapted from
TraderFeed: Why Trading Might Be the Most Difficult Job in the World)
As Brett Steenbarger writes,
"Many people have a need to be right. That makes it difficult to quickly accept losses, and it makes it especially difficult to flip one's views. The best traders don't have a need to be right, and in fact they readily admit that there's many times they're wrong.
There's a different reason why trading might be one of the world's most difficult occupations: the rules of the game are always changing. In most performance activities, from sports to chess, the rules don't change from year to year. Market patterns, however, are continually shifting: trends change, volatility changes, and historical patterns that worked at one time suddenly fail during the next time period (a phenomenon that has recently tripped up several quant funds).
Because markets are ever-changing, success is never assured. Indeed, it's not at all unusual for very successful traders to re-enter a learning curve when market conditions change radically. It takes a very secure person to be able to accept those returns to the learning curve, and it takes a highly conscientious person to keep losses down when market patterns undergo a major shift."
He also touches on why totally automated systems trading is at some level a never ending chase -- even with a fully automated mechanical system that works now, sooner or later the markets changes sufficiently to break the system. At that point human intervention is required and so human discretion gets applied and put back into the system to fix it or write a new one. That same would've of course held true of a manual system, except that the trader would've probably noticed the market changing underneath him a little more quickly and adjusted/adapted automatically. But, I digress...
Regarding all the reflections on discipline and psychology: you seem to be trying to deny the importance of discipline and psychology for discretionary trading, when paradoxically it seems to me that, and by your own admission you have major discipline problems and in reality psychological issues (no offence intended, and when I say that I readily say that we all have issues!), which is what's prevented you from being a successful discretionary (e.g. manual) trader for 12 years! Remember that discipline for example includes such things as following a set routine in preparation for the trading day. Analyse previous day movements, identify developing opportunities, support/resistance levels, Pivot levels, important dates and times, and whatever is needed to have a clear head when you start trading. It includes going to bed early enough so you get enough sleep, so you'll be alert when trading, taking excercise, and doing all those things you seem to be subconsciouly rebelling against. It includes *sticking to the rules of your system while in the trade* and to *cut your losses* if you've been wrong! I would argue that in reality the "discretion" part in discretionary trading comes in more *before* trade entry, where you filter *out* potential trades and/or reduce position size if for example there are reasons that you know of that make the trade more risky than normal that are not taken into account by your basic system.
Discipline further includes stuff like keeping a proper trading journal with enough information that you can analyse it afterwards and *learn from it* (for reference,
see here and
here.) Not being able to muster up the willpower to consistently do this, is I would argue, a simple lack of discipline. I would submit that this entire dichotomy (which I would agree is a false one as per a previous poster) that you see between systems trading and discretionary trading is itself really a subtle attempt at avoiding responsibility/a lack of discipline to do what is neccesary to succeed. A dichotomy by the way, is a "split" or "distinction", which you would've quickly seen had you bothered to google the word in dictionary.com. To me semi- or fully- automated/systems/mechanical trading is simply a system where all rules are externalised into a program or indicator such that all trades stand or fall based on the rules, and are under the control of a computer. Discretionary trading is no different except that *you* are the computer/machine and thus, you need to have disciplien and sound psychology to execute like a machine, while being able to bring to bear the substantial capability of your brain to support the basic system to help make it more successful. This does not mean you can make and break rules anytime you please.
Anyway, I hope all these comments help, and that they don't come over as harsh or over critical.
Regarding fixing bad habits, perhaps this post may help:
TraderPsychology: So How do Traders Break Their (Bad) Habits?
Finally regarding giving up trading (or perhaps in your case discretionary trading), here's some more thoughts from Brett Steenbarger. Maybe it will give you a new perspective of where you're at:
TraderFeed: Deciding to Give Up Trading
As another aside, in his book "Trade your way to financial freedom" (which I thorougly recommend you read), K. Van Tharp writes about "Judgmental biases" in chapter 2. This chapter lists and discusses all the different subtle psychological biases we have that can mess up your systems development or execution. One of the biases is the "Conservative-with-Profits-and-Risky-with-Losses" bias [pg. 42]. He writes:
"Perhaps the number 1 rule of trading is to cut your losses short and let your profits run.
Those who can follow this simple rule tend to make large fortunes in the market.
However, most people have a bias that keeps them from following either part of this rule:
Consider the following example in which you must pick one of two choices. Which would you prefer: (1) A sure loss of $9,000 or (2) a 5 percent chance of no loss at all plus a 95 percent chance of a $10,000 loss?
Which did you pick, the sure loss or the risky gamble? Approximately 80 percent of the population picks the risky gamble in this case. However, the risky gamble works out to a bigger loss (that is, $10,000 * 0.95 + 0 * 0.05 = $9,500 loss -- which is larger than the sure $9,000 loss.) Taking the gamble violates the key trading rule - cut your losses short. Yet, most people continue to take the gamble, thinking that the loss will stop and that the market will turn around from here. It usually doesn't. As a result, the loss gets a little bigger, and then it's even harder to take. And that starts the process all over again. Eventually, the loss gets big enough that the gambler becomes forced to take it. Many small investors go broke because they cannot take losses.
Now consider another example. Which would you prefer: (1) a sure gain of $9,000 or (2) a 95 percent chance of a $10,000, plus a 5% chance of no gain at all?
Did you pick the sure gain or the risky gamble? Approximately 80 percent of the population picks the sure gain. However, the risky gamble works out to a bigger gain (that is, $10,000 * 0.95 + 0 * 0.05 = $9,500 gain -- which is larger than the sure gain of $9,000). Taking the sure gain violates the second part of the key rule of trading - let your profits run.
Once they have a profit in hand, most people are so afraid of letting it get away that they tend to take the sure profit at any sign of a turnaround. Even if their system gives them no exit signal, it is so tempting to avoid letting a profit get away that many investors and traders continue to lament over the large profits they miss as they take sure small profits. These two common biases are well stated in the old saying: "Seize opportunities, but hold your ground in adversity." The good trader had better use the adage: "Watch profit-taking opportunities carefully, but run like a deer at the first sign of adversity."
Another bias he covers is the "My-current-trade-or-investment-must-be-a-winner" Bias. He writes:
"What makes all these problems come to the forefront, is the overwhelming desire of human beings to make current positions (those you have right now) work out. What happens? First, when you have a losing position, you'll do anything to nurse it along, hoping it will turn around. As a result, losing trades tend to become even bigger. Second, people take profits prematurely in order to make sure those profits remain profits.
Why? People have an overwhelming desire to be right. Over and over again, I hear traders and investors tell me how important it is for them to be right when they make a market prediction or, even worse, when they invest their money in the market.
[...]
Yet being right, has little to do with making money."
So, I humbly submit that you need to decide that you want to make money and don't care about being right anymore. You need to tell yourself and keep telling yourself that you don't care about being right anymore, you'd rather know you're wrong and move on, and make money in the long run, than being right and lose money. (Of course, even though we want to be right, us wanting it doesn't end up making it so -- the market eventually proves to you in the cruellest way possible that you are in fact wrong -- by taking your money. So you you end up being wrong and penniless. So, you might as well be wrong and retain more of your pennies, if you're going to be wrong sometimes anyway...)
Here's another post by Brett Steenbarger on how to lose money the right way as a trader, relevant to all this.
Finally, can I suggest you read some of the other posts on Brett Steenbarger's blog (the Traderfeed one.) There's a heck of a lot of stuff there to make you think. He also wrote several good books about trading and psychology which you might want to read.
Right, I didn't intend to write that diatribe when I started... hope it helps at least...
