In my opinion, the reason most people fail at trading is because they never learn how to trade. The argument about mechanical vs discretionary is very relevant too.
It is human nature to want to follow a mechanical approach. This gives you a finite ruleset to follow and absolves you of decision making responsibilities.
On the other hand, a discretionary approach is being touted here as random clicking on a gut feel. This is because it is misunderstood in my opinion.
It appears that some people think that a totally mechanical trading approach is something can be developed quickly and/or easily by combining various things they read in trading books. This means they don't actually need to learn how the markets work and what relationships exist between different markets.
There seems to be a leap of faith taken once the basics of TA are understood. People make the mistaken pesumption that cobbling together bits of this information on TA will lead them to a profitable mechanical strategy that will work in all market conditions, in all markets and in spite of any fundamental information at all. If ONLY it were that easy.
Now, not only do people
underestimate the effort of developing a non-discretionary approach, they also
overestimate the effort of using a bit of discretion. You can still have boundaries when you use discretion. You can still have trading rules. You can decide where your discretion would be applied. For instance, you might use discretion deciding when to enter but have hard and fast rules on stop size, trade size and trade management.
Let's put some meat on the bone of discretion....
This is the e-mini - I flipped it on yesterday during the Globex session, not expecting to see much yet games were afoot.
At point "1", we have price hitting prior support (thank you TA). What caught my eye at this point was some guy with over 6000 contracts on the DOM at 1110.50. As price came to him, he stood his ground and brought up all contracts thrown at him. You can see below how the volume rose as more and more contracts got traded. The Time and Sales showed that he was sucking up some serious size.
By point "2", he was down to just over 3000 contracts on the DOM and then someone took him out - basically someone hit him for the whole lot in one go and price dropped off rapidly. Obviously - there is interest at that price level !
At point "3", we can see how this played out. Despite efforts to defend that price level, the game ended here and I should imagine this very much ruined someone's day but made someone else's. Point 3 would have been an excellent place to short on the break of that level (of course - easy to say in retrospect).
So - where was it heading ? The last swing low of the prior day was 1103.25, which made it a reasonable target. So - as price reached that point, it made sense to come to attention again. At point "4" there were plenty of sales going through, not a great deal of size on the bid but price wasn't moving down and then gradually, some fairly large contracts started coming through on the T&S. Here we have TA to the rescue again - an 'almost' double bottom (and doji/hammer possibly on the higher TFs) but significantly, it couldn't break the level, someone was sucking up all the size and big players were starting to put some sizeable orders through.
So - we have TA - support, double bottoms. We also have discretion.
This is not rocket science is it ? It's much simpler than anything I read by Ehler.
I would say most traders fail because they think mechanical is an easy route and never really understand why they fail. On the other hand, they feel that discretion is too high a mountain to climb when in fact, it is not.
. as i;ve said before though i think implementing a semi-mechnical side can be benfitial to discretionary trading
