1. Objectivity Vs. Subjectivity
Trades based on discretionary technical analysis are just that – discretionary. Traders make their own subjective analysis. Simply put, this makes them more prone to human error.
A systematic approach relies on statistics and numbers. Analyzed properly, numbers don’t lie.
Subjective trading is prone to the trader’s bias. For instance, I am a “gold bug.” For me to find a reason to buy gold is easy. For me to find a reason to short gold is rare.
If Gold drops below it’s 200 day moving average, I might think that gold is “cheap” here. That it is a buy. When technically, buying below the 200 day moving average is not advisable (IMO).
Similarly, if gold daily is under it’s 200 DAY moving average, but it’s 5 minute chart is above the 200 bar moving average, I’m buying on the 5 minute chart. Where, an objective, systematic trader would wait for ALL “their” charts to line.
Especially now, in this age of Youtube and Social Media, everyone is claiming Gold, Silver, or some hot crypto is about to “moon-shot.” That XRP is about to 1,000X. If you aren’t careful, you will buy into the hype. Literally; and buy XRP or Silver or whatever. And either lose money. Or, sit on a trade for weeks, months or even years. Have you done that? I have numerous times. I’m still sitting on crap coins I bought years ago.
Leave the discretionary trading to the master; people like Paul Tudor Jones. Or, my father. He spent 65 years pouring over charts and reading about technical analysis. After a few decades, he got a good feel for the markets and could trade, successfully, that way.
Do you have decades to learn the ART of charting?
Some alternatives to discretionary trading include:
- Systematic trading: Uses predefined rules and algorithms to make trading decisions.
- Algorithmic trading: Employs computer programs to automate trading strategies.
- Quantitative trading: Relies on mathematical models and data analysis.
- Copy trading: Involves replicating trades of experienced traders.
- Rule-based trading: Follows a set of predefined rules for entering and exiting trades.
These alternatives aim to reduce emotional bias and increase consistency in trading decisions.
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