Discretionary Trading: Part Art, Part Science

Filed under: Learn Forex Trading |

Discretionary trading, as opposed to system trading (which is an inflexible method based upon a number of mathematical rules), is a methodology which involves taking each chart as unique and using your knowledge and skills to find profitable setups. It has been said that discretionary trading is part art and part science. This is because many discretionary traders use their gut feeling as well as their knowledge when trading. This ‘gut’ feeling does not actually come from the gut of course. It is more likely that this feeling arises from the unconscious mind based on similar setups that have been tried in the past. The human mind has so much information to process that it tends to only store the really important things as conscious memories. All of the other stuff, like drinking a cup of coffee, crossing a road, or making a trade (!), tends to get stored as unconscious memories and manifests itself from time to time as a ‘gut feeling’.


With discretionary trading, a trader has to see a setup for themselves rather than it being flagged by an automatic mathematical system. They have to find significant areas of support and resistance, and they have to recognize patterns that have worked favourably in the past. The scientific part is knowing which patterns have a high probability chance of success; and you discover this by testing historical data, forming a hypothesis, and then doing a live test. The artistic part, and the more difficult part, comes in following and trusting that gut feeling and acting on it. Whether you follow a systematic approach or a discretionary approach is up to you and your unique personality. There is not one best fit for everyone, and in the end, it is up to you to discover what is the right way for you to trade.

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