Discretionary Trading: The True Art of Trading

Filed under: Learn Forex Trading |

Set and forget systems can be profitable if you employ good money management, a positive risk-reward scenario of at least 1:2, and of course, use price action signals and strong levels of support/resistance to confirm your trades in the direction of a trend. This can be a good solid foundation for being a profitable trader.  However, the true art of trading lies in a style of trading know as ‘discretionary trading’.


Discretionary traders do what the name suggests; they trade at their discretion. They use all of the elements that a set and forget operator would implement. But there is a final and crucially important aspect of their trading. After the trade is in play, they monitor the price action and make informed decisions. After each candle closes in a particular timeframe, they decide whether they are bullish, neutral, or bearish. If they are in a long trade and there is a very bearish looking candle that has just closed, they might move their stops up or even exit the trade. If there is an inside bar, which means that price is consolidating, then they might move their stop up to just under the mother candle of the inside bar.


What discretionary traders are doing, in fact, is watching price action as it unfolds and making informed decisions based on what is happening with that price action. A set and forget system uses such price action signals to enter a trade, so why not use price action to also exit the trade, rather than just having unchangeable exit points? Well, although discretionary trading does make more sense, there is the psychological element that a lot of people cannot deal with. Once a trade is on and real money is under threat, people often tend to make emotional decisions rather than logical ones. This is why a lot of people have a hard time when it comes to discretionary trading. It takes a lot of practice, but the rewards are there if you have the patience.

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