Discretionary Trading vs. Systems

Filed under: Learn Forex Trading |

This is a hotly debated topic in the world of forex. Is it better to use a discretionary method or a systematic one? First of all, let’s define the terms.


A discretionary trading method is when a trader puts the market in context and in part, uses his gut feeling as well as technical indicators. Conversely, a system is very rigid and has a fixed set of rules.


The benefit of using a system is that you can mitigate emotion from your trading by simply follow a very rigid, fixed set of rules. However, trading is ultimately done by humans and as such, having a very mechanical system such as this can have certain downfalls. For example, one of your rules may be to trade pin bars in the direction of the trend, with the trend determined by some moving averages. However, if the market is very choppy and volatile, the discretionary trader may stay away from the market, while the systematic trader would have to take the trade – which probably has no edge at all.


Discretionary trading is particularly difficult for beginner traders, because they have very little experience to draw on. For this reason, I would suggest that beginners to forex trading take a more systematic approach to begin with. After some considerable screen time, you may begin to see patterns in the market that occur time and time again; and once you have experience with this, you could start to take a more discretionary approach and pick and choose your trades. However, trading is like any other field. You must put the time in and gain some experience before you can excel. Try trading on a demo account for six months and see how you do with some virtual funds. See it as your forex trading education, and if you are profitable after those six months, then you could start to dip your toes in with some real funds.

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