Author: Shanda Biggs


In todays post we are going to explore a topic that many traders question. I to questioned this topic on my trading journey. I wondered which trading style would best suit me as an individual and which would be the best for my growth as a trader. What we are going to be discussing today is discretionary trading vs. automated trading. There are similarities and differences between the two styles and we are going to introduce you to both in this post.

What is Discretionary Trading?

Discretionary trading is laying out a trading plan that must be executed manually by the trader. Each trade requires the trader to decide if the setup adheres to their trading plan. If it does then the trader executes the trade. If it does not than there is no trade.

Some discretionary traders are more lenient in their trading plan while others are rigid. What does this mean? To be lenient in your trading means you may take some trades based on “gut feeling” or a “sense” that the market may move one way or another. When the trader feels these feelings they may chose to execute a trader or stay out of a trade. This skill takes years and years of development and only a handful of traders can use their intuition successfully.       

To be rigid in your trading plan means that you have a strict set of criteria and rules that quality potential setups. You then wait for ALL of these criteria to happen and than you execute a trade. As a discretionary trader with a rigid trading plan, you still execute all of your trades manually. Where the risk with this method lies, is that you may not be at the computer screen all the time in order to catch every setup.

What is Automated Trading?

Now that you are familiar with discretionary trading we are going to introduce you to another type of trading that you may or may not have heard about. It is automated trading. Many of you may thing that automated trading or algorithmic trading is only for institutions or big banks. This is not the case. There are many retail traders who have developed automated strategies and trading them successfully.

Automated trading is the process of coming up with a strategy that abides by a strict set of rules. Each rule must be adhered to before the trade is taken. Once each rule is adhered to the Expert Advisor executes your trade without you having to be at your computer screen. It really is as simple as that. Rather than sitting at your computer all day, you predefine your entry, exit and management criteria and the computer will execute your trades.

So How is Each Method Similar?

Discretionary trading and automated trading are actually very similar. They both require a set of rules to be followed in order to be successful. Automated traders know this set of rules must be well defined. Discretionary trades are able to be more lenient with their approach, which can leave room for gaps in their trading plan. They may not have defined the way to manage a trade and therefore when they execute a trade, it could result in unexpected losses. Trading automated systems means that you have already tested and defined exactly what your setup is. This means you execute every trade with no doubt in your mind.

A professional trading system leaves no room for interpretation. Every detail about how the trade is executed is well defined. Your system is the set of rules that will guide your trading. Both discretionary traders and automated traders MUST have systems. This is the only way to succeed in the market.

How is each Method Different?

Although each method of trading has similarities, they also have differences. The main difference is that as a discretionary trader, it is easier to deviate from your trading plan.

After all, you are the one in control. You are making the decisions. This means that there can be room for interpretation with your system and how you define a good setup at different points in time. Some people thrive in this environment while others do not.

To be a successful trader you must have your trading system very well defined. You need to know your action steps when different events happen in the market. Although, successful trading is not all about having the perfect put together plan. It is also about execution. How well are you able to execute the plan? The execution of the system is where I believe the problem lies for most traders and is another major difference between automated and discretionary trading.

A system can be beautifully defined but if it is not executed properly, it will not make money. Your trading plan is nothing without proper execution. Not being able to execute your plan the same way with every trading opportunity is when gaps in your trading plan start to develop.

How can you move forward?

Now that you understand the similarities and differences between automated and discretionary trading you can make an educated decision on which will best suit you and your lifestyle. There are traders who succeed at both types of trading.

But lets jump back to the main point that was reiterated multiple times in this article.

“Successful traders have well defined systems”

They execute these systems flawlessly and this is what allows them to have an edge in the market overtime. For you to develop your edge in the market it is critical that you are trading time tested strategies that are proven to work.

DARA – One Step Forward

For you to take the step to trade systems that are proven to work, requires you to find a mentor or great trader who has developed a strategy that works. You can then follow exactly what they are doing. This drastically improves your learning curve.

Let me now introduce you to our newest trading assistant who we believe will help you on your transition to automated trading.

DARA is a robot trading assistant that allows you to trade automated rules based systems while applying your own trading discretion. The great thing about DARA is that you are able to get alerted of great trading setups and than you can open the charts and decide for yourself if the trade meets your own additional criteria.

How does this help you? DARA is programmed to only find the highest quality setups. This helps you to see exactly what great trades look like. When you are patient to only take great trades, you will have an edge in the market. Successful traders have developed an eye for their ideal setup and that is what DARA will assist you with. Training your eye to only take quality trading setups. To start your trailing our DARA robot click the button below.