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Discretionary trading

Trading where a human makes the final call on each trade, using judgement that is not fully reducible to rules.

Discretionary does not mean random. Most good discretionary traders have a trading-plan, a checklist, and hard risk limits; what they keep is the right to say no to a setup that technically qualifies, or to size up when the context feels unusually good.

The honest difficulty is measurement. If the trader applies judgement, you cannot backtest the judgement, so the only real sample is the live trading-journal. That sample grows slowly: at four trades a week it takes a year to reach 200 trades, which is still a thin basis for claiming skill.

Discretionary and systematic-trading are ends of a spectrum. Many books are systematic on entries and sizing, discretionary only on whether the strategy is allowed to trade at all that day.

Related: systematic-trading, trading-plan, trading-journal, sample-size

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