Discretionary Trading- A Different Set Of Rules.

We often hear that we should "trade the system", "take every trade"...that the last trade has no bearing on the prior trade etc etc.

But that isn't the case with Discretionary Trading.

"Discretionary-Available at one's discretion; able to be used as one chooses; left to or regulated by one's own discretion or judgement."

"Judgement" is the keyword. I'm pretty sure most would agree that our judgement is easily influenced by how we feel. Binge eating/drinking, driving under the influence, incidence of higher suicide rates around holidays...these are all examples of where people may feel they are making rational decisions but are, in fact, making judgements based on emotion rather than fact. 

So, it then follows that trading in a discretionary manner, even around a pretty objective framework, will always be subject to your feelings/emotions. If there is any room to maneuver within the approach, it will always be in the least favorable direction unless a close eye is kept on how you feel.

Here are some of the things I keep in mind when trading with regards to the discretion involved in the method:

1) The length of time spent thinking about an idea doesn't increase the value of an idea.
2) Increasing trade frequency doesn't translate to a proportional increase in profits- the edge inherent in each trade changes dependent on your state of mind. Even if the set-ups are "the same".
3) What are your emotional triggers? Do you get irritable before you're about to throw the baby out with the bath water?? Do you fight the market when you're tired?? etc. Know your triggers and act on them.
4) Are you seeking the truth or trying to avoid being wrong?

I wish I could explain how important number 4) has been to me!

There are many more ideas, but the goal is the same; to flat-line the waves of Personal Variance which always cancel any positive edge your analysis might have (and you don't need much of the latter in the absence of the former...).