DislikedHey, Where is the right balance between mechanical and intuitive trading? Would you please share your views to help me shape my approach? One extreme is fully mechanical systems. Something so well-defined that we could write an automated system to backtest and trade it, e.g. a MT4 EA. I believe, and I guess many of you will agree, that fully mechanical systems either do not work long term (years) OR they are very hard to trade with drawdowns twice as big as annual return (like long term mechanical trend following systems). Another extreme is totally...Ignored
I'm a discretionary trader and I would simply say that your trading plan needs to be rigid (or, thorough is perhaps a better word) enough - and no more - so that when you go over your past trades and ask, "did I follow my plan", you're able to answer that question definitively and without ambiguity. But I wouldn't make it any more complicated than that.
So to perhaps put that in practical terms for you, the first example you gave is probably fine "trade bullish pinbars on key levels in line with the trend" so long as you define in your plan a) what a key level is, and b) what is your definition of a trend. But maybe you're having trouble taking bad pin bars and so have to define that clearly as well. But the things I personally have in my plan are driven primarily by specific issues I've had in the past that have caused me to lose money repeatedly, and worded in a way that "draws the line" so that I'm never in a position to go back to a past trade and ask myself, "did I follow the rules", and my answer is "I have absolutely no clue".
Here's an example from my own experience. I have a rule when day trading the NY open that I've had a minimum of 7 hours of sleep the night before. If I've had less than that, I'm not trading. I created this rule when I realized a clear pattern from my journal, which was simply, lack of sleep = bad trading day. But let's say in my rules I stated "No trading if I didn't get enough sleep", and then I look back at a trading session where I got 6 hours of sleep. Now, did I follow my rules? I have no clue, because I have no definition in my rules of what "enough sleep" is. Now does this mean if I got 6:59 hours of sleep the night before, I'm not rested? Probably not. What I'm more concerned about is being able to look back to my journal when things are not going well, ask why, and clearly say, "oh, I didn't follow the rules", or "I did follow the rules - so maybe this rule isn't working or isn't as important as I thought it was". But you can't make that assessment otherwise.
I tend to think of the balance between mechanical and discretionary as a violin soloist playing at a concert. It's critical for the soloist to a) play the right notes, with the right rhythm, and in tune (follow the rules), but also b) adapt / improvise to the tempo and dynamics of the orchestra & conductor and to the moment (make discretionary decisions based on context). If either aspect is broken or missing, the piece can fall apart. But neither aspect necessarily negates the other and in fact, they actually work together in harmony. I know that's a bit more philosophical than practical but that's the way I think of it.
Hope this helps.
If you can't tell what the herd is doing...you probably are the herd.