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Define discretion

  • #1
  • First Post: Mar 7, 2013 12:18am Mar 7, 2013 12:18am
One phrase that you see quite often is “Trader’s discretion”
Well what is discretion exactly?
Is it some sort of mystical intuition?
How does discretion come into play when trading a system?
If you have a set of rules that dictate when to enter/exit a trade and you deviate from those rules: is that discretion or lack of discipline?
I guess that trading a naked chart requires much more discretion than trading a system.


I believe that you need discretion when deciding what are relevant S/R levels. Also, if you draw trend lines, you may need to use your discretion with the highs or lows that you use.
Maybe you need discretion when deciding whether a break out from a range is a fakie or not?
Some may say that they are using discretion when deciding not to enter a trade because the market is ranging. Well no, that’s not discretion if it is one of your rules. Of course it may require discretion to recognize that the market is ranging?

So how do you define discretion?
Please Do Not PM Me With Coding Enquiries
  • #2
  • Mar 7, 2013 4:05am Mar 7, 2013 4:05am
choice
Time hides Nothing
  • #3
  • Mar 7, 2013 5:19am Mar 7, 2013 5:19am
discretionary traders like to think of as themselves as being analytic . they make "analysis" they have "methods".
for me what discretionary traders are doing is witchcraft combined with gut feeling and luck. you cannot follow their analysis and you cannot follow the method because it usually doesn't work. but you can see a discretionary trader with a nice equity curve , nice statistics and the consistency for long term profits.
  • #4
  • Mar 7, 2013 8:22am Mar 7, 2013 8:22am
Magic 8 ball, the brokers just follow through on whatever comes up..
  • #5
  • Mar 7, 2013 6:41pm Mar 7, 2013 6:41pm
Quoting Gumrai
Well what is discretion exactly?
Dis-cre-tion (dis'kreSHen) - noun

1. The freedom to decide what should be done in a particular situation.

2. Ability or power to decide responsibly

3. Freedom to act or judge on one's own

4. Freedom of judgment or choice

5. The right, but not the obligation, to do something
Doing what you like is Freedom. Liking what you do is Happiness.
  • #6
  • Mar 8, 2013 12:12am Mar 8, 2013 12:12am
I think the missing link to discretion is logic. Logical discretion ? Is there such a term ?

Discretion (as an excuse) usually occurs when I want to trade against my plan, and the results are usually disastrous. Just my mind looking for an excuse to gamble.

However, many times my "discretion" also saved me from taking lousy trades. As a precaution, I only use "discretion" to avoid taking a trade from my system's signals and never use discretion to enter a trade especially those that are not from my system.
  • #7
  • Mar 8, 2013 3:22am Mar 8, 2013 3:22am
Discretion is not sticking to a plan. Simple
Most people have the will to win, few have the will to prepare to win
  • #8
  • Mar 8, 2013 4:11am Mar 8, 2013 4:11am
Quoting burnzmeister
Discretion is not sticking to a plan. Simple
Nonsense. Almost everything in trading has an element of subjectivity to it. Unless you're running a rigid, mathematically based system you're probably using discretion in trading. What direction trend are we in? How are you defining the trend? Is this swing a higher high? That swing? What about that one? Does it count as a lower high? What about the 4 hour chart, it looks like it's the opposite!

There's a reason the markets will never be efficient. Every trader has a different way of looking at the markets, even if they share a general strategy.
  • #9
  • Mar 8, 2013 4:35am Mar 8, 2013 4:35am
Honestly, traders use the term "discretion" as an excuse for not defining a trading plan and sticking to it.

IMO, it's nonsensical to guess where the market will go next because you might have seen a similar pattern some time in the past, but you don't know how relaible the pattern is because you can't quantify the likelyhood of the outcome. I speak from a programming perspective, I don't make things up as I go along.
Most people have the will to win, few have the will to prepare to win
  • #10
  • Edited 4:56am Mar 8, 2013 4:41am | Edited 4:56am
Quoting burnzmeister
Honestly, traders use the term "discretion" as an excuse for not defining a trading plan and sticking to it.

IMO, it's nonsensical to guess where the market will go next because you might have seen a similar pattern some time in the past, but you don't know how relaible the pattern is because you can't quantify the likelyhood of the outcome. I speak from a programming perspective, I don't make things up as I go along.
So if that's the case, and taking into consideration what you said before: 'Discretion is not sticking to a plan', it would seem that you think that once a plan has been written in concrete (so to speak), that there can be no deviation from that plan whatsoever. Is that what you're saying?
Doing what you like is Freedom. Liking what you do is Happiness.
  • #11
  • Mar 8, 2013 4:54am Mar 8, 2013 4:54am
Quoting burnzmeister
Honestly, traders use the term "discretion" as an excuse for not defining a trading plan and sticking to it.

IMO, it's nonsensical to guess where the market will go next because you might have seen a similar pattern some time in the past, but you don't know how relaible the pattern is because you can't quantify the likelyhood of the outcome. I speak from a programming perspective, I don't make things up as I go along.
And I assume since you're such a great programmer you can write all of the code necessary to detect the vast number of subtle variations of patterns that the human eye can readily detect? Good luck with that. Programming intelligence is a nice thought but when it comes down to it putting it into computer code is a lot more easily said than done.
  • #12
  • Mar 8, 2013 5:22am Mar 8, 2013 5:22am
I never said I was "such a great programmer". Why are you being so defensive?

I stick to a plan, which keeps things simple and it works for me, but I trade momentum, not patterns so I guess thats where we differ.
Most people have the will to win, few have the will to prepare to win
  • #13
  • Mar 8, 2013 6:21am Mar 8, 2013 6:21am
Quoting burnzmeister
Discretion is not sticking to a plan. Simple
What if you plan to exercise discretion?
Time hides Nothing
  • #14
  • Mar 8, 2013 6:46am Mar 8, 2013 6:46am
Wow..."discretion"...really??!! I must say I am very disappointed with some of the responses listed here. Definitions and personal opinions aside, whether you like it or not you use discretion every day in trading. You decide which time frame to trade. You decide which direction to trade. You decide what signal is a "AAA" signal and which signal is not. You decided to hold or take profit. If you have a "plan" you decided how your plan would work. You decided to follow (or not follow) your plan. Even if your computer is trading for you...you decided to use your computer in the first place, you decided which program to use. If you programmed it yourself, you decided which logic to use, and how it would be employed.

Discretion is nothing more than the act of using your best judgement to make a damn decision. Why all the fuss? Either your making good decisions or your not...if you are then your discretionary process is working...if your not then you need to redo your process...that's it.

Geez folks...move on
  • #15
  • Mar 8, 2013 7:01am Mar 8, 2013 7:01am
Quoting gspajon
Wow..."discretion"...really??!! I must say I am very disappointed with some of the responses listed here. Definitions and personal opinions aside, whether you like it or not you use discretion every day in trading. You decide which time frame to trade. You decide which direction to trade. You decide what signal is a "AAA" signal and which signal is not. You decided to hold or take profit. If you have a "plan" you decided how your plan would work. You decided to follow (or not follow) your plan. Even if your computer is trading for...
There's no "fuss".....take a pill....geez
Doing what you like is Freedom. Liking what you do is Happiness.
  • #16
  • Mar 8, 2013 7:02am Mar 8, 2013 7:02am
I think you're missing my point gspajon. Of course you need discretion to create your trading algorithm, but once you have defined the set of rules to determine whether or not a signal is a signal, discretion doesn't even come into it, for me anyway.
Most people have the will to win, few have the will to prepare to win
  • #17
  • Mar 8, 2013 11:22am Mar 8, 2013 11:22am
Here's one way to get an explanation for what broker's discretion is all about - ask your broker and chances are each would come up with their own version on how to define what at the outset seems simple enough - LOL
  • #18
  • Mar 8, 2013 11:34am Mar 8, 2013 11:34am
Quoting burnzmeister
I think you're missing my point gspajon. Of course you need discretion to create your trading algorithm, but once you have defined the set of rules to determine whether or not a signal is a signal, discretion doesn't even come into it, for me anyway.
Lets not confuse discretion with discipline...discretion is using some form of judgement (good or bad) to make a decision that seems logical based on your thought process. Whether you are right or wrong is relevant. However, once you have decided on your trading plan (using your best judgment) then you use "discipline" to adhere to your plan. Deviating from that plan is NOT discretion, it is simple lack of discipline. The idea of having a plan is so that you will always act in your own best interest as you have determined that to be using your discretion.

You point is well taken, once you have a set of rules and a plan to follow there is NO further discretion because that step has already been taken. The next step is discipline.
  • #19
  • Mar 8, 2013 12:46pm Mar 8, 2013 12:46pm
I would define discretion as a decision making process that occurs in the absence of fixed rules.
If you have rules in place but ignore them, that isn't discretion
si hoc legere scis nimium eruditionis habes
  • #20
  • Mar 8, 2013 4:32pm Mar 8, 2013 4:32pm
Quoting gspajon
Deviating from that plan is NOT discretion, it is simple lack of discipline. The idea of having a plan is so that you will always act in your own best interest as you have determined that to be using your discretion.

You point is well taken, once you have a set of rules and a plan to follow there is NO further discretion because that step has already been taken. The next step is discipline.
No it is not a lack of discipline.....it is using good judgement ie discretion to make a decision based on the information that is coming from the *EVER CHANGING* market.

Of course every trader must have a sound plan, that is essential. It is also essential that a trader moves with the market and remains flexible......to bend like a tree in the wind, so to speak. If discretion is rules out of a plan, then you have a human EA....and EA's do not work simply because they cannot adapt their plan to suit the market.
Doing what you like is Freedom. Liking what you do is Happiness.
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