Discretionary Vs System Trading

Posted Saturday, April 13, 2019 by
Shain Vernier • 2 min read

When it comes to active trading, there are two primary ways of engaging the market ― discretion or system. Each has a collection of unique advantages and can be extremely profitable if executed competently. So, are you a discretionary or systems trader?

Discretionary Vs Systems Trading

One of the best parts of being a trader is the freedom to conduct business however one deems fit. In reality, achieving sustainable profitability is the only goal; all else are secondary concerns. In order to accomplish this objective, a vast array of decisions must be made every day. The better your decisions, the greater your chance of making money in the market ― simple as that.

If you are a discretionary trader, then your trade-related decisions are made according to an internal mechanism. Market entry/exit and money management are handled on a case-by-case basis. You are involved in every step of every trade, with the final outcome being a product of the choices you’ve made. To say the least, discretionary trading is a highly personal endeavor.

Systems traders conduct business through the implementation of an external mechanism. A rigid framework is put into place that governs all aspects of trading, independent of the individual. Market entry/exit and risk management are executed automatically, exclusive of any human intervention. Systems trading is a hands-off method of engaging the markets ― once the system is built and put into place, that is it. Performance depends upon the strength of the system and the efficiency of its execution; nothing else.

Pros And Cons

In reality, each type of trading has a collection of pros and cons.


  • Pros: Discretionary traders enjoy extreme flexibility and freedom when crafting decisions. Any market may be traded in any fashion, boosting the chances of extraordinary returns and self-gratification.
  • Cons: Applying a strategy consistently can be an epic challenge. In addition, losses can become large, destroying self-esteem. Negative emotions often stem from sub-par performance due to the personal nature of decision making.


  • Pros: Consistency is the single largest benefit systems traders enjoy. All decision making is predetermined, effectively taking human emotion out of the equation.
  • Cons: It is common for trading systems to have a relatively short shelf-life. In the event a system is rendered ineffective, extensive troubleshooting, overhaul, or an entirely new system will be needed.


At the end of the day, it really doesn’t matter what type of trader you are ― making money is the only rule! If you are consistently profitable, then don’t change a thing. If not, it is time to look for a system that works or ways to improve your decision making.

As with most things related to active trading, there really is no single correct answer. The key is to adopt a viable strategy and trade it consistently. If you can do that, then profitability is right around the corner.  

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