Next Steps When You've Had Discretionary Success
By Dave Mabe
So you've had success by manually trading a strategy.
However, you know that a systematic approach will be more robust and sustainable in the long run.
And a lot less stressful during the trading day because you'll be following a script versus making decisions - a subtle but crucial difference.
I see lots of traders in this situation, and I've helped many make this transition.
But where's the best place to start?
There are two approaches to take here, and one of them is significantly harder.
First, the hard way: completely replace your current manual strategy with an automated version.
This is much harder than it seems for a variety of reasons.
It's often hard to completely recreate all your discretionary rules in code for a backtest
If you are able to recreate it, you'll have a distinct cutover point where you go from 100% manual to 100% automated - the step always takes longer than you imagine
Transitioning from a known quantity to a fundamentally different approach is hard
All these things are magnified when you're producing a steady P&L from your manual strategy.
There's going to be pressure for you to make it work at the cutover point.
Setting an artificial deadline for yourself in trading is almost always a bad idea.
A much better approach is to continue trading your manual strategy (it's producing nice profits - don't change it yet) and create a tangential strategy designed from the beginning to be automated.
There's no need to rip out something that's working.
Your automated approach can operate independently and in parallel to your working manual strategy.
It will be a lot less stressful, and you'll have a much better chance of success.
A benefit of this approach is that you'll have an excellent way to gauge your automated strategy by comparing it to your familiar manual strategy.
But the best part is that the automated strategy ends up being completely additive to your trading business and your P&L.
And then you'll be in a much better position to make changes to your manual strategy.
-Dave
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