Two Different Approaches
Algorithmic trading relies on pre-defined rules executed by software, while discretionary trading depends on a trader's real-time judgment and experience.
Trade-offs
- Consistency: Algorithmic systems execute rules identically every time; discretionary trading can vary with emotion or fatigue.
- Adaptability: Discretionary traders can react to unusual events an algorithm wasn't designed for.
- Time Commitment: Algorithmic systems can run unattended; discretionary trading requires active screen time.