Adrian Reid contrasts discretionary trading, where mood and personal judgment shape decisions, with systematic trading that uses explicit rules like if A and B and C then buy. Rules-based systems produce identical, testable outcomes you can backtest.
Discretionary trading is where you use your discretion to make a decision. Take some information from here, some information from there, and you. You combine it and you use your judgment and you make a decision. The information could be a range of different things. It could be what's on the stock chart, it could be the news, it could be social media, could be, you know, tips from analysts and all these sorts of things. And you're supposed to, you know, assemble all of that information and make a logical, rational decision.
And buy or sell the stock. The trouble with that is it's subjective because you can have the same information that I've got. We can make completely different decisions because we come at, you know, we interpret the information differently because it's subjective. It's not consistent, because you might feel really great and positive about the world one day. So you read all the information, go, yeah, I'm gonna buy. But I might not be feeling very positive about the world. I might read the same information and go, holy crap, I'm gonna sell. So that's discretionary, right? Systematic is kind of the opposite. It's purely objective. If A and B and C are true, you buy. If D or E is true, you sell. So it's rules based. And if I have the rules and you have the rules, we get exactly the same answer every time. It's repeatable and it's testable because you can look at the past and say, okay, how did these rules perform?
