Let’s imagine you have a profitable system already and you want to see if you can improve the results by using discretion or maybe you have a quasi-defined strategy that you think could work with discretion. Below, I list steps you might take to go about the conversion to increase your probability of success:
If you beat the system significantly then you have evidence you can improve the results. You might, also, be able to identify new rules or improvements which you can add to the system.
If you have a few systems, you could follow the same process with each system and then you’d have a playbook. Obviously, this is the opposite way that most traders go about things. There is a valid question that even if you can manage to improve the results whether or not you can improve them significantly enough such that it makes it worth the time and increased risk. But, this approach is certainly more refined then simply trying to “wing it”and make changes on the fly.
The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at email@example.com.
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