Sometimes it may seem like we give contradicting advice on binary options trading. We suggest that you learn how to select and apply a consistent trading method using trading rules on which to base your decisions. At the same time, though, we urge you to stay involved in your trading and to use your judgment, not to automate your trading completely. When you allow your intuition and judgment to play into your trading decisions, that’s called “discretionary” trading. You can contrast it with “mechanical” trading, where you make your decisions based on your trade rules the same way a computer would. Most people aren’t 100% mechanical or discretionary traders. How discretionary you are is partly a question of your personality. For some people mechanical trading works best, while others do better if they let their intuition and personal judgment play a bigger role. You have to test until you find out what works.

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Good Example Of Discretionary Trading

What’s a good example of discretionary trading? Let’s say that price action signals you that the price of oil is going to rise. You could place a trade, but you notice that the context surrounding your setup is less than stellar. Maybe there is a moving average positioned to act as resistance above your entry. Discretion warns you that you might enter only to have your trade turn against you. So you decide to skip this one and wait for a better setup. Surely enough, the price action was situated in the wrong place, making the entry weak and oil trades down after the entry is triggered. Thankfully you weren’t invested so you didn’t lose.

Bad Example Of Discretionary Trading

Here’s a bad example. Let’s say you’ve been watching the news a lot and you think you know a few things about oil. Some limited skirmish in the Middle East causes you to pause and think, “I bet that oil is going to go up in price.” You’re not a geopolitical expert and you’re not an expert on fundamental analysis. You just think you’re smart. So you place a discretionary trade on oil, assuming it will go up. Then oil goes down, because it turns out that the geopolitical pressures were more complicated than you realized, and you didn’t have a clue what was really going to happen. You simply gambled. That’s not really discretionary trading—it’s just arbitrary decision-making.

Hopefully this illustrates the idea of discretionary trading more clearly for you and helps you to see the difference between using sound judgment and wagering based off of irresponsible assumptions. This should help you to become a better binary options trader!

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