Systematic vs discretionary — two philosophies, one account

Educational content only. This post reflects my personal views and experience. It is not financial product advice, general advice, or a recommendation to buy, sell, or hold any asset. Trading carries a high risk of loss. Speak to a licensed Australian financial adviser before making any financial decision.

Two philosophies

There are two general approaches to speculating in markets: forming a view on something the price doesn't reflect yet (discretionary), or isolating a statistical pattern the market keeps producing (systematic). Both approaches have produced winners and blown plenty of people up. What I've noticed — in my own account and watching others — is that running both at once compounds the downside of each.

The switching cost

Here's the specific trap: your bot is up 2% for the week, and you see a chart setup on the hourly that screams long. You're sitting at your desk, the trade looks clean, the risk-reward is 3:1. You take it. It loses.

Now your discretionary trade has wiped out the bot's weekly P&L. Worse: you start second-guessing the bot, because it "missed the move." Next week you override one of its entries. Now you don't have a systematic edge — you have a bot that you're vetoing based on mood.

Every professional quant I know has done this. It's not a retail problem, it's a human problem. The fix is a hard rule: one account, one philosophy.

A framework for thinking about the choice

This is how I personally reason about which philosophy fits someone — it's not a prescription, it's one framework among many. Three factors tend to matter:

• Screen time. Can you actually watch the market during the hours your style trades? Not "I'll check in at lunch." Watch it.
• Pattern recognition. Hardest to measure. Some traders keep a 60-day journal, tag setups, and review whether they can distinguish what works for them from what doesn't. That's one way to find out.
• Emotional control under pressure. The one that tends to catch people. Most retail losses I've read about don't come from a bad system — they come from overriding a reasonable system under stress.

If any of those three is genuinely weak, systematic often makes more sense for that person than discretionary. That's not a rule — it's a pattern.

The systematic trade-off

A bot doesn't care about your mood, your sleep, or the CPI print. It sizes, enters, manages, and exits according to rules that were written when the author was thinking clearly.

The trade-off is that systematic bots capture a narrower range of edges. You can't easily systematise "geopolitical intuition." You can very easily systematise "capture funding when the basis is positive and the spot carry is below threshold X."

For people with day jobs and no screen time, systematic tends to be the more forgiving path. That's not a guarantee — no approach is. Plenty of systematic strategies have been crushed by regime changes, and plenty of discretionary traders have done just fine. Fit matters more than philosophy.

What I personally run

For my own account, mine is almost entirely systematic. Seven bots, running on Hyperliquid with one CEX for diversification. I keep a small bucket for discretionary curiosity — if it zeros out it doesn't meaningfully affect my financial situation.

This is what works for me given my own risk tolerance, time availability, and past mistakes. It isn't a recommendation for anyone else. Anyone considering their own approach should talk to a licensed Australian financial adviser who understands their situation.

Educational content only. Not financial product advice. See /terminal and run cat rules.md for the list of rules I personally trade by.