Why Every Discretionary Trader Still Needs Structure
If you’ve been following my content, chances are you’ve heard me reference “trading systems” more than once. But what do I actually mean by that — especially if I wasn’t using any bots or algos to execute trades?
Let me clarify something:
You don’t need automation to run a trading system.
Every trade I made was manual — old-school keyboard clacking. And yet, I followed a systemized approach to the markets with a high degree of structure. That’s what I want to unpack here.
A Trading System Defined
At its core, a trading system is:
A structured method for trading that minimizes guesswork and removes as much emotion as possible from decision-making.
It’s a repeatable set of rules that tells you:
- What to trade
- When to enter or exit
- How much to risk
- When to scale up or back down
- How to manage yourself
Think of it as your personal operating system for the markets. It brings discipline and consistency to your process — two non-negotiables for any long-term success.
Systems Aren’t Just for Quants
Yes, discretionary traders use systems too.
There’s still subjectivity and art in interpreting the markets — but that doesn’t mean you should “wing it.”
The more rules you can define, the less mental capital you burn during live trading.
Let’s break down what a practical, real-world discretionary trading system looks like.
Step 1: Define Your Universe
Know what’s in play and what’s not.
The first part of any system is filtering which stocks you allow yourself to trade. You’re trying to pre-define where your edge might exist.
Examples of criteria:
- “I only trade stocks with fresh news.”
- “I only trade stocks doing 3x average volume.”
- “I only short broken slot machines on the third green day.”
- “I only play tickers with range and clear catalysts.”
These filters narrow your universe to the tickers most likely to match your playbook. They prevent you from getting distracted by noise and chasing things that aren’t aligned with your edge.
Step 2: Define Your Setup(s)
What exactly are you waiting for?
Once you know what names to watch, your system should define the actual patterns or signals that trigger a trade.
Each setup should include:
- Entry rules — What’s the trigger? Is it a breakout, a reclaim, a VWAP push, etc.?
- Exit rules — What conditions get you out? Prior bar lows? Price target? Volume stall?
- Position sizing — How much do you take when confidence is high vs. when it’s just average?
The more explicit, the better. If your setup is vague, your decision-making will be inconsistent — and your results will reflect that.
Step 3: Define Your Risk Management Rules
Control the downside. Protect your capital.
Every good trading system includes built-in constraints to keep you in the game. That means setting:
- Max loss per trade
- Max daily loss
- Sizing caps based on account equity or volatility
- Rules for when to increase or reduce size
And perhaps most importantly:
- When to take a break
“If I hit 2 red days in a row over X amount, I step back.”
“If I’m up 3R on the day, I take off 50% size on the next trade.”
Risk management is not just about stop-losses. It’s about creating a structure that protects you from yourself — especially in tilt-prone environments.
Step 4: Turn It into a Playbook
From system → structure → execution.
If you’ve followed my videos, you know how much I preach the importance of building your trading playbook.
What is a playbook?
It’s simply the documentation of your trading system — written down, structured, and reviewable.
Your playbook should include:
- Your filtered watchlist criteria
- Your top setups and their triggers
- Example charts
- Rules for sizing, scaling, and risk
- Notes on market context or environment filters
Final Thoughts: Structure = Freedom
Here’s the kicker:
If you’ve already built a playbook, congrats — you’re already using a trading system.
Maybe you didn’t think of it that way at first. But once your process is structured and repeatable, you’ve moved beyond “random trading.” You’ve stepped into the realm of intentional execution.
The beauty of a system is not in rigidity — but in clarity. It frees you from decision fatigue. It gives you data to review. It puts your process on rails so your mindset can focus on the right things.
And next time someone at the family dinner table asks,
“What do you actually do?”
You can proudly say:
“I run a trading system I built myself.”
(And no, Grandma, it’s not gambling.)
P.S. If you’re trading the wrong stocks, then it CAN BE gambling – learn more here!
