The trading world is divided into two camps.
Camp one: "Follow the system. No exceptions. Remove emotion. Execute like a robot."
Camp two: "Markets are dynamic. You need judgment. Systems can't capture everything."
Both camps have successful traders. Both have spectacular failures. So which approach actually works?
The answer is more nuanced than either side admits.
The Case for Rules-Based Trading
Rules-based systems have compelling advantages:
Consistency. A system does the same thing every time. It doesn't get scared after losses. It doesn't get cocky after wins. It doesn't revenge trade. It doesn't overtrade on slow days.
Testability. You can backtest a rules-based system. Not perfectly - past performance doesn't guarantee future results - but you can at least see how it would have performed. Discretionary judgment can't be backtested.
Scalability. Rules can be automated. A discretionary trader is limited by their attention span. A system can monitor unlimited markets 24/7.
Removal of emotion. The biggest edge for most traders is simply not making emotional mistakes. A rule says "do X when Y happens." There's no room for "I feel like the market might..."
The Case for Discretionary Trading
But discretionary traders have valid points too:
Context awareness. A rule can't know that today is FOMC day, that the CEO just resigned, that the sector is in crisis. Context matters, and context changes.
Adaptability. Markets evolve. What worked in 2020 might not work in 2025. A discretionary trader adapts in real-time. A system keeps doing what it was programmed to do until someone updates it.
Pattern recognition. Experienced traders see things that are hard to codify. The "feel" of a market isn't mystical - it's pattern recognition built over thousands of hours. Converting that to rules is often impossible.
Avoiding the curve-fitting trap. Many "systematic" traders just curve-fit rules to past data. Their backtest looks great. Their forward performance is random. Discretion, applied wisely, can avoid this trap.
The Real Answer: Structured Discretion
The best traders combine both approaches. They use what's called "structured discretion" or "systematic discretionary" trading.
Here's how it works:
Rules define the setup. You have clear, specific criteria for what constitutes a tradeable opportunity. This part is systematic. If the criteria aren't met, no trade.
Discretion filters the trades. Within the universe of valid setups, you use judgment about which to take. Context, feel, and experience inform this filter.
Rules govern the execution. Once you're in, rules take over again. Entry price, stop placement, position size, exit criteria - all predefined. No in-trade discretion.
This captures the benefits of both approaches. Rules handle the emotional parts (execution, risk management). Discretion handles the parts where human judgment adds value (context, filtering).
Where Rules Must Be Absolute
Some areas should never be discretionary:
Position sizing. Calculated the same way every time. Not "I'll size up because I'm confident."
Stop losses. Set before entry, honored without exception. Not "I'll give it a little more room."
Maximum daily loss. A hard cap that triggers a shutdown. No exceptions.
Prohibited actions. No averaging into losers. No trading during news if that's your rule. No exceptions.
These are the guardrails that keep discretion from becoming gambling. Discretion within guardrails is judgment. Discretion without guardrails is emotional decision-making in disguise.
Where Discretion Adds Value
Discretion legitimately helps in these areas:
Setup quality. Not all valid setups are equal. Experience helps distinguish A+ setups from B setups.
Market regime. Is this a trending market or a choppy one? Your systematic rules might not know, but you can feel the difference.
Unusual circumstances. Your system says buy, but the company just announced a fraud investigation. A rule can't anticipate every scenario.
Partial profits. Taking some off at a key level might not be in your rules, but sometimes the context screams for it.
The Development Path
For most traders, the optimal path looks like this:
Stage 1: Pure rules. When you're new, trade a simple system mechanically. You're building execution discipline and learning that your feelings about the market are usually wrong.
Stage 2: Observe deviations. Track when you wanted to override the rules. Were you right? What patterns emerge? Document everything.
Stage 3: Structured discretion. Based on documented patterns, create discretionary filters. "I take this setup only when X context applies."
Stage 4: Refinement. Continuously evaluate which discretionary decisions add value and which are just fear/greed in disguise.
This path respects both the power of rules and the value of experience. You earn discretion by first proving you can follow rules.
The Bottom Line
The rules-vs-discretionary debate is a false dichotomy.
Pure rules ignore the value of human judgment. Pure discretion ignores the reality of human emotion. The answer is both: systematic foundations with discretionary refinement.
Rules handle what you can't trust yourself with. Discretion handles what rules can't capture. That's the structure that wins.
Modular indicator systems embody this philosophy. When you can toggle individual components on or off - cycle detection, squeeze alerts, supply/demand zones, trend filters - you're building a systematic foundation that still allows discretionary selection of which rules apply to current conditions. The system provides options; judgment selects among them.
OmniDeck combines ten independently toggleable systems - TD Sequential, Squeeze detection, SuperTrend, Supply/Demand zones, and more. Pick which rules apply. Augury Grid's 5-filter scoring system (ADX, HTF, OBV, RSI, Distance) lets you decide how strict your entry criteria should be. Systematic foundation, discretionary overlays.
See the modular approach →