Richie Hermes

I love mechanical strategies.

They are easy. Its like you analyze, enter and its done. No need monitoring or worrying.

So I have spent years rotating mechanical strategies. And I have also traded dynamic ones or so called discretionary strategies.

I have enough experience on both.

This is not going to be pros and cons type.

Its going to be what I experienced.

Here we go:

Mechanical strategy is good on paper and for the emtion. There is no looking after the trade once you enter.

There are some really good wins and really bad losing streaks with it.

In my recent test of a strategy I had 11 back to back loses. The account was already down 5% and risking 0.5% per trade the 11 loses breached the account.

I am sure if I traded enough times, like 50 trades, the pnl would be at least breakeven.

But then we are trading prop.

Keeping under the max drawdown is vital.

Every strategy has a losing streak and with a mechanical one, its worse,

Why?

Because we know some setups are going to fail. And instead of culling it we let it run to stop loss.

Here is where dynamic strategies rise.

We know this won’t work or has reached an important level. So we either cut it way before it hits stop loss and take profit earlier than expected.

It might sound counterintuitive to some. Because the whole idea is to let your setup play.

Yes, I agree.

But the market changes. It isn’t the same condition in which you entered.

The market is alive. New information is generated every second.

So you cut the non working ones and give space to which works.

And again you keep taking profits here and there which gives confidence and raises your balance.

With mechanical, you are saying to the market, “Look this is what I had in mind. I don’t care if you change.”

This mindset is good as you are not tampering with your edge. You are allowing the sample to bring out a positive edge.

But not in prop.

You will lose to losing streaks. No matter how disciplined you are.

In all honesty, and its my opinion, I believe dynamics are best for props and if you have a mechanical edge use it on your personal acc.