EA Recommendation 1: What I think about discretion and EA, and considering it with the “Three Ms” in investing
Good morning, everyone. This is Renmi.
Recently, on the recommendation of an important person at GogoJungle, I decided to try writing something called "Investment Navigator" for the first time.
Honestly, I’m still figuring out what to write, but I plan to write in a free-wheeling style, without setting rules from the start, writing whatever comes to mind.
According to the important person at GogoJungle, “Wouldn’t it be okay to write it like a diary?” So I hope I can write casually.
Now, I was wondering what to write in the first post, but there was a theme I’ve been thinking about recently, so I’d like to talk about that.
What are the “Three Ms” in Investing?
Are you familiar with the “Three Ms” of investing?
- Mind (psychology): Eliminate greed, fear, and impulses, and trade with a calm mental state.
- Method (methodology): Utilize carefully selected chart patterns and trading strategies.
- Money (fund management): Practice objective risk management based on data.
These are known as important elements for achieving investment success.
In discretionary trading, all of these “Three Ms” must be managed by the trader themselves. However, no matter how much experience you gain, completely controlling your “Mind” is extremely difficult. For example, when losses accumulate, you may lose your composure and make entries you hadn’t planned; conversely, when you’re in profit, greed may push you to “go further.” This can destabilize the “Method” and may even lead to neglecting “Money” management.
Then, what happens to the “Three Ms” when using EA (Expert Advisor, automated trading program)?
The “Three Ms” in EA Trading
With EA, all trading decisions are made by a program, enabling emotion-free trading. In other words, you can execute trades mechanically according to the rules without being affected by the Mind. Also, EA has a strict logic built in, so there is no deviation in the Method. Furthermore, Money management is automatically handled according to pre-set rules, including optimal lot sizes and stop-loss levels.
In short, using EA offers the major benefit of eliminating the psychological factors among the Three Ms.
Conclusion
In discretionary trading, you must manage the Three Ms yourself, and controlling the Mind is particularly challenging. However, by using EA, you can eliminate emotions and trade with consistency.
Reactions to the above article
- Using EA doesn’t completely control the Mind. Divine hands might still come into play.
- Discretionary trading can earn more than EA; EA is inefficient (from a friend who is a trillionaire trader).
- etc...
There are various such reactions. But I’m tired today, so I’ll delve into these in future articles in more detail.
That’s all for now. See you next time!
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