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Day Tradingа Art or Science?

Truth lies within a little and certain compass, but error is immense.

henry st. john

Anyone who has traded the futures markets for a reasonable amount of time realizes fairly early in the game that method and technique go hand in hand; that art and science are inseparable. While much may be said in support of a purely mechanical approach to day trading, there is also a great deal of anecdotal evidence to support the fact that a good portion of success as a day trader depends upon the art of the science of day trading. I am not implying by this statement that anyone who is artistic in trading terms can succeed. I also believe that when closely examined, what may be considered artistic or intuitive is actually an internalized scientific approach.

Rather than accepting this possibility at face value, I'd like to explore, in some considerable detail, its ramifications for the day trader. While it may be unpalatable to the rigid day trader to accept the possibility that there is some art to the science of day trading, the fact remains that there is, to a certain degree. Let's explore the art of the science that will be analyzed and explained in this book.

An Issue of Discipline

The first and foremost area where art and science diverge is the issue of discipline. The simple fact is that discipline in trading is not inborn or easily acquired. Every trader has a penchant to subvert and pervert his or her market discipline. This occurs because of the involvement of ego and pride. Few traders are willing to admit to being wrong. Although it may be their timing methods that are wrong, they take the loss personally, and this ultimately prevents them from acting in a disciplined fashion.

Now enter hope and fear. These are the two emotions that ultimately transform a disciplined trader into an undisciplined trader; a good trader into a bad trader; a successful trader into a losing trader. And here is also where science becomes art.

If all traders were perfectly disciplined, then there would be no need for this commentary or analysis. But the simple and undeniable truth is that traders lose their discipline and revert to art, emotion, sensation, intuition, and random response. Were this not the case, the number of losers in all types of trading would not be as large as it is. Hence, we have no choice but to accept the fact that the trader can and will make mistakes based on his or her emotional, intuitive, and psychological responses to the markets. The real issue is what can be done to overcome the negative effects of such behaviors. Following are a few of my thoughts regarding the above issues.