When it comes to trading your exchange traded funds (ETFs) are you a mechanical type, or a discretionary?

A discretionary trader uses experience and judgments to make trading decisions, with a documented trading plan set with rules to guide or bind their decisions. When it comes time to put the plan into action, they will not only use intuition for the final decision, they also use knowledge of current market conditions.

Rob Davenport for Trading Markets says a mechanical trader is one who has precise rules that dictate every trade they make. They do not care about anything going on in the market, unless it is part of their rules base. A systematic trader takes every trade and pays no mind to intuition, judgment or experience.

Our strategy is to stick to our plan, and not let emotions get involved, much like a systematic trader. As Davenport says, emotions can be a demon when it comes to your trading. It can be just about impossible to eliminate them, but neutralizing them will serve any trader well.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.