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Gernot Heitzinger Benedicte Gravrand, Opalesque Geneva:

The debate over whether discretionary trading is better than systematic trading is ongoing, as indeed there are advantages and disadvantages for each, and each may better fit certain market environments.

Systematic Trading involves the use of computer models, mainly based on technical analysis of market data or fundamental economic data, to identify and make trades, with limited manager intervention. While Discretionary Trading seeks to opportunistically participate in market-driven price actions. The final decision about trading is made at the discretion of the fund manager.

Discretionary traders can sense the mood of the market in real time. However, they may project their emotional bias on their views. On the other hand, systematic trading, which might also be referred to as mechanical, black box, or algo trading, lets the computer make the trade. But systematic traders might get too excited about back-tested results, even though they don’t guarantee future returns.

The majority of hedge fund managers continue to utilize a discretionary appro......................

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