Over the years a lot of debate has been going on within traders on which is the best way to approach the FOREX markets as regards to Manual trading or Automated trading. The decision to trade automatically or manually can at times be a difficult one to make. The one fact I have come to realize is that both types of trading style has its own advantages and disadvantages no matter the perspective or angle you approach the two with. First of all, let’s understand what the two types of trading style is all about before making a conclusion.
Manual trading is a trading system that involves human decision-making for entering and exiting trades. In this type of trading system, the trader analyses the market trend in a particular currency pair using technical indicators or fundamental reports, then opens a position manually and then specify the stop loss and profit taking points.
Managing open transactions such as placing of trailing stops and break-even or break-even offset has to be done manually also by the trader in manual trading. These steps listed can be carried out whenever the trader decides to act. In some cases, traders also set automated indicators to alert them to potential trading opportunities. However, in all cases, human input is required to authorize trades. .
On the other-hand, automated trading is a trading system that involves the use of computer software (program) known as expert advisors in decision-making for entering and exiting of trades, specification of stop losses and take-profits, trailing stops and break even. Auto-mated trading is solely based on algorithm (set of instructions) programed into the software by the trader which performs all trading activities on behalf of the trader. In all cases, there is no human factor attached to trading after all parameters have been set into the software.
The quickest way for a novice or new bee trader to learn about the market is to engage in manual trading, which enables a trader to open or close his market position whenever he chooses. It also helps new traders to learn and understand the dynamics of the FOREX markets, majorly how trends are established and reversed. A lot It is crucial to compare the pros and cons of automated trading and manual trading to determine the pluses and minuses of these two platforms and eventually to choose which one to use. Let’s look on the features of automated trading first.
Just like every normal qualities of a computer system, auto-mated trading provides a speedy, less time-consuming, more efficient, an error-free and an accurate trading platform. Most importantly, automated trading is an extremely good approach of trading because it helps to prevent traders with weak psychological profiles from affecting their trading. Automated trading prevents fear and greed from affecting traders’ decisions. Emotion is one of the biggest factors that affect profitability: fear and greed can cause us to close our positions prematurely or overtrade. In automated trading, however, computer algorithms replace the human element that leads to this emotional threat to profits.
However the disadvantage of auto-mated trading is that the program (robot) can be prevented from running if there’s an upgrade in the broker’s platform or the launching of a new build from metaquotes in general, which might result into a runtime error. In cases like this, such robots have to be upgraded or re-complied to match with the current build to enable the robot work properly.
Forex robots can also perform trades correctly. If programmed properly, a robot will not buy when it must be selling. Moreover, robots can also process more data compared to a human forex trader. This means that if your approach or strategy can help you with several pairs of currency, your robot can process this data simultaneously and execute trades on several currency pair at a time. Finally, the robot doesn’t get tired unlike human traders. Hence, you can trade and earn profits 24 hours a day and seven days a week.
In manual trading on the other hand, an upgrade of the trading platform by the broker or launching of new terminal builds doesn’t affect the trader’s performance or activity as all trading activities are done manually. Most importantly, the primary thing that a human FOREX trader has that a FOREX robot doesn’t is the capacity to think. In automated trading, the robot can only make decisions based on the setting and parameter that has been programmed into the platform, a reason why auto-mated trading is regarded as Zombie-trading. When the trading situation calls for analyzing markets technically, thinking and emotions, a human trader can be beneficial.
A minus about manual trading is the lack of speed sometimes when necessary to place trades or adjust stop losses, take-profits, break-evens and trailing stops in fast moving markets like during a fundamental news report or breaking news. An advantage auto-mated trading has over manual trading. Over-all the trading style of each trader would determine whether the manual or auto-mated trading style is the best when dealing with financial markets.