Automated Trading vs Manual Trading

The forex market is the largest market on Earth, and according to the latest estimates, more than US$3 trillion is being traded on a daily basis. Unfortuantely, most individual traders fail to make a profit in the long run. Let’s look at the reason why.

People who enter the world of forex is commonly of a fairly high intellect, however, they usually lack the right tools to make profits in the long run. The right tools does not neccesarily mean for instance analytical tools, but rather tools that take away the “human-factor”, for we as humans have a number of inherent weaknesses that make us seem almost self-destructive.

Let’s discuss a few human weaknesses…

1. Greed. Often times we let a wiining position run back into a loss because we wanted more profit from that trade.

2. Fear. Fear of losses is often the cause for people to make irrational choices and end up losing all their money.

3. Lack of confidence. A lack of confidence can mean taking a small profit on a trend that goes a very long way, and making larger losses all the time. A lack of confidence is the opposite of greed in this case, but a good trading strategy should dictate where entry and exit points are even before the trade is made.

4. Hesitation. When we hesitate when faced with a very important decision, it often has two unfortunate outcomes. One, we confuse ourselves and end up making the wrong decision. Two, we loose the window of opportunity where we would have made a maximum profit.

5. Weariness. Taking a break is something we all need every now and then. However, taking a break in the fast-paced world of forex can often be the difference between making a profit and a loss.

6. Negligence. When trading forex we need to take account of many factors and do so in a very short time. Any negligence could mean some very important information has been overlooked and then you’d make bad decisions that will leave your account in the red.

7. Lack of discipline. When trading forex, we need to be very disciplined in keeping to our trading strategies. It is only by keeping to your trading strategy almost religiously, that you can make a profit in the long run. In order to keep to our trading strategy and not let our emotions get the better of us, we need exceptional discipline.

One way of overcoming these weaknesses, especially for the newbie trader, is to employ what is called an expert advisor, alias forex robot. An expert advisor is a form of automated trading where the computer program opens and closes trades totally by itself given a number of predefined criteria.

An automated trading system is a group of specific rules and parameters, governing entry and exit points, having the ability to both generate signals and execute trades automatically.

There are many advantages in Automated Forex Trading:

1. Automated trading is executed by computer. Computer technology advancements mean that computers can now process millions of times as many calculation per timeframe as humans can, giving them a clear advantage in the fast-paced world of forex.

2. Taking the emotion out of trading. Computers do not trade based on emotions. Period. They only trade based on a certain set of criteria that was programmed into their algorithms.

3. Automated trading can take trades day and night, non-stop, no weariness and negligence. EA robots free their owners of the necessity of sticking in front of the computer at all times. Once an effective system is developed and optimized, it can be left to run full automatically and independently. A successful automated trading EA robot will allow its owner to focus on optimizing strategies and money management rules rather than having to constantly watch the market.

4. Computers can run multiple programs simultaneously, so we can use automatic trading EA robots to take multiple trades synchronously. We cannot monitor multiple currency pairs over multiple timeframes all at the same time, yet computers can, and what’s more is that you can even run multiple different ea’s on the same computer at the same time.

5. For day traders or other short term trading fans, automated trading robots are very helpful tools to deal with the high frequency of trades using tick data. The short high-intensity nature of daytrading is much better handled by computers than humans.

6. No matter whether you are doing long or short term trading, the forex market is always volatile and moves fast, only automated trading can afford faster identification of signals and reaction to them. No doubt, computers will typically beat human beings in the speed of identifying a trading signal and the entry and execution of the corresponding orders. No more missing a trading opportunity.

After all these considerations, is there anything good to be said about manual trading? Certainly, there is. Finding a good manual system, learning the ins and outs thereof and implementing it with the utmost discipline is the best way to really learn how the forex market works. So, if you do have the time and money, as well as the desire to really learn every aspect of the forex market, you can’t go wrong with a manual system. It is advisable though, to add an expert advisor to your arsenal just to spread the risk and compliment your manual trading system.

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