Automated vs Manual Forex Trading

Automated Forex Trading vs Manual Forex Trading. Robots vs Humans.

Unless you have been living under the rock, you have probably heard about the constant Forex trader’s debate on what style of trading is better.

Well, different traders would give you different opinions. Some prefer manual, while others would prefer to trade the Forex market with an automated trading system, also known as a trading robot. 

But then again, there are people out there that would die for a good selfie…So which one is really better? 

The truth be told, both approaches have their advantages (and disadvantages), and both sides have good arguments to support their stance.

Let’s dig a bit deeper and explore some advantages of both manual and automated trading. 

Forex Robots/Automated Forex Trading

automated vs manual trading, forex

First, let’s take a quick look at what forex robots are and what are the advantages of using an automated trading system.

What Are Forex Robots?

Forex robots (also known as Expert Advisor, or EA) are a piece of software that trades automatically based on a set of preset conditions. This type is also known as automatic trading or algorithmic trading and is basically a trading method that uses predefined algorithms (usually based on technical analysis indicators) in order to automatically place orders in the markets.

But it’s not as fancy as it sounds.

When I first heard the term I had visions of an intelligent machine capable of outsmarting my Roomba at a game of Chinese checkers.

But… it’s not.

Let me put that into context for you. If we were to create a basic technical trading strategy using the RSI indicator and insert it into our trading platform. Say, we enter a trade every time RSI oversold or overbought on a particular chart. Every time RSI hits a particular number we want to buy or sell and set an accompanying take profit and stop loss level.

Instead of sitting watching the charts for hours on end, the software (or your Roomba…. I mean a trading robot) can do it for you.

All you need is some basic MQL5 coding knowledge to get started. Moreover, many traders (and especially new traders) use free demo accounts provided by brokers to test their different strategies and achieve consistency before they start live trading. 

It’s that easy.

These robots/EA’s are also what’s known as black-box trading systems. We don’t know how they’re built or why they work. All we can do is attach it to our charts, find a statistical edge, and cross our fingers.

But as you can see, automated systems clearly have some advantages…

What Are the Advantages of a Forex Robot/Automated Trading System?

 Trading systems are exact, perfectly disciplined, and don’t make mistakes (if programmed correctly, of course).

  • They stick to the trading plan and trading strategy you set up. Robots ain’t got no time to rebel. 
  • Forex robots will ALWAYS execute your trades correctly. An automated trading software won’t Make a buy when it should be taking a sell, it won’t enter the wrong lot size.
  • Forex robots can take in more historical data than human traders. That means, if your strategy applies to a whole bunch of different currency pairs or multiple markets, you can probably only monitor a few at a time. With an automated system, you just plug it into however many charts you want it to monitor, and boom, it won’t miss a signal. Another point for the robot…
  • Unlike manual traders, Forex robots don’t get tired and can be plugged away at the markets 24 hours a day. That is 3, 4, maybe 10 times as much as a manual trader trades in the Foreign Exchange market.

Humans/Manual Forex Trading

automated vs manual trading, comparison, forex trading

Okay, Okay. The human trader has been beaten up enough. Time for them to fight back! So, let’s take a quick look at what manual trading is and what are the advantages of manual trading strategy and human traders.  

What is Manual Trading?

Manual trading is when trades are entered by a human without using computerized algorithms or programs. It can best be described when a trader opens a trading account and manually places orders based on technical and fundamental analysis. 

What Are The Advantages of Manual Trading?

  • The main advantage of humans compared to robots is that we have a brain. Shocking, I know… This means you have more control over your profit target and you can effectively manage your losing trades directly on a trading platform – something that automated trading systems cannot offer you.
  • Automated trading robots can only execute trades based on the scenarios that were programmed into them, whilst humans who trade manually can take into account everything that is going on including market conditions, and process it altogether.
  • Humans can take into account fundamentals that are occurring unexpectedly (like Trump being busy on Twitter slamming poor Jinping again).
  • Manual Forex trading gives you the real feel and thrill of the Forex market.
  • Supply and demand are influenced by human variables which most computers cannot analyze or predict.
  • Humans can see that the market is moving extremely slow or unreasonably erratic and pull out their trades. 
  • Humans can decide when they reach their profit targets and when they think the momentum will continue in their favor. 
  • Humans can use qualitative factors to judge the current market scenarios and make smart trading decisions.
  • And most importantly, experience, knowledge, and intuition will ALWAYS outperform computation logic. With a manual strategy, most traders have more control over their trading decisions, profit levels, and finding trading opportunities.

Manual Trading vs Automated Trading Forex Robots – Which One is Better?

There is a place for automation in your trading by using automated trading systems. But in all honesty, the use of automated trading systems only works with manual oversight.

You MUST understand the reason the market is moving in a certain direction and couple this knowledge with a technical overview. There are NO shortcuts to successful trading.

You need to put in the effort, develop a disciplined mindset, and set specific rules if you expect to succeed. If you have the passion and dedication you will eventually succeed and set yourself up for financial independence.

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