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Human versus machine. Automatic trading or manual trading

humanvsmachineThe never-ending debate, is manual trading always more profitable than automated. Now this is a very hard topic and the comparison has to be made between similar systems being executed manually and automated.

 

Letís look at the features of automated trading first:

  1. 1.The main advantage of Automatic trading is the 24/7 availability to trade. A system set up on autopilot can trade continuously without requiring any downtime.
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  3. 2.The trading can be accurate, perfect and error free, however there is a big IF, the system has to be coded perfectly with no errors.
  4. 3.The ability to follow a set-up no matter what. What makes a difference between a good forex trader and a bad forex trader is their persistence and non-emotional behaviour. An automated system has all these qualities, it is non-emotional and is persistent it takes 100% of the trades that meet the criteria that was programmed.
  5. 4.The robot does not make incidental errors. A human trader might sometimes press the wrong button and buy instead of selling, or set the wrong lot size.
  6. 5.Automated systems can handle huge amounts of data compared to a human. A robot can trade a system that requires hundreds of verifications on a single trade, or 10s of levels of confirmations, which a human trader will have a very difficult time following.

Features of manual trading:

The pros of manual trading are the cons of automated trading.

  1. 1.Capacity to think. Bear in mind that in automated trading, the robot can only make decisions based on the settings that has been programmed into the platform. As an example the forex system is only programmed to see certain indicators, however letís say a human is trading and the human sees huge macroeconomic news coming that affects the market. The human can act on this but the robot will simply keep trading the system as usual.
  2. 2.A human trader can easily assess that the forex market is moving in an awkward or unreasonable pace, and can decide to pull out the trades. In manual trading, it is also easy to decide when a trader has enough profit and when he thinks that the growth will be in his favor. Human traders can feel if the trade will be profitable based on his skills and experience.

So it may appear that there are actually more pros in using automated trading, and there are clear advantages in not having to think, not having to feel and not having a limited range of the information you can keep track and process in order to make a decision. Most forex trader fail not because of a bad strategy but because of bad money management and bad position management under the pressure of a losing position or self doubt.

So which one is best, manual or automated? In the current environment where investment banks and hedge funds employ extremely sophisticated algorithms that trade the markets non-stop, a small traderís edge can be their brain. Who can compete with the big guys? Only someone with intuition and someone who is disciplined to follow their own system. Perhaps the best is a combination of manual and automatic trading, a system that spits out buy/sell signals and a trader manually confirming and executing those trades might be the real holy grail in forex trading.



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