These days, there is a lot of discussion about automated trading vs manual trading.
One of the main things that have caused these discussions is the flood of automated trading systems that have come into the marketplace. There are THOUSANDS of Forex trading robots out there, and almost everyone claims to turn tiny accounts into millions of dollars overnight.
Now, hopefully, we are beyond the point of believing these ridiculous claims; however, we shouldn’t let these EA scams steal the validity of real automated trading systems. The truth is that automated trading can work; many major investment institutions use highly optimized trading robots to pull money out of the market, so there is a way to make money using these robots… BUT…
Is a Good Robot better than a Good Trader?
Like in any good argument, there are certainly advantages to both. For me, it is impossible to say one is better than the other, but let us dive into the argument and see what we may discover.
We will look at automated trading systems first.
The first advantage that jumps out to me about automated trading is simply the nature of having a robot trade. It is exact, perfectly disciplined, and doesn’t make mistakes (if programmed correctly, of course).
One of the biggest problems that a trader faces is his ability to be disciplined and stick to his plan. With automated trading, you can be assured that the robot will be completely disciplined and stick the plan you set up. Often times, it is the ability to stick to the plan that makes the difference between a profitable trader and an unprofitable trader so that is a point for the robot. (+1)
Not only will a robot stick to the plan and be disciplined, but a robot will always execute correctly. A robot won’t take a buy when it should be taking a sell, it won’t enter the wrong lot size and it won’t misplace the s/l or t/p. This is a huge benefit in trading because mistakes like the ones mentioned are killers to your overall success. That’s another point for the automated trading. (+1)
Robots can also take in more data than a human trader. That means, if your strategy applies to a whole bunch of different currency pairs, 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 BAM, it won’t miss a signal. Another point for the robot…(+1)
But wait! There’s More!!
Not only will the Robot trade with better discipline, better execution, and more range BUT ALSO, a robot doesn’t get tired. While you pick the few hours that work best for you, the trading robot will be plugging away at the markets 24 hours a day. That is 3 , 4 maybe 10 times as much as a manual trader trades the market… Yet another advantage point for Mr. Robot trader. (+1)
Okay, Okay. The human trader has been beaten enough; time for him to fight back.
The Human Forex Trader
The main thing that a human forex trader has that a robot doesn’t is a brain. Where a robot can only execute decisions based on the scenarios that programmed into him, a human can take into account everything that is going on and process it together.
A human can take into account fundamentals that are occurring unexpectedly (like a hurricane in Japan). (+1)
A human can see that the market is moving awkwardly slow or unreasonably erratic and pull out his trades. (+1)
A human can decide when he has enough profit and when he thinks the momentum will continue in his favor. (+1)
A human can get a feel for the market–he can get “in the zone.” (+1)
So there are actually a lot of bonuses to being human–who knew?!
But there are also bonuses to not having to think, not having emotions, not having a limit to the information you can process.
So which one is actually better? Manual trading or automated trading?