Manual Trading vs Automated Trading

These days, there is a lot of discussion about automated trading vs manual trading.

One of the main things that has 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 every one 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 is 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 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 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 beat enough; time for him to fight back.

The main thing that a human 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? Which one has the potential to be a more profitable trader?

Do you side with your own kind?

The Human?

….

Or the Robot?

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  • Greger Rantala

    Robots can be used as long as you know what they do. But be aware of robots based on Martingale because there is a great risk that they will blow your account sooner or later.

  • NathanTucci

    Yeah, the use of both is probably your best bet. Thanks for reading!

  • NathanTucci

    Yes, a 50 dollar robot automatically makes me very nervous about its potential to be profitable.

  • NathanTucci

    Good point.

  • NathanTucci

    Thank you for the comment. Good luck with your robot.

  • NathanTucci

    This is a good point, but the robot would still need to know when to get out of the market if the conditions get weird, don’t you think?

  • NathanTucci

    I would agree with you. Is this a robot you bought or one that was programmer by you or for you?

  • NathanTucci

    Hmm, interesting point about monitoring your trade.

  • NathanTucci

    This is definitely a good way to trade. We use both here at Winner’s Edge to trade.

  • NathanTucci

    Good point, Sayed, thanks for the comment

  • NathanTucci

    No, this is definitely not possible.. This is a video that I personally made as a joke that we are going to show later on in a joking context.. I apologize for any confusion, I didn’t realize that anyone would be watching this video.

  • MW

     I agree!  I’d rather not trade than use a robot.

  • Ledwabae

    Hi Nathan
    I agree with the points you mentioned above and as for me I think that the two compliment each other.
    They all have their disadvantages, where the machine fails the human trader will take over. The robot will always be good with sticking to the rules of the programme and the manual trader will always be there to take care of fundamental part of things.
    I say it good to have a robot and a good one at that, but still need a man trader.

  • Patrick Ridgway

    Robots are great, it works for me, or should I say one does. If you’re buying one for 50 or 100 bucks would you trust it to manage a 10K account?? The problem arises when an inexperienced trader leans on the bot to much. It eventually falls. Trader education first, I think.

  • Fx-megaforex

    I think you can use a robot if you know how to trade and what the robot is doing. I don´t think is a good idea for someone who doesn´t know anything about trading start trading with a robot, you still need to know how to trade to know which robot is good for you or if you need to get rid of that robot.

  • Marcin

    EAs are very profitable on demo accounts !!

  • NJW

    As far as an EA thats put up for sale on the web?…… well Ive been looking at this for a long time and have spoken with several people on this subject and have reached the conclusion that the genuine article simply does not exist for sale. For a few months now I have been developing a fully automated system of my own. It works very well and can sit on several instruments simultaneously. At the moment I am just trying to get some of the software glitches ironed out. When I have that done then it will be good to go. I also hope to have this done within the next week.
    So whats the lesson out of all this??? The simple bit is not to waste your money. Forget about all the scam bots out there. If your really into it then just go and develop your own. And no its not all that hard once you break through that glass wall so to speak!!! Best of luck to all…..
    Slán….

  • Skforexinfo

    if u programe in ur idea throu EA automatic software..that is better compare with manual ..

    so 80% vote for robot

  • R Khantaraj

    I use robot with my trade strategy I think it`s very helpfull when you use both of them 

  • Onyia boniface anni

    For me, the stress of sticking to your computer in the name of monitoring a trade makes automated trading more proffered but the issue lies on getting the right robot and the accuracy in the programming. The bottom line is profitable trading. The right robot with the wrong programming makes you loose money, therefore it is still better to watch your trade even if you are a bad trader, you can always pull out of the market at the moment it goes against you.

  • David Johnson

    Both you mirror successful human traders and monitor your EA 🙂

  • Sayed Haider

    All the pros which you are talking about a human should be a super human or human with very long experience and with a good base also a human who should be very descipline trader and should have a
    control on emotions. Such humans are very far and few between and may be 1 out of 100.
    Where as behind a robot a human mind is working as who programme the robot? a human..Only  if the robot is programmed by a good back tested strategy and such strategy where you can win the trades no matter where the market goes plus robot should be programmed by a good programmer..then believe me there is nothing better choice then a robot. Even if you win small percentage of trades but you consistently win then robot is much better to make money although a robot is a boring thing because you miss the action.

  • I am very sceptical about robots. I saw this Youtube video yesterday and it really surprised me. Is this really possible with a robot?

    http://youtu.be/6BuT9rra0mA

  • Enlightened Investor

    For true fully automated trading that requires no programming, go to http://cool-trade.com.  works with many brokers including TD Ameritrade, ETrade, OptionsXpress, MB Trading, OptionsHouse, MB Trading…