Automated Versus Manual Trading

How to plan for a stock market correction
Automated Versus Manual Trading

In this day and age, we’ve become used to everything around us is in a constant state of flux. We would like to think that change is always for the good, but in fact, that isn’t always the case. It’s up to us to determine which of our old ways we want to throw out in favour of new, or when it’s in our best interest to stick with the old tried and true. In forex and other trading systems, we are seeing more and more automated systems being developed. They are marketed as being a valuable trading tool that will help you place more winning trades. So the question is, do we throw out the baby with the bathwater and let robots take over our trading decisions? Or do we find an in-between point that doesn’t turn over complete control to an automated system? As in most things in life, there are good points to both sides of the dilemma. Here are some of the factors to consider when choosing automated or manual trading systems.

What Are the Important Benefits of Automated Trading?

The beauty of automated trading systems is that they do exactly what you program them to do. There is no varying from your trading plan. If you set up specific scenarios for placing a trade, holding back or selling, that is exactly what the automated system will do. The robot is not able to judge each situation and make a decision except for following your instructions. You retain complete control of the trading plan. According to your training, testing and experience, you can build a trading plan that works for you. Then, it’s a matter of teaching the robot precisely how the plan works. It sounds too good to be true, doesn’t it?

How the Automated Trading System Can Protect You

Human error can be a thing of the past if an automated system is placing your buys and sells. How is that? Have you ever worked too late into the night and accidentally hit buy when you meant to be selling? Or put in the wrong number of digits and made a trade for 10% more than you intended? Humans Make Mistakes. Period. Besides entering a trade incorrectly, we get moody and emotional. It’s not always possible to keep your personal problems from getting in the way of your trading scheme. You can have a great plan set up that usually works well for you. But then you come home from a hard day’s work after a fight with your boss, you’re tired and hungry and BOOM. You let your emotions take over. You might try to improve your mood by entering trades that are against your own set of trading rules. You can slip and let emotions take over, but a robot would never!

Using Your Brain with Manual Trading

A brain is what is missing from automated trading. Experienced traders know that according to the news reports or financial announcements of any particular day, anything can happen in the market. How does a robot take unexpected events into account? Or what if you are watching the charts and you see the market moving sporadically and want to make a quick exit. As humans, we often make decisions by what we’re feeling in the gut. Sometimes this is beneficial but not always. For many, the aspect of complete control makes manual trading the natural answer.

For anyone who wants to give up control in favour of longer trading hours and less emotional involvement, an automated system can be a godsend. But understandably, not everyone is ready to turn over their finances to a robot.