Manual Trading involves human involvement in analyzing and placing trades based on a trader’s experience. It is a system of trading where an individual closely monitors his trading activities and the market movement and places his buy or sell orders based on his analysis.
Robot Trading, also referred to as mechanical trading, algorithmic trading, automated trading or system trading, allows a trader to establish specific rules for both trade entries and exits that, once programmed, can be automatically executed via a computer.
Features of a Manual Trader
A manual trader is easily recognized, he has the following characteristics:
- He has a trading routine: A manual has a set of rules he strictly adheres for optimal success in Forex trading. A forex trading routine differ from one trader to another, it could be to engage in intraday, daily, weekly, monthly or longer term trading.
- He goes through three phases of Forex trading: the preparation stage (identifying the market direction to follow, when to enter and exit trades, check stop losses and take profit), execution stage (identifying trends correctly and placing orders) and evaluation phase.
- A manual forex trader demo trades in order to know what is working for him and what is not working in order to improve the results he get from forex trading.
- A manual forex trader ensures that he is physically and psychologically fit to trade and he also supervises the activities surrounding his trading and the market movement.
Advantages of Manual Trading
There are a number of advantages a Forex trader enjoys when he trades manually, they are as follows:
- The capacity to think as a human: A human trader has a brain so he can take everything that is going on into account and process it together.
- 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.
- 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 and not on limited codes and programmed settings followed by a robot.
- A human trader learns and gain experience with manual trading.
Disadvantages of Manual Trading
- Time and energy investment: A human trader will have to invest a whole lot of time and energy in developing a trading strategy that can yield profitable result.
- Trader dependence: The success of manual trading is solely dependent on the experience and ideas of the human forex trader.
- Non-systematic approach: In manual trading, there is no strict systemic approach or rule in creating a trading plan. The creation and evaluation of a trading plan vary from one trader to another as clear path for this.
- Overtrading: Many human Forex traders tend to overtrade as a result of the eagerness to make big money, anxiety not to loss or in an attempt to retrieve money that was lost while trading.
- Potential inability to repeat: A human forex trader may not be able to repeat the process of creating more profitable strategies after he has found one that meets his criteria for live trading.
When to Trade with Robot
Robot trading is an automated system or an Expert Advisor (EA) that trades according to instructions, these systems are not emotional like humans and are not prone to mistakes. Robots are disciplined and strictly follow a trading plan programmed into it.
You should trade with a robot when you experience the following;
- When you are struggling with sticking to a Trading Plan or you do not have one
- When you are not yet an experienced and matured trader
- When you do not yet have emotional stability
- When trading at all hours matters to you
Advantages of Trading with a Robot (Expert Advisor)
The following are the benefits a trader stands to gain when he or she trades with an EA:
- EAs operates on a set of rules without emotions. It is not affected by the fear, greed, bias or ego that disturbs human traders. It accesses the market and open or close positions based on historically tested strategies.
- It decreases the reaction time of a human trader, therefore, a trader who uses an EA does not need to worry about missing out on trading opportunities because the EA uses the reaction time of the computer to monitor the markets, search and identify trading opportunities bases on coded rules and executes within seconds.
- It sticks to the trading plan without exceptions unlike the human traders who may not have a trading plan or fails to stick to it.
- It does not get tired like the human traders, it trades at all hours except it is stopped.
- Robot Trading makes the practice of constantly watching the markets completely unnecessary for the human trader who uses it.
- It overcomes the challenges of over trading.
- Improved order entry speed: EAs respond immediately to changing market conditions, therefore, automated systems are able to generate orders as soon as trade criteria are met.
Disadvantages of Trading with a Robot
- Mechanical failures: An automated trading platform is not without faults; it might not take all the trades it was designed to take if an internet connection is lost, there may also be a conflicting difference between the trades generated by the strategy and the order entry platform component that turns them into real trades.
- Monitoring: EAs require monitoring as a result of potential mechanical failures that do occur such as power issues, lost internet connection, computer crashes etc. They could also experience irregularities that results in missing orders or duplicate orders. The system has to be monitored in order to identify and quickly resolve the issue.
- Over-optimization: Excessive curve-fitting that produces a trading plan that is unreliable in live trading could be applied to the automated trading system such that the created system looks perfect when it is created but fails as soon as it is applied to a live market.
- Server-Based Automation: These EAs are always run through a server based trading platform and these platform frequently offer commercial strategies for sale.
Every Forex trader has one thing in common, finding the best possible way to maximize their profits. There is no right or wrong method of trading as it depends on the method that works best for each individual time putting a lot of factors into consideration. Some traders claim that robot works best for them, while for others, it is manual trading as it is the system that brings in profit for them. Therefore, it is very crucial that you know what works for you.
If you prefer to trade manually, get adequate knowledge (you can register for our Free training course here), have a trading plan, keep a trading plan. Ensure that you do all that is needed to achieve your financial goals and be a successful trader.
On the other hand, if you would rather trade with a Forex robot or EA, make the EA an extension of you. Whether you borrow or create your own EA, Have a working trading plan, strategy and entry/exit positions, conduct a regular check on the system, monitor it and review the result it delivers from time to time to ascertain that its’ achieving your goals. You can then call it Manual Robot!