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Automated Trading Vs Manual Trading

June 04, 2012 | Comments: 0 | Views: 222

One of the major topics in Forex is automated trading. There are tons of system out there, all claiming to make you millions of dollars. Now, I would encourage you not to get caught up in these marketing claims because no system--manual or automated--can consistently make returns like the ones many of these EA sales videos are claiming. With that said, there are certainly automated systems available that can produce profit consistently; however, as Forex investors, we need to be careful about our expectations. If you are determined to find an EA that is going to make you rich quick, you are very likely to spend a lot of time and money on things that will only hurt your account. As a matter of fact, with all the time you would spend searching for the black box of trading, you could probably have earned a significant amount of capital by just running a system that produces consistent, lesser profits over that time period. It is crucial to understand that no market is suitable for making massive amounts of money in a short period of time. Every type of market can deliver a very large return on investment to its investors, but in each scenario, those returns should be made with consistent profits over a period of time.

If we are happy with consistent returns, than there is definitely some robots that can deliver those. The key to finding an automated system that actually works is finding someone who is not claiming to make you rich overnight. Ideally, you want to invest in a system that is created by a real trader who is targeting 5-12 percent per month. In most cases, you would not want to invest in something that is targeting more than this return because that would mean one of two things. 1. It is too risky to trust with your hard earned money or 2. It is false advertising, and the robot does not deliver as suggested.

My point is, that if you know what is reasonable, there are definitely robots that can produce profitable returns. But the question is, is a robot trader better than a human trader?

There are, of course, a lot of things to take into consideration when we ask this question, and I surely will not be able to get into all of them, but let's take a look at some of the advantages and disadvantages of both.

When you talk about a human being trading, you have to automatically account for human error. Human beings, no matter how smart or sophisticated are bound to make mistakes. Whether it is entering an incorrect size om a trade or putting a buy order where there should have been a sell order, you can automatically assume that there is going to be some mistakes when a human being is in charge of executing a trading strategy. This is obviously one of the crucial disadvantages that a human has compared to a robot. However, along with the disadvantage of human error, human beings also have a significant advantage. The "feel factor" is a big advantage when it comes to human trading. With the human feel, traders can get "in the zone" and really have a feel for the market. In these times, human traders can get in and out of the market at more precise prices than a robot could ever match.

Humans also have more vision than robots. A robot can only "see" what is programmed into it, but a human can take into account current, unexpected events like natural disasters or corporations declaring bankruptcy or governments defaulting on loans. This is a significant advantage for the human trader, because often times it is these events that can crush your account.

On the other side of things, there is certainly a lot of advantages to robotic trading. As we already mentioned, the main advantage is probably that it doesn't have a mistake tendency. A robot, if programmed correctly, will not make execution mistakes. A program can deliver with exactness at all times. This is a very, very large advantage for robotic trading, because the mistakes that a human trader makes can be the difference between profitability and unprofitability.

Certainly, there are advantages to both of these methods, but is one better than the other?

This is a difficult question to answer. Like many of the debates in Forex trading, the debate of Automated Trading vs Manual Trading has many different ways to look at it, and many different answers depending on how you look at it.

The key thing to remember is that, if done well, either one can be done successfully and consistently, and if done successfully and consistently, either one can make you a wealthy individual.

Winner's Edge Trading has just released an article about Forex trading. Is it better to be a human trader or use an automated trading system?

Source: EzineArticles
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