Forex trading is often thought of as a way to achieve financial freedom but sadly many new traders find it an uphill struggle. Traders usually start by trying various strategies and manually entering trades themselves. However, many traders then get stressed entering positions or bored watching the trading screen for long hours. This can lead to a loss of trade discipline and capital. Some traders then turn to trading robots in the hope that automated trading will alleviate some of their problems and get them back on a winning track.
In this article, we will take a look at the advantages and disadvantages of manual and automated trading. From making this comparison we will discover that there is a ‘happy medium’ that incorporates the best parts of automated and manual trading. We introduce semi-automated Forex robots’ big potential to maximize traders’ profits while minimizing their chart time and stress levels.
Whether you have developed a strategy yourself or are using one created by another trader, a key part of using any trading strategy is being able to test it and make sure that it works. Most trading robots are developed for the MetaTrader platform, and one of the key advantages of automated systems is that you can quickly and easily backtest a strategy on historical data. This usually takes just a few minutes on MetaTrader and allows you to easily analyze the results and find the weaknesses and strengths of a system. By contrast, if you want to test a manual trading strategy you would need to painstakingly go through masses of data by hand, to find out how it performed.
Manual backtesting could provide greater insight and you may be able to spot the behaviour of an instrument that could enhance your trading capability. However, this could take days or even weeks with no guarantee that the strategy would actually be found to be successful. Ideally, a blend of auto and manual backtesting would be used. An automated system can be tested over a long time period and then manual testing can be conducted over a shorter time period so that a detailed understanding of the strategy can be developed. This can bring efficiency in terms of time saving and accuracy.
If you are manually trading, it is common for emotions to affect trading decisions. The failure of many strategies is often due to traders’ emotions rather than the strategy itself. Emotion can cause traders to enter trades late, exit trades early or take trades when they should not. People often confront greed, anger and fear during trading. They may even attempt to cover their losses by violating money management principles and end up with even more losses.
Automated trading is extremely mechanical and follows strict parameters. This approach can help eradicate the emotional pitfalls that some traders encounter, but poses other sources of anxiety. Many trading robots are designed to automatically enter and exit trades, but for many traders, this can be a very uncomfortable feeling. Traders may not want to hand over complete control of their account to a piece of software. There is always the ever-present danger that a bug in the robot or the trading platform could cause runaway losses. Trading robots that enter trades automatically can malfunction or crash and can lead to erratic behaviour. For these reasons many traders find themselves endlessly watching their account, in just the same manner as if they were manually trading.
This lack of control of their own trading fund has caused some traders to rule out automated trading completely. Clearly, the best option for a trader is to combine the analytical and unbiased analysis of an automated system while maintaining full control of their trading account. Semi-automated trading is the superior approach, enabling traders to prioritize time and efficiency while maintaining total control of their capital.
An obvious disadvantage of manual trading is that you cannot watch the trading screen for 24 hours a day, nor watch every Forex pair. This means that you will miss many good opportunities to trade. A robot has the advantage that it can run all day every day and analyze many FX pairs at the same time. But if an automated system is left to trade for itself on many Forex pairs, the chances are that it will open too many trades and possibly result in a margin call. For best results, you would want a system that automatically alerts you to every opportunity and then you manually validate your trades. This allows you to filter trades using your own trading instinct and identify the optimum opportunities.
Often the primary reason traders seek an automated trading solution is the belief that it will make their lives easier. You do not have to be awake for long hours watching the charts because a trading robot is expected to do everything for you. An automated system allows traders to follow the markets when they are travelling, dealing with personal affairs or even while they are at work. This is a key advantage of any automated system and this is something that we want to benefit from when finding a ‘happy medium’ between manual and automated trading.
As we have seen, both manual and automated trading have their advantages and disadvantages. The ideal solution is one that combines the best parts of manual and automated trading. We want excellent results that can be conveniently achieved while minimizing the effect of emotions. The clear solution is to use a semi-automated Forex system. This type of system continuously and rigorously analyzes the Forex markets, looking for trading opportunities, but does not automatically enter trades.
This kind of semi-automatic system would still identify trading opportunities and provide trade alerts with entry price, stop loss and take profit levels, but the trader maintains full control of their trading account. With a semi-automated robot, you can choose whether to trade or not. You can combine the intelligence and experience of a human trader with the analytical rigour of an automated system. Importantly, you will be able to maintain full control of your trading account.
Ideally, this kind of system will allow you to be ‘chart free’ and will send signals to you by email or MT4 push signals. This way you can always be informed of any potential trading opportunity. These types of system are fairly rare, but some high-quality systems are available. Whether you develop a semi-automated system yourself or use one developed by a professional, it is our belief that trading this way is the best way to achieve success in Forex trading.