Manual or automated trading, which one is better for you and when should you make the change?

Feb 20 • Between the lines • 3248 Views • Comments Off on Manual or automated trading, which one is better for you and when should you make the change?

shutterstock_48897310It’s worth taking a step back from our industry from time to time to marvel at the improvements and opportunities that have developed over recent years. Our retail industry as we know it, operating on the web through trading platforms, is only just over 14 years of age and yet in its present form retail FX trading is unrecognizable from where it started out back in the early days and that time has passed in a relative blink of an eye..

The wonders of technology have delivered us:

* platforms that open and close trades in the blink of an eye,
* spreads lower than one pip on FX and one point on many indices,
* the ability to follow and copy other successful traders,
* the ability to trade from anywhere on any device,
* lightning quick fills…

These are just some of the many technological advancements we’ve witnessed. But perhaps the biggest worthwhile achievement the industry has made for clients is the ability to move from manual trading to automatic. The ability to be in the market the second your high probability set up occurs is, in the humble opinion of this article writer, by far and away the biggest technological leap this industry has made since its inception for retail traders. Why do we rank it so highly? Let us explain and in doing so perhaps we’ll discover if we’re now ready to make the leap to full automation…

Benefits of automation versus manual trading

Here’s a quick ‘ready reckoner’ list of the values of automated trading versus manual

* Ability to strike at any time of day – 24/7.
* No hesitation or nerves that traders’ can often experience with manual trading.
* The market comes to you and your evaluations; you don’t need to ever chase it.
* Precision in terms of; entries, exits and trade management.
* If the high probability set up parameters are not aligned, the trade won’t be filled.

As many will no doubt deduce from our initial introduction we’re fans of automated trading for a variety of reasons, however, there is one huge caveat and consideration traders must be aware of before moving to automation; automation will not make you successful. We only use automation to move our successful manual trading strategy to mechanize in order to squeeze the pips out of our overall method and strategy. Automation will not make a bad strategy good.

So what’s the next stage when you truly believe you have a terrific overall trading strategy that the method part can easily and simply migrate to automation? Well firstly we need to forensically analyse our results and to be absolutely sure what we’re intending to migrate to automation can migrate successfully. And without a doubt the simplest strategies work the best.

As an example of what may be tricky it’s fair to say that the least amount of conditions you attach to your automated method the better, what we don’t want is to have a simple entry, exit and take profit limit method, underpinned by a trailing stop, to then rely on a huge amount of confluence factors in the form of indicators. The adage of KISS, for us as traders to “keep it simple stupid” is very relevant with automating and let’s not forgot at this first foray into the most basic form of coding we only want it to be as complicated as altering the settings on our mobile phone. What we don’t want at this early stage is to begin a crash course in coding and here’s the irony; many successful expert coders will testify as to how the simplest methods are the most profitable.


So, to summarise, we only look to mechanize our method when we have absolute confidence in our current method as we know an automated strategy will simply enhance our profitability, it (automation) won’t make us profitable in itself.

Despite the excitement of ‘moving up’ to automation we must still ensure that everything trading related is still committed to our trading plan.

Despite the fact that the automation may make us feel more relaxed with regards to our trading we still have to remain incredibly vigilant as automation is not fool proof. If we exercise our automation on a platform such as MetaTrader 4, or the new revised 610 version from MetaQuotes, we won’t suddenly never experience slippage again and minor slip ups will still happen as we’ve yet to see a platform that never fails, however, rarely that may be.

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