Should I stay with manual trading FX or move over to automation?

Jan 10 • Between the lines • 2247 Views • Comments Off on Should I stay with manual trading FX or move over to automation?

shutterstock_111054995There comes a time, very early on in a new trader’s development, when thoughts will turn to the subject of automation. Whilst automating trades can have many benefits, which we’ll cover in this article, traders must be absolutely 100% sure that they’re fully committed to and have absolute unwavering confidence in the method element of their overall trading strategy before taking the plunge with regards to automation. And this confidence and commitment should be perfectly illustrated in their trading plan, before committing to automation.

The biggest issue and barrier with automation is that it requires a completely different approach to trading than trading manually. Your discretion is completely over ruled by a newer set of rules to replace the old ‘manual rules’. You’ll be entering trades based on your high probability set up occurring and one of the drawbacks is that markets often evolve and change far more quickly than we adapt and there’s very little in the way of adaptability we can attach to a form of automation that is designed to trigger once a certain set of conditions are met. Therefore whilst we think we’ve developed an automated method, that we simply have to repeat again and again and just watch our account balance grow, automation does require a far greater degree of constant vigilance than many traders would imagine.

Where to find help with automation

There are many resources on the web that offer up help for automation. The most relevant would be the forums linked to MetaTrader, which is the most used platform when it comes to automation. The owners of the site and forum offer up a free service to code what we term expert advisors. Expect advisors are the coded instructions you’ll input into your platform in order to trigger your specific instructions regarding entries, exits and the manipulation of your stops – trailing or hard stops. If you’re looking for something more advanced there are a number of ‘coders’ who may be prepared to offer up free help. Whilst there are also some on these forums who will code up an expert advisor for a small and generally reasonable fee and with the advent of payments, ‘wiring’ someone a small fee has never been easier.

Automation replaces a manual system that works, it doesn’t make money by itself

It’s very important that traders don’t imagine that simply moving from manual trading to automation immediately provides an opportunity for profitability. It can’t be stressed enough that we’re looking to migrate our already successful trading method to automation, thereafter we’re looking for slight enhancements. The automation doesn’t make a poor trading system better. It could make your trading easier, more fluent and you’ll develop a more relaxed attitude towards trading, but you must have reached a reasonable level of competency and profitability before you fully automate.

It would be reckless and naive to simply buy an off the shelf automated strategy, ‘plug’ it into your trading platform, then keeping your fingers crossed that it will work because you’ve been seduced by some marketing spiel promising riches beyond your wildest dreams. It’s important that you know every nuance regarding your strategy, as early on when moving over to automation you may make mistakes as you become familiar with the process. Trying to cope with someone else’s expert advisor, that you have very little understanding of, other than a fantasy level of returns, whilst you’re learning the ropes of automation, could lead to a severe drawdown. And whilst on that subject many of the expert advisors available for purchase employ gambling methods to achieve the truly fantastic returns.

Automation will lead to marginal increases in profitability, but a more efficient way of managing time and capturing profits

Once we move our successful manual trading method to automation we can then begin to tweek our trading system for profit enhancement. We may pinpoint our entries to be executed to the pip, likewise our exits. We can programme platforms such as MetaTrader 4/5 to execute our high probability set ups at any time of the day; we never need to miss our set up should it occur during times we’re not in front of our monitors. The efficiency and time management benefits this offers up can be a considerable leap forward for traders.

You have to have confidence in your broker

Naturally traders considering automation need to ensure that their brokers can cope with the complexity of using expert advisors, there are brokers who don’t have access to platforms such as MetaTrader. Therefore the suggestion would be to talk with your broker to understand how your automation, your expert advisor and the platform will ‘match up’. At FXCC we’d be delighted to answer whatever questions our clients may have with regards to automation and with that in mind please feel free to pick up the phone, or send us an email with your enquiries.
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