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Expert Advisors Reviews

Trading Dilemma: Manual vs Automated forex trading?

Automation appears to be entering all areas of our lives – from home systems, which set the temperature for specific hours, driverless cars to even algorithms writing music.  In this article we will focus on trading automation, which is by no means a new concept. The focus will be placed on forex trading and the more simple robots – no high frequency trading, machine learning or bots which can make a content analysis of a news release.

 

 

Automated forex trading

 

Automating your trading means using a piece of software to make your trading decisions. The most popular such programs, when it comes to forex trading are the MetaTrader4(MT4) Expert Advisors. What are the advantages of trading with such a system:

Robots don’t make errors. Expert advisors will never miss a trade when the set-up they are programmed to act upon happens. The same can not be said for human traders – everybody has missed a nice set-up, due to a lack of concentration. Furthermore every trader has made misscliks. Whether you accidentally go short instead of long, or enter the market with a bigger (smaller) lot size than intended.  In essence robots always stick to the plan. 

 

Another key benefit of automated trading is the fact, robots can process a lot mote information, than a human can. A system can take into account dozens of variables and calculate them faster than you look for next support/resistance level. 

 

That being said, simple Expert Advisors do not follow events outside the charts. A major news event, like a statement by a central banker or the result of an election can change the entire trading dynamic for months. Although automated trading should save you some precious time, monitoring your system frequently is advised, for this particular reason.

 

 

Manual forex trading

 

Trading manually allows you to negate one of the weaknesses of algorithms – the fact most of them do not take the fundamentals into account. As mentioned above, a major event can impact the markets significantly. Traders can decide not to look at the charts ahead of crucial announcements, like an ECB meeting, as they bring too much uncertainty to the table.

 

Furthermore an experienced manual trader can realize when the market conditions have changed, without a major even occurring. If you trade a trend following system and the market simply slows down, trading in a 50 pip range for a few weeks, the manual trader will adjust his approach. 

 

This may sound weird to you, but expert manual traders can outperform a system, which trades exactly like them. This is due to the fact he may choose not to enter certain set-ups, or take his profit earlier in other cases, if he feels like it. This can happen, if the trader in question enters what Marc Douglas describes as “the zone” in his aptly named book “Trading in the zone”.  Some days you just can’t make a wrong decision, where as an automated system will always take the trade it is designed to. 

 

 

A few tips on automation

 

After looking at the major advantages and disadvantages of manual and automated trading, we would like to give you a few tips, if you decide to go down the robot path:

 

Know what your robot does. Have you developed your algorithm from scratch, or have you bought it from a vendor? If the case is the latter, be sure to get at least a basic grasp on what the robot actually does. Some variations of the risky grid-based and martingale systems are fairly popular among providers of EAs. Although they may appear attractive, they will most likely fail in the long run.

 

Know when to simply pull the plug. Some automated systems perform well in trending markets, while others do better in a range. Markets will switch between the two general states, and you should have some idea of when this happens. This requires some experience and following the news, but nobody said automated trading is a “set and forger” way of making money.

 

Some EAs have a news filter – a measure which makes them not trade whenever a major releases are approaching. Others even scan the information and make trading decisions based on them. These are fairly advanced algorithms, which require some development experience.

 

Backtesting can be missleading. Whether you are looking at your own bakcktests or the ones provided by a company, trying to sell you an Expert Advisors, there are several things you need to know. A strategy can have amazing results, which can not be replicated in real market conditions. This happens when the system is overly optimized, or “curve-fitted”. There are many factors, which will most likely make it perform differently in the future. For one, although market moves tend to repeat themselves, they do not do it with a 100% accuracy. On top of that, if you are trading with a dishonest forex broker, slippage may start being more prevalent, if you have a few winning weeks. 

 

Conclusion

 

Whether you like it or not, automation will stay and affect many areas of our lives in the future. Hopefully we presented you with some solid arguments for and against automating your forex trading. To summarize everything, algo trading has some advantages over manual trading, but does not require less effort, by any means. You should read a lot more than this post, in order to really get better. If you are looking for a “set and forget” system, which will continuously make you money, while you are on the beach, you will probably be disappointed. 

 

TAGS: forex  manual trading  automated trading  expert advisor  ea  forex ea  trading robot   
Broker Country Regulation Platform Min Deposit Review
Cyprus, UK, Mauritius CySec, FCA, IFSC MT4, MT5, Web $10 Review Website
Cyprus, SVG CySEC MT5, Web,
cTrader
$100 Review Website
Australia, Cyprus ASIC MT4, MT5,
IRESSTrader
$100 Review Website
UK, Cyprus, Australia FCA, CySec, ASIC MT4, MT5 $5 Review Website
UK, Australia, South Africa FCA, ASIC, FSCA MT4, Trading
Station,
NinjaTrader
$50 Review Website
UK, Cyprus, UAE, South Africa FCA, CySEC, DFSA, FSB MT4, MT5, FxPro
Markets,
cTrader
$100 Review Website
Cyprus CySEC MT4, MT5, Web $1 Review Website
Belize IFSC MT4, MT5 $100 Review Website
Cyprus, UK, South Africa, UAE CySec, FCA, FSCA, DFSA MT4, MT5, Web $5 Review Website
Cyprus, UK CySEC, FCA MT4, MT5 $1 Review Website
UK FCA MT4, Web, MT4
for Mac
$100 Review Website
Australia, UK ASIC, FCA MT4, MT5,
cTrader
$200 Review Website

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