Due to the constant 24-hour environment of the forex market and the growth of online trading platforms, new and more advanced trading methods, such as automated trading programs, have emerged. The best forex software available in the market helps users in determining whether to acquire or trade currencies. They also have a basic programming feature that lets a user make trading decisions based on predefined parameters. This increasing popularity of FX bots among traders reflects how manual trading practices lack many features when compared to automated FX trading software.
Let’s take a look at the disadvantages one might face when trading manually and how automated FX trading can make up for them.
Limitations as a manual trader- Automated FX Trading
Manual market participants seem to be at a disadvantage in the fast-paced world of trading when contrasted to traders that employ significant computing ability to positively impact market price occurrences. Additionally, manual traders may be more prone to trading on emotion than traders who depend only on trading software. A manual trader executes buy and sell orders independently of computerised signals. They also manually enter transactions into trading markets, which raises the possibility of improper or faulty order placement.
A manual trader should always depend on their own capabilities to enforce discipline and execute trades as intended. A trader of this sort must be diligent in monitoring the trades to prevent errors such as purchasing when they decide to trade and guarantee that deals are conducted using the appropriate order types, at acceptable prices, and at the right volumes.
People, unlike computers, have a limited ability to continuously analyse a large number of variables. As a result, an individual’s ability to create extraordinary earnings would be limited. Humans are incapable of totally eliminating emotional biases, flawed algorithms, and psychological blunders from all decision-making processes. In the manual trading approach, this is a fairly obvious disadvantage.
Advantages of manual trading
With that being said, there are certainly a number of advantages to manual trading that still makes it preferred among many traders. Despite its numerous restrictions, manual trading does offer significant advantages.
Humans, unlike algorithms and automation processes, do not make judgments based on a set of established rules or sets of reasoning. As a result, manual trading is less vulnerable to huge, unanticipated macroeconomic impacts or fluctuations in economic environments and trends. Since market participants are human beings, experience, expertise, and intuition may frequently surpass computing logic.
Why automated trading is better than manual trading?
All of the limitations indicated by the manual trading evaluation above can be eliminated by automated methods.
- Backtesting can be done by automated software
Backtesting is a term that refers to the process of testing new trading strategies using data from the past years. Automated software must always be permitted to accomplish what has to be accomplished without making assumptions. Backtesting enables a trader to assess:
- How dependable their trading strategy is
- How probable is it that the strategy will be profitable
- How the approach might perform in different market situations
Furthermore, it enables a trader to determine how much revenue they might expect to gain or lose for every unit of investment.
- Reduces emotional responses
Since all parameters are predefined, automated platforms do not allow traders to doubt or challenge the trade. Furthermore, just as they assist traders who are hesitant to make a decision, they prohibit traders from overdoing it — buying and selling at every apparent favourable window. Since they’re not influenced by intuition or emotion, these systems produce objective and consistent decisions that certainly help a trader to excel in their trading career.
- Encourages discipline
Using an automated trading system allows you to maintain your discipline. When a trader bases their judgements on sentiment, discipline is compromised. In algorithmic trading methods, the parameters are already specified in and trades are promptly executed. Furthermore, even when a trading strategy has the potential to succeed, breaking the rules undermines any credibility in the system. Trading methods that are automated can assist you in preventing this.
Conclusion
While there are benefits to using an automated system, it may also be complicated. Once you start employing the platform, make sure to gain some expertise and familiarise yourself with the system’s complexity.
