Automated trading, also known as algorithmic trading, the orders are placed purely in accordance with the trading strategy, without any temporary thought corrections during the period. The trading strategy must be sufficiently specific and detailed so that traders will not have ambiguous choices during execution. The best case is to use EAs for trading. Even if EAs cannot be used, traders need to imagine themselves as an ordering machine without any emotions in automated trading.
For example, before the stop loss level is touched, no matter how unfavourable the message is, you cannot stop the loss in advance; before the stop profit level is touched, no matter how much you lose in the previous orders, you cannot stop it and take profit in advance.
Relying on certain trading principles to place orders, these principles will not be too detailed, so that traders have a larger space for independent decision-making. What needs to be pointed out is that manual trading is not impulsive trading. It is also based on an in-depth understanding of the financial market and rich trading experience.
The beginners, without any knowledge reserves and experience accumulation, place orders according to the buying and selling signals of their own judgment. This model is called impulsive trading and is not the manual trading we are discussing here. It’s like a beginner and an advanced trader playing chess, the same move of a pawn (such as a pawn in chess), but the two are completely different in thoughtfulness. Manual trading can be “moved with time” without taking too many restrictions into consideration.
Automated Trading Vs. Manual Trading: Which One Is Better?
For the advanced level traders, manual trading is the best; for beginners, automated trading is the best. Manual trading puts traders in real-world scenarios, allowing them to make more informed trading decisions and gain trading experience. Technical and fundamental analysis become second nature to a trader. Manual trading gives traders more control over what traders can do in a given situation. Advanced level trader is easy to identify what works in their favour when using a manual system of trading. However, manual trading calls for a disciplined mindset. In this case, beginners tend to get emotional and imagine huge profits and make decisions that often go wrong, resulting in losses.
With automated trading, traders will be able to maintain consistency in their trading because the statistical advantage works in their favour and the trading robot does not demonstrate emotions when executing transactions. Unlike manual trading, there is no need to struggle with the trading strategy, and there is no question of incurring a loss. As such, this is suitable for beginners that do not know how to start trading.
How to improve trading analysis in manual trading?
The first step is to read a sufficient number of trading strategies and apply and test the knowledge learned in the real account to distinguish the authenticity. At this stage, we must hold the attitude of learning, not the illusion of getting rich overnight. After all, it is difficult for most people to make a profit at the beginner stage. There are lots of reasons traders fail, dreaming too big is one of them.
The second step is to have sufficient market information. Information is the most important factor to ensure accurate judgment. If the information you have is not comprehensive, timely, or accurate, your judgment will be greatly compromised in real trading, and you will naturally become a passive party.To master complete information and learn how to become a trader, in addition to purchasing various financial terminals and financial data at high prices, you also need to develop good information gathering habits. Every day’s international market news, corporate news, central bank news, key figures’ speeches, national policy changes, hot events, etc., need to be tracked in time.
Moreover, it is not enough to listen to these messages once, and important parts of them need to be edited in a fixed file for later review and sorting. For example, in the recent inauguration of the 46th President of the United States, if you do not allow enough time and energy to watch the whole process, it will be difficult to make accurate judgments on the impact of the event on the US dollar and US stocks.
The third step is to control your emotions. Manual trading is more susceptible to emotions than automated trading, because the latter completely negates the positive effects of emotions, while the former uses the positive side of emotions.
For example, if you hold gold from $1,600/ounce to $2,000/ounce, automated trading relies on iron rules. As long as the market price of gold does not reach the take-profit level of 2000, you will resolutely not take profit in advance; manual trading relies on confidence in the future market trend is the rational expectation that the new crown epidemic will increase risk aversion and promote the rise of gold.
Emotionalization is not a good phenomenon. Excessive optimism will lead to larger and larger positions, and excessive pessimism will lead to timidity in the face of certain signals. It is easy to quit smoking completely, but it is difficult to set only one cigarette per day. The psychological barriers to manual trading are roughly the same.