Manual vs Automated Forex Trading

Generally speaking, there are two ways of approaching forex trading: manual trading and automated trading. Of course there are various approaches within these categories as well, but all forex trading styles fit into one of the two categories. In this article we will discuss the pros and cons of each approach and help you find the style of forex trading that is right for you.

Manual Forex Trading

This tends to be where most traders start. Manual forex trading means doing all the work yourself: fundamental and technical analysis, trade execution and trade management. Manual traders may base trading decisions on fundamental analysis alone, technical analysis alone, or a combination of the two. A fundamental trader will usually be trading over longer time frames, whereas technical traders trade anything from the 1 minute chart, right up to the monthly.

Manual forex trading can be quite demanding, you need to be able to analyze markets objectively, time your entries and exits correctly and keep a cool head when managing your positions. A detached, objective approach to forex trading is one of the biggest issues new traders struggle with, managing your greed while trying to make money can be quite the baffling paradox. Manual forex trading is all about your personal edge (ability to pick markets), the edge of your system and most importantly, your ability to stick to your system, hell or high water.

On the other hand, good manual traders make money consistently and lots of it. Some successful manual forex traders only trade for two hours a day and do really well. Manual trading is all about your edge and beating the market, and if you do have this edge, this is the way to go.

Automated Forex Trading

Don’t have an edge? Struggle with psychology and discipline? The automated approach might be right for you. Automated trading removes 99% of the decision making from the trading process. The only trading decision you have to make is whether or not you should be running your automated system and a good system even removes that part of the trading process and will be left on 365 days a year.

Automated systems will generally always be technical, all that funny grey area known as quantitative trading. The exception to this would be trading using forex signals, where the signal provider may well be basing his or her trading decisions on fundamental analysis. 20 years ago, automated trading was only an option for hedge funds, investment banks and extreme high-net-worth individuals, but since the MT4 platform came out and with the rise of forex signal services, literally anyone can get into automated trading in 2017.

The disadvantage of automated trading is also it’s biggest strength, as all of the decision making is removed from the equation, you have next to no control over what trades you take. Interfering with a proven system can lead to horrible performance divergence and even turn a profitable strategy into an unprofitable one. Another problem is relative underperformance compared to exceptional manual trading, automated systems that perform exceptionally well are generally very expensive or may not even be available to the public and designing your own automated system tends to be quite a time consuming process.

The exception to all this, once again, is forex signals. With forex signals rather than having an coded system dictate your trades, a good manual trader is essentially trading for you by proxy. If you are struggling with manual trading and don’t have the required skill set or capital to develop or obtain a solid automated system, forex signal may well be the way to go. Having said that, you still need to do due diligence when selecting a signal service. Look for consistently profitable signals with a solid track record and carefully analyze whether the trader is trading with stops or without. Be very wary of automated systems and signals with 90%+ win rates, something is almost bound to go wrong eventually!

Trade forex with an ECN broker like Vantage FX

Whether you are trading manually, trading with an automated system or ea, or simply following forex signals, spreads matter. ECN forex brokers are substantially cheaper than brokers employing the market maker model and they also allow you to trade any strategy. Lots of market makers will actually ban you if they discover you are trading an automated system or scalping manually. No matter what your approach to forex trading, ECN should be an easy decision. There’s no point paying more than you need to and do you really want to risk being banned from a market maker and having your profits confiscated? It’s a no brainer.