The problem I see with automated systems is that they cannot adjust to the different environments. While an automated system might be great for ranging market environments, the system might fail during trending seasons.
No one can replace the human brain. The Forex is dynamic and because of that discretion is always required. You must know all the factors affecting the price at the moment.
I agree that discretion is good to use. We humans are capable of adapting while an automated system is not. This is for sure. That being said, however, there are strcitly automated systems that do quite well. Some of the best traders in the world follow a purely automated system (John W. Henry and Tom Basso to name a couple)
But i must disagree with you piplicious when you say that we must know all the factors affecting the price at the moment. The need to know is a strong psychological bias of many beginners because they feel that will help them gain more control over the market. But the truth of the matter is that it is impossible to know all factors affecting the market. There are just too many players to know what each of them are thinking.
I agree that we need to have a good understanding of what moves currencies in general. This will help us to better plan trades around potentially more volatile times. But price itself is king. We don't necessarily need to know why a market moved...we just need to know that it moved and let price action dictate our actions.
personally, i prefer to use my brain to decide when or if i will be getting into a trade. i dont like to give up control. i dont even trade signals from another trader or system if i cant verify. but on the same note i know someone who does quite well on an automated system. i was lucky enough to check out what he was doing and i found it quite fasinating. over the years, his system has been quite profitable but there have been many times he seemed to have a huge drawdown, which to me, was quite frightening. but his system always managed to make it back and then some. if i could take my trading system and make automate it i would really love it but i probably would not feel confortable trading on it soley for a very long time.
I have never felt comfortable while in a trade....dont think automation would work for me....although I have never tried a fully automated system except under backtesting conditions. Someday I may give it a try....but for now, I need to participate in the trade with my finger on the trigger. My loosers average under 10 pips while my gains average over 20 pips. Many times I will exit at precisely the right time and other times I will leave pips on the table. But I think cutting the losses is the key.
It's interesting to hear it said that "I don't trust automated systems". Why not? If the system is based on your own research and built around your particular trading style, what's not to trust? Basically, that implies a lack of trust in yourself and your own work. If that's the case, then there's a deeper problem that needs addressing.
If you're referring to an off-the-shelf black box system, then you shouldn't trust it because you have no idea what's going on in there. You don't know how it's going to act under different market situations or if the trading style matches your own. That's why I would never even consider using such a system. I need to understand the workings so I can know if it's right for me.