MANUAL TRADING VS AUTOMATED TRADING
When I first heard this question on my Instagram account; well actually it wasn’t a question, but a statement saying that manual trading is dying because of all these robots and artificial intelligence; I started thinking about it giving it some time before replying and that is why I wanted to share this question with all of us.
Now speaking from a computer science background and after developing few robots, it is kinda hard to make such statement. I mean even though Artificial intelligence is booming, however it is extremely hard to just create such a robot and rely on it in taking all the decisions for you.
I have plenty of trading tools (you can check them on my MQL5 account) that I use in my trading; I have published few videos on my YouTube channel; however I assigned tasks to these tools to help me in trading, for example I have an EA (PotentialEntries) that will trigger a trade for me once it detect a potential entry for me. However I choose either bullish or bearish potential entries, the maximum risk that I am willing to take and I also choose at what time I want to run this EA.
So as a summary, these trading tools will do most of the work for me (let’s say 90%) but the rest of the job I have to do it myself (which is 10%)
How about you ?
Hi Mario,
Welcome to the forum. I agree with you. AI or robots will be used first to perform mundane, repeatable tasks, but I think most traders will want and need to retain overall control over the parameters you mention.
Hi,
I think it depends a lot what kind of system you trade.
I trade only with automated systems.
You can automate a lot and computers act very quickly.
But for long trend trades will you probably still see manual trading.
No way manual trading will end. Emotions is involved in trading. AL or robot can work for a short time but not for longer time. Market will never allow to make profit everyone. Only smart people survive.
Part of trading successfully is by keeping emotions OUT of trading.
What does this mean, it’s nonsense. I have seen people come through here bragging about their high IQ, or having degrees in finance and economics who ultimately fail at trading.
Smart? if smart people can earn easy money on the market then a lot of PhD would be traders.
Not the case… People working hard beats often smart peoples
Well I guess there is a important missing piece of the puzzle that a big number of graduate and smart people (but not all of them) don’t know about which is financial intelligence, and even though they got introduce to it, they actually avoid taking this risk. However, what is important here is to know if manual trading is coming to an end? or better say, how many really believe that manual trading is coming to an end !
Trading has evolved a lot over the years, but I think we’re a long way away from manual trading completely coming to an end.
I trade 100% manually, I don’t even use those built in alerts that platforms provide. However, I am not opposed to setting up a semi-automated system if it was reliable and worked with my strategy.
Totally true, but are you able to trade manually in a hyper volatile market?
It is not about being smart nor hard-worker but it is about being patient enough.
For me, forex is the exchange of money between patient people and impatient people.
Time is your friend in Forex. Important not to trade with big leverage.
excellent !!!
Leverage is a weapon of mass account destruction
@MattyMoney By smart I didn’t mean High IQ and lot of degrees. I meant people who are smart in trading world. People who are discipline in trading and can control their emotions effectively. You can call them Intelligent Investor.
I’m sure I saw somewhere that statistically those in professions associated with having a high IQ in fact tend to do worse in trading than those not.
Thanks for creating this great subject for folks to chat about, Mario.
I’ve been working with the MT4 platform for several years. I write scripts, indicators and Experts in MQL4, AND, I also trade naked charts. Robots are great X percent of the time. I find they need fairly constant attention to be profitable.
Just one example, you can build trading times into your bot and select only certain currency pairs and be profitable one month. The next month, the “mood” of that currency pair may change for a multitude of reasons, and, you’re back to “tweaking” your bot to be profitable again.
Neural nets are an example of AI that is constantly attempting to replace the “behavior” of the human brain in its learning and decision making activities. But, even neural nets require “tuning”. And, the human brain and mind are so gigantic and complex, man will be creating new neural nets to emulate themselves…well…forever.
When it comes to money management and risk, robots offer some assistance, however, the human thinker is required to keep those two items in balance, also.
We humans have been attempting to creatively replace the human brain, human organism and even the human mind (play God), with robotics, for as long as robotics have been around.
Something to consider though: the human brain, human organism and human mind are constantly evolving…automatically. The bots will have their electro-mechanical tongues dragging the ground in an attempt to keep up with that “human evolution” and CREATIVITY.
Kenny Rogers, an old country-western singer in the U.S. puts it this way in the lyrics of his song, “The Gambler”:
You’ve got to know when to hold ‘em
Know when to fold ‘em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done
( Kenny Rogers - The Gambler - YouTube )
Though professional traders certainly are not gamblers, those lyrics ring true in trading successfully. And, they reflect something humans are great at doing.
Whether your “tool” is a robot you teach and tune, or, you play on the edge with a naked chart…trade on humans!
Ok, I have spent the last many many months developing a trading engine in mql5 that has the capability of trading many different strategies on multiple currency pairs simultaneously. I realized this is as far as I can go with my Algo Trading journey; I hit a road block. I may have an awesome powerful trading engine; I don’t have an edge in the market. I started with powerful custom grid trading system where I finally figured out how to build a grid that won’t fail, BUT, because of the way it has to be built to withstand major draw downs it isn’t very profitable and I found it just isn’t worth it. I spent months trying to go down the Grid Trading path. Previously I thought if I have enough computing power with my back-testing I could just muscle my way to profitability, WRONG! That just leads to over-fitting and is the reason most EAs fail. Back-testing a EA is major topic in itself and would be several college courses on the science of it and how to do it properly. There is one person I follow that is an expert on the subject (you can find his videos on the Darwinex YouTube channel). The more parameters you backtest at once the more likely you are overfitting the sample size. Manual Traders have to deal with discipline and emotions, Algo Traders have to deal with the problem of overfitting their optimization and the strategy(s) programmed becoming obsolete as markets change. I started thinking, there are many Professional Manual Traders out there that don’t ‘muscle’ their way through backtesting the markets. I also started to realize how am I suppose to program a bot to be a Professional Trader if I’m not one myself yet! So what are Pro Manual Traders doing differently? Why do they not need to backtest thousand of permutations of their strategy which would take a lifetime to do manually? Here is the main point I found in an article about this:
Also, I follow a Professional Trader that is good enough to work for a prestigious firm. Many years ago he tried to have his system programmed. The programmer finally told him what makes your system work, is you. It’s my belief now that the most reliable traders is US! As humans we are best to adapting market changes; we are best at recognizing price action patterns. That same pro trader said there is one thing that a program cannot do and that is having that ‘gut’ feeling–the conviction of a trade. You can only gain that skill through time sitting in the chair…
“It’s only after many years of sitting in front of a computer screen watching price action that such a skill can really be acquired.”
So what am I doing now? I’m putting in my dues. I’m going to put as much time in the chair as it takes while also learning everything I can about how to be a successful discretionary trader first and algo trader second. Only then when I’m profitable will I start to attempt to program my bot how to execute my trading plan. So for me it’s an increment approach. I’m currently building my own custom order entry system that works best with my risk management plan and approach to trading. Then I’m going to program that system to manage my trades for me after I enter them. I’ll keep on adding to the system little by little, an agile approach.
In summary, my opinion, manual trading will never end, and it’s what anyone should do first–to gain skills and a solid foundation before attempting to Algo Trade. Also, after a lot of research on the subject I think a hybrid approach is best. Automate what you can, but keep the ‘gut’, the human element, the conviction part of it manual.
Also, don’t buy an EA. If you are interested in Algo Trading, learn how to program and do it yourself. Another quote from an article:
“If there was a piece of code that could extract profits from the market in every type of market regime, it’s very likely that the developer wouldn’t be selling it to you.”
If I ever get my system working after many more years to come of hard work, I wouldn’t sell it.
By “emotions” I think you actually mean to say “psychology” am I correct?
Pterodactyl2, Thanks for the great thinking and insights. Using bots as “assistants”…doing the heavy-lifting and repetitive “grunt work” is my idea of how to approach robotic trading. I’ve been working on the trade management idea myself. I build indicators to test my favorite algorithms, and after entering a trade, turn it over to a trade management system to handle all the post entry stuff and exit the trade. It seems like nothing beats the idea of building a successful manual trading process and then mimicking it with a bot.
Besides, manual trading on the edge of the market, realizing one second in the future from that edge is a complete unknown, is GREAT FUN!
The craft of automating a great manual system, mentioned by several of those billionaires in Jack D. Schwager’s “Wizards” books, started out by automating a well-oiled, successful, manual system.
@MarvM3 , thanks for confirming we are on the right path by mentioning “…automating a well-oiled, successful, manual system!” Sounds like you and I have both come to similar conclusions in our Algo Trading Journey.
Analogy of a soccer video game developer vs a real professional soccer player (trading bot developer vs real professional trader)…
You might be the best programmer in the world, but you can only program something up to the knowledge you have on that subject. If that subject continually changes you better be able to change with it. If you were to program a bot to be a professional soccer player, how would you do that without actually been there tasting the grass when you fell to the ground, or knowing how to do a perfect corner kick—to give your forwards the best chance at scoring a goal? Statistically, a corner kick will give your team an ‘edge’ as long as you know how to do a corner kick! Can you bend it like Beckham 50% of the time, or can you barely kick it 10 feet? How would you know if you have never done it or are too scared to do it? How long did it take for Beckham to master his corner kicking craft? I bet years.
My thought is, like being a pro soccer player, it’s the same thing with trading. How will you know how to program the perfect execution of a trade or program an edge in the market (like how to kick a corner kick like a professional soccer player giving their team an edge at scoring a goal) if you don’t have experience doing it? Who do you want making the corner kick? The guy sitting in the stands that may be a video game developer for soccer video games (staying with the analogy, the trading bot developer) or the guy on the field that’s kicked 1000 corner kicks in real life? If the professional soccer player learned how to program just as well as the soccer video game developer who would you hire if you just started a soccer video game company?
EA developers that are just programmers (that have not put the time in the chair learning price action) are getting their butts/bots kicked by professional discretionary traders just eating them alive just
like a Pro Soccer team would playing against a bunch of soccer video game developers that have not actually played soccer. A couple of months ago, I realized I’m the video game developer sitting in the stands too scared to taste the grass. I’m now on the field, kicking the ball around trying to learn soccer with the hard realization knowing I have years of hard work ahead of me to make it to the big leagues before I can program a bot to go head to head with Manchester United (The Big Bad Banks).