What type of Trading is Manual vs Automatic: Key Differences

Automated and Manual are two ways to analyze and trade in the market. Discover what type of trading is manual vs automatic and select the best for you.

Automated and manual trading are the two ways to trade in the financial market. However, there is an ongoing debate between traders about which one is better.

Many traders prefer manual while many prefer automatic trading. Being a leading trading platform Beirman Capital has many clients who stay confused between manual and automated trading which to choose. Thus to help you out we will discuss manual vs automated trading with key features. It will help you select the best style according to your needs.

What Type of Trading is Manual vs Automatic

Manual trading involves analyzing the market and making buying and selling decisions using the human brain. Under a manual trading strategy, all the activities related to trading are done manually without using any machine or technology.

The human brain and intelligence play a crucial role in manual trading. Many people think of it as a traditional approach. However, even in the present time, many people give importance to human intelligence over algo trading. They plan and execute trades by themselves for better results.

Meanwhile, automated trading refers to the process of analyzing and executing a trade using automated trading systems and their advanced tools. Under this, a trader uses highly advanced computer trading software developed on the basis of complex algorithms

Automated tools help a trader organize market analysis, identify potential trading opportunities, and place trade. In simple words, automatic trading involves buying or selling financial assets in the market using automated tools

Decision Maker

In manual trading, too much importance is given to human intelligence. Thus the decision-maker is human. All the buying and selling decisions including which asset to choose, when to trade, and how much risk-reward ratio is taken by the trader.

Meanwhile in automated trading traders combine human intelligence with an automated system or sometimes solely make decisions based on the algorithms-based program.

Knowledge

Manual trading involves continuous market watch and analysis. So in-depth knowledge of the financial market, its workings, terminologies, methods, strategies, analysis, and all the other factors is important. In order to be a manual trader you have to master the market and its working. Without market knowledge, a trader cannot use this strategy.

Under automated trading, your system will do most of your tasks. However, technical knowledge is important for using these systems efficiently and customizing. So a trader should have a basic understanding of coding, programming languages, and other technicals.

Market Analysis

In manual trading, traders need to organize three types of analysis fundamental, technical, and sentimental. So a trader needs to watch what’s going on in the market including financial news, economic events, geopolitical factors, and market mood. In addition, the knowledge of chart patterns, indicators, and tools to conduct technical analysis is important.

Under automated trading, traders give too much importance to technical analysis. Automated systems organize technical analysis and take indicators, tools, chart patterns, and candlesticks into consideration to analyze and interpret the historical data. To predict the rise and fall of the asset in-depth knowledge of technical analysis is required even with automated tools.

Time and Speed

Under manual trading, humans analyze large numbers of data, making trade decisions, and place trades manually. So, basically it is a time-consuming process and it takes a lot of effort. You have to dedicate at least three to four hours daily for manual trading.

Meanwhile, in automated trading, the system is doing most of the tasks for you. With the help of the automatic bots you can analyze the data interpret the market and even automatically execute trades. It can save a lot of the time of a trader and passive traders just need to monitor the system.

Emotions

When analysing and placing trade manually it is human nature to attach emotion to trading. So basically with manual trading human emotions like stress, fear, greed, anxiety, anger, and other emotions can affect your trade.

However, with automated trading, systems follow a set of rules and guidelines. Traders can only place the trade when the market matches your predefined criteria resulting in logical trading.

Accuracy and Errors

While analyzing historical data or analyzing the market manually the chances of human mistakes are there. So errors and Mistakes are common with manual trading.

However, with automatic trading, everything is done by advanced tools so the chances of human errors and mistakes are minimal. So, ultimately the accuracy rate with automatic trading is quite high with negligible error.

Flexibility and Adaptability

Automated trading systems work on the basis of historical data based on a predefined set of rules. So they are not ideal in case of unexpected events or sudden changes in market conditions. However, with manual trading, traders keep watch on the market. So during the instant environment change, traders can customize their trade strategies and trade execution criteria.

Backtesting

Automatic systems allow traders to backtest their strategies and analysis methods. Once traders have developed a system, traders can backtest it and make changes considering the results. However, with manual trading backtesting is not possible. Traders can keep a journal, record their profit or loss, and customize trade manually.

Cost

With manual trading, a trader needs to make efforts, dedicate time, and ] learn continuously. So it does not involve any monetary cost but requires significant effort. However, with automated trading, a trader need to purchase or develop highly advanced tools. So definitely it involves a significant cost and not every trader can afford it.

Conclusion

We have a detailed study on what type of trading is manual vs automatic. Manual trading and Automated trading, both have advantages and disadvantages. Depending solely on automated tools or keeping your trading 100 percent manual is not good for traders.

True traders know when to use tools and when to use their brains. So a trader should combine manual trading with automated trading for maximum returns.

FAQs

What type of trading is manual vs automatic?

Manual trading is manually analyzing and placing trades in the market. Meanwhile, automated trading refers to integrating automated tools and computer programs for trading.

Automated vs manual: Which is more suitable for beginners?

Automated trading is more suitable for beginners. Manually analyzing the market and placing trades is difficult.

Automated vs Manual: Which is Better?

Manual trading and Automated trading, both have advantages and disadvantages. So a trader should combine manual trading with automated trading for maximum returns.