Key Distinctions Between Manual and Automated Trading – Advantages and Disadvantages Explained

Regardless of their level of experience, an investor has at least once faced the dilemma of which trading approach is better – manual or automated?

While manual trading has been around from the very beginning, the automated approach has come quite late in the picture with the increasing growth of technology. The main difference between these two trading methods is of course the degree of human interference required when executing a trade.

Key Distinctions Between Manual and Automated Trading - Advantages and Disadvantages Explained
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By opting for the the best forex robots determine success rate In the automated trading approach, manual trading, on the other hand, depends solely on the experience and expertise of an investor.

Understanding manual trading

As the expression suggests, this method of trading is entirely up to personal judgment, which means that an investor is solely responsible for executing trades. This means that the trader will perform various trading operations, ranging from deciding the right time to initiate a trade to analyzing different markets to identify the best possible opportunity.

In this conventional approach, the outcome of the trade will depend on the effort made by the investor. A typical manual trading approach involves a trader going through multiple currency pairs based on certain indicators. The trader can either open a position or simply create a watchlist to monitor price movements until they reach the desired level.

Some of the preferred strategies of manual traders involve the buy and hold approach, swing trading, and day trading, while investors frequently use stop loss and take profit indicators to manage a trade.

Benefits of using manual trading

  • Manual trading is certainly the most effective way to gain knowledge and try your hand at forex trading. This is because as an investor you need to familiarize yourself with and master certain tools, strategies and most importantly learn how to make crucial decisions on the basis of fundamental and technical analysis.
  • In this type of trading method, a trader is more likely to have better control over the execution of a trade. It also helps to determine possible and avoidable mistakes that can prevent losses in the future.

Disadvantages of using manual trading

  • Despite its advantages, the conventional method of trading can be time consuming as the trader has to do proper research, review past trades, and determine the ideal time to initiate a trade.
  • Another major drawback of this approach is dealing with the sentiment factor which often impacts trading decisions and distracts attention from certain trading indicators.

Understanding Automated Trading

Unlike the conventional method of trading, the automated method deals with a pre-programmed system. This method of trading encourages a hands-free approach by identifying the appropriate time to initiate a trade based on certain algorithms. Often referred to as algorithmic trading, traders who follow this approach depend on software that primarily runs on the MetaTrader 4/5 platform.

These systems are responsible for analyzing different price charts and market activity, which allows them to identify certain signals and determine possible profitable currency pair transactions. The main advantage of using this method is different from manual trading, with the help of automation, the trader does not have to look for profitable opportunities on his own. Investors can take this opportunity and focus on optimizing their strategies in the meantime.

Benefits of using automated trading

  • Most traders prefer to trade with automation for its ability to remove the emotional factor from trade executions. Being shielded from certain feelings when executing a trade allows traders to focus on statistics only.
  • This trading method also allows investors to build a diversified portfolio by covering multiple market conditions.
  • Beginners can easily experiment with different strategies through demo accounts.

Disadvantages of using automated trading

  • Although historical data is useful in determining the capacity of the software, it does not guarantee the future as the forex market is known to be very volatile and changing trends occur frequently.
  • This method of trading is comparatively more expensive than the conventional approach.


It is obvious that these two methods are beneficial in their own way; It is therefore important to assess the advantages and disadvantages to come to the conclusion of choosing the method that will suit you best.

Interesting related article: “What is a trader?” “