Thursday, July 22, 2010

The Greatest Advantage of Automated Trading, at Least for Me !

It is true that my posts regarding automated trading are generally focused towards the negative aspects of this way of trading and explaining why it is bound to be harder to achieve than simple manual profitable trading. However, there are a few advantages inherent to automated trading that have made it my operational way of choice and the generator of the majority of my current income level. Within the next few paragraphs I will be explaining to you one of the main reasons why I decided to use automated instead of manual trading systems to succeed in forex trading, especially why this is so beneficial for my trading style and personality. I will also tell you why this quality is also a double edged sword and why it does NOT mean that you can just "set and forget" trading systems.

Yes, we have all heard the many "benefits" inherent to automated trading. Most EA sellers just tell you that you can make money while you sleep, trade like a professional without knowing anything and simply enjoy the profits using the forex market like some sort of ATM machine. The truth is VERY far away from this and automated trading is simply not what they tell you it is. In reality automated trading is harder to achieve than manual profitable trading and it is as challenging and demanding from a psychological point of view.

What is the difference then ? What are the TRUE advantages of automated trading ? In reality automated trading has a lot of pitfalls but it also has some great advantages that made me decide to go with it instead of regular full time manual trading when starting to build my forex trading career.

Truth be told, the fact that you are able to watch the markets 24/7 and "not miss any trades" or do a "ton of analysis in a millisecond" were not the things that made me choose this way of trading over manual execution. Even though you may think that this is actually better the fact is that you can use manual trading systems that require only a few minutes every day to achieve the same profitability levels as a regular long term profitable automated trading system. I know traders who trade daily charts and don't spend much time "working" and achieve the same profit targets as me so the fact that you can just have an ever-watchful eye is not a true reason to choose automated over manual trading since being on a constant lookout for trading opportunities is not necessary nor does it warranty more success in trading.

The most important reason that drove me to use automated instead of manual trading systems was simply that - from a psychological point of view - I am better able to control my short term emotions when I do not have to take the actual trades of the systems I am using. I am very good at dealing with draw down periods since I always have a strong analysis and long term perspective but having to take trades from a strategy that has been losing for a given period of time manually is just psychologically hard for me to do. As a trader, I quickly noticed that draw down periods when trading manually made me change my strategy and this led to long term loses and deviations from my projected profit and draw down targets.

Automated trading is a blessing in the sense that it offers me the ability to have a long term plan and stick to its guidelines even if I am not actually personally executing each position the system goes into. Of course this does NOT mean that automated trading is emotionless and those of you who assume this to be the case will be making a BIG mistake. Automated trading attacks your psychology a LOT but from a different perspective. If you don't understand the system you are using you will not be successful because you will not know if you should or shouldn't stop using a given trading system when a draw down period happens, you will constantly wonder if it has stopped working and you will NOT be able to achieve long term profitability.

Even though automated trading is very demanding emotionally, it is demanding in a way which I am more comfortable with. I am very meticulous about the analysis and understanding of my trading systems and I have built what I think is a very good capacity to draw plans around automated trading systems and stick to them. Manual trading is demanding for me in a way that I cannot handle very well, reason why automated trading became the perfect answer for my question about success in forex trading.

So for me not having to personally suffer through each trade of my systems is great since I am better able to handle the great psychological pressure that is exerted by automated trading systems in other ways. However what you have to realize here is that whatever you choose -manual or automated trading -, it will be challenging and believing that automated trading will be a "breeze" simply because you don't have to watch and take every trade is going to be a FATAL mistake. In the end it comes down to having a well laid out plan, a GREAT understanding of your trading strategy and the will to execute your plan exactly as you have laid it out.

If you would like to learn more about the psychology of automated trading, the building of systems and how you can trade with confidence with a likely long term profitable system YOU build based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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