Forex trading systems are meant to help traders to predict and analyze market trends, to help them understand when to buy or sell currencies in the Forex market. These Forex trading systems are like the veins that get the trader going on in his trade. There are manual trading systems in place as well as automatic ones. If you don’t trust either, then you can make your own system too.
The difference in the two prominent trading systems, namely Manual or discretion and Automated are the way they work. In manual systems, a trader needs to think and execute his plan of action in trade. He would have to place, manage and close a trade on his own. An automated FX trading system, on the other hand, uses algorithms and codes to decipher the market trends. In fact, the automated systems are also called Algo trading systems.
Manual FX trading system:
Manual FX trading systems are operated through human intervention. Due to this, manual FX systems are logical and shows you, what you really need to see, to be able to make a trading decision. Kishore M, Dubai based FX expert says, “A manual system is intelligent. It calculates the risks that you are already taking and show the trends that you ask the system to show. This helps traders make informed, well thought out decisions”.
1) Can be back tested:
These systems can be back tested in a practice environment. Hence when a trader tests his trade in a practice environment, he makes his strategies and executes them.
2) Initial strategy in place:
When the same trader enters the FX world, with a back tested environment to practice in, he will have a beginner’s strategy in place. Kishore has also received reviews on his Forex trading workshops from the trainees, especially for easy to understand trading strategies.
3) Manual trading systems trades through the trader:
Another aspect of a manual FX trading system is that the system trades for you through you. You will be the one which defining which trade to invest in, how much to invest, when to enter the market, or when to close or where to put your stop loss point etc.
4) Operates on a traders discretion:
A manual system will run on your discretion and hence is also called the discretion FX trading system.
5 ) Learning emotional control :
However, one of the drawbacks of the manual system, in a way, is the screen time that manual systems demand. Not every individual trader would be a full timer in the FX market. Trading at any hour, needs monitoring of the trends of the day with insights for a decision to be made. Kishore M states that with manual FX trading systems, here is where traders face problems. He says, “Being a real time trend tracker, a manual FX system will have no trends to show for reference. This is a bottleneck which manual systems have not been able to know the trading trends of the day overcome as of now”.
Manual FX trading systems often fall prey to a trader’s emotion. This makes logic hard for the traders and leads to the destruction of many.
Manual FX trading system
Can be back tested
Helps with a beginners strategy
Trades through the individual trader
Uses traders discretion
Teaches Trading Emotional control
Automated FX Trading system
Also termed as Algo trading, this system uses programming software to track the market on predefined criteria or algorithms. Here is Kishore M’s take on automated FX trading system. He says “The FX trading market is, after all driven by human minds. The market will therefore fluctuate, on emotions as well as many other factors. An automated system might not be programmed to give a resolution for all of the millions of situation that may arise in the market”.
1) Automatic trading:
An automated system depends on the software programs, also called programs trading advisers. These are termed expert advisers. They are the programs which trade for you, depending on the instructions as already in the software. Here a couple of things that happens.
- Since you have a predefined logic, coded into the software, the algorithms will decide, when should you start trading;
- You also have you stop loss predefined. Hence you software will keep on trading till you reach the stop loss point.
2) Defined trading rules:
An important aspect of getting codes written to get software for trading is that a trader might brief about what he needs, but human mind works all the time. So a developer might find it logical to make changes, according to his own understanding. This is where it becomes a problem. However customization is a norm with these software.
3) Not affected by any emotions:
The brighter side of an automated FX trading system is the fact that emotions do not affect the system. The downside of this, however is that an automated system is unable to respond to market as a human can. With the FX market being as volatile as it is, human judgement is often the need of the hour to take decisions for profitable trading.
4) Not affected by rumors:
A trader may be a technical or a fundamental in his approach, and most of the times they will stick to their way of trading. However for the new bees, falling prey to rumors in the market is easy. It is probably one of the reasons why automated systems are preferred.
5) Does not need a trader’s screen time:
With many brokers, working another full time job simultaneously, an automated system is a boon. All that a trader needs to do is open up his system, feed in his parameters and go about his work while his computer trades for him.
Automated FX trading system
Defined trading rules
Not affected by any emotions
Not affected by rumours
Does not need a trader’s screen time
Either of the systems work for traders, as per their convenience. Though most of traders and brokers find manual FX systems to be more apt, given the fact that they are full time into trading. Each system comes with pros and cons. Choose the one that suits your requirement. If you don’t find any, take the long path. If you know coding make yourself software, if not, then you have to learn.