First in a series of the various types of trading.
#1 In a series, meant to give a fundamental overall meaning to the various types of trading done in the DEX’s, Forex Markets, and Stock Markets. These may not cover all categories or go totally in-depth but give an overview for a basic understanding.
A Manual Trader lists his trades and enters the market without using Algorithms. While algorithms automatically enter trades that follow a programmed, pre-determined set of rules.
I think we can all agree that the realm of trading is corybantic and not for everyone. Manual Traders could be at a distinct advantage, especially against the traders who prefer to capitalize on their computing power to take advantage of the deviations in market prices.
Manual Traders can naturally succumb to emotional trading in comparison to traders who all but eliminate that variant by using an automated trading program.
How a Manual Trader Works
As the name implies, Manual Trading is done by hand and therefore could easily be inaccurately posted. This could seriously put the trade order in peril with disastrous outcomes, especially if the trade error is large. Is it any wonder then that manual traders rely more and more on automated trading, which allows them to take advantage of application programming interfaces? (API)
I believe many Manual Traders seem to forget that they must maintain the mental discipline to focus intensely on what they are doing. They have to be fastidious at monitoring the markets and their own trades to maintain the correct, current prices and quantities and ensure they execute the proper sell or buy orders they intend.
Program Traders (automated) prefer to rely on Algorithms and Computing power to submit virtually error-free trades. They can enter trades much, much faster than a Manual Trader as well. This ability enables the Automated Trading system to take advantage of any “mispricings” entered by novice or “lackadaisy” traders who are left wondering what happened to their funds. Yes, the markets are unforgiving, and you cannot recall any losses!!
Advantages and Disadvantages of Being a Manual Trader?
Have you heard of FOMO? (Fear of Missing Out) Unfortunately, Manual Traders are prone to emotional decisions such as fear and greed. This characteristic could cause minor to major harm if the draw of “easy money easily sways a trader.” The adage “a fool and his money are soon parted” comes to mind.
Despite being susceptible to FOMO, Manual Traders can pick up on market signals that algorithms cannot determine, such as a declining market volume or an unusual spread in buy/sells in a singular market asset. Algorithms trade according to strictly programmed rules given them, and Manual Traders are adroit and can respond to news of mergers, competition, investigations into companies, power outages, and the like.
I can see advantages on both sides of the coin. Manual Traders, it seems to me, have greater control over their trades; however, incorporating Automated Traders using algorithms such as with trading bots does seem to have certain advantages.
Next we will explore deeper into Automated Trading or Automatic execution, black-box trading, etc.