What is the Difference between Automated trading and Manual trading?


In the process of manual trading, the trader needs to make decisions and manually enter and exit the trade. They might have an automated system to alert them whenever trading opportunities arise, but the trader needs to manually authorize trades. On the other hand, in case of automated trading or machine trading, the trader needs to come up with a pre-decided plan and employ the computer to implement it. Whenever possible trading opportunities arise, the computer itself can start generating orders. This is in contrast with the process of manual trading, where human input is required in order to enter or exit the trade.

  • Human behavior: A lot of times, a trade is not made because the trader becomes emotionally unfit to carry out the trade. It becomes a problem for manual trading as human input is required to authorize trade, but automated trading does not let the trade be affected by human emotions.
  • Errors: Automated trading systems are less likely to perform errors as the strategy has already been determined by the trader long before the trading happens. However, manual trading is prone to human error. In a hurry, a trader can make a lot of mistakes that can be avoided in the case of machine trading.
  • Human judgment: It is believed by many traders that human judgment is essential in every step of trading. It causes disadvantages in case of machine trading because once decided; the trader cannot stop the trade from happening no matter what, unlike manual trading, where the trader can stop trading manually whenever he wants.

Many traditional traders believe that the automation system should be used only for monitoring data, but the success of automated trading systems is undeniable. Both processes have a few advantages and disadvantages, but automated trading like machinetrading prevents human mistakes and human emotion from getting in the way.