Forex Expert Advisors vs Manual Trading. What should I choose?

The Forex market provides traders with a wide range of tools that help simplify trading and increase its efficiency. One of the most popular of these tools is trading advisors. However, like any other tools on the market, advisors (EA) can be both a source of profit and a cause of losses, including a complete loss of the deposit.

Traders Union analysts conducted a detailed study to find out how often successful traders turn to the use of advisors and whether it is worthwhile for beginner traders to rely on these automated tools in their trading.

When I was just starting to trade, the issue of using advisors was especially acute for me. Therefore, the results of this study turned out to be very useful not only for beginners, but also for those who have been working in the market for a long time, seeking to compare their own experience with the practice of professionals.

The TU team of experts carried out work to identify the key characteristics of all existing approaches to trading on the Forex market and determine which of them is preferred by truly successful traders: manual trading, **full automation **with the help of advisors, or a combined, semi-automated approach.

To achieve this goal, a survey was conducted among 2,800 experienced and effective traders cooperating with brokers included in the Top 10 Traders Union rating. The collected data allowed us to obtain an objective idea of ​​the preferences of professionals and identify the most effective trading method.

I participated in this survey as a trader with over a year of profitable trading. This allowed me to look at the results from two perspectives: as a participant in the study and as a practitioner interested in comparative analysis.

In addition, the study answered the following important questions:

• What are the different methods of trading on the Forex market?
• Which ones do successful traders prefer?
• What are the strengths and weaknesses of each approach?

Theoretical part of the research

After studying information from open sources, the TU analytical group determined that the following trading methods can be distinguished on the Forex market:

1. Manual trading method
2. Automated approach
3. Semi-automated trading

According to statistics, approximately 25% of all transactions on the market are carried out automatically, about 30% — using semi-automated tools, and the remaining 45% — manually.

Manual trading

Manual trading means that the traders analyze all market events, technical **indicators and fundamental news on their own and based on that open and close trades in the Forex market. This trading method is the most popular one, as it has many pros compared to other methods, including:**

• A possibility to control opening and closing of each order.
• Clear control over the change of the market situation.
• Quick reaction to release of fundamental news.
• Flexible approach to setting **Stop Loss** and Take Profit orders.
• A possibility of trading regardless of the market situation.

It is also worth noting that manual trading also has cons, the main ones being the following:

• It is not possible to trade more than 4–6 currency pairs simultaneously. The quality of trading falls substantially if their number is bigger.
• It is impossible to send many orders for purchase/sale of different currency pairs within a short period of time.
• Complex calculations take time.
• It is impossible to review several charts simultaneously.
• The trading time is limited to the time a trader can dedicate to being on the trading platform. Accumulation of physical fatigue.
• High psychological strain on the trader, which results in mistakes leading to losses.

Automated trading

Automated trading means using a special software (Expert Advisor), which automates the process of performing trades, thus substantially saving the time and effort of the traders.

A trader creates a trading algorithm based on his/her **trading strategy** and sets the advisor up accordingly. After that, the traders are performed without the trader’s involvement, i.e. automatically.

The advisor strictly follows the criteria chosen by the trader: conditions for entering and existing the position, no-loss level, admissible risk and other indicators. The trader only has to monitor the efficiency of his/her strategy and make adjustments, if and when necessary.

The pros of automated trading include:

• A possibility to work with a large number of instruments.
• A possibility to place many orders for purchase and sale simultaneously.
• Instant reaction to price fluctuations.
• The advisor does not feel any emotions: fear, panic, unfounded euphoria.
• Instant analysis of indicators, charts, volumes.
• A possibility of 24h trading.

At the same time, automated trading also has a large number of cons, the main ones being:

• If the strategy was chosen incorrectly or there were mistakes in setting up, the advisor will not stop performing trades, even if they lead to losses.
• Simple advisors cannot perform fundamental analysis and react to the news.
• An advisor cannot independently adjust to the changed market conditions, which means its settings must be adjusted continuously.
• An advisor cannot pass a trade, even if it is based on a false signal, for example a false breakout.

Semi-automated trading

Semi-automated trading means that a trader makes an independent decision on opening or closing a position, same as with manual trading. At that, complex calculations, analysis of charts and indicators are performed by the expert advisor, which provides the trader with corresponding signals for opening or closing the trades. In semi-automated trading, the advisors often play the role of a confirming indicator, when fundamental factors point to opening a trade, and the signal from the advisor serves as a confirming factor.

The pros of semi-automated trading include:

• Instant analysis of price fluctuations, indicators, volumes.
• Simultaneous formation of signals for purchase/sale of several currency pairs.
• Providing the trader with an opportunity to take fundamental factors into consideration without performing automated trades.

The cons of the semi-automated trading are similar to those of the manual trading, the main ones being:

• Opening trades manually, which leads to delays with opening orders.
• Impossibility to open/close trades for a large number of trading instruments.
• In case of a mistake in the settings, a semi-automated advisor will provide wrong signals for opening/closing trades.
• The number of trades is limited to the time a trader can dedicate to being on the trading platform. It is impossible to trade 24/7.
• Emotional condition of the trader may affect opening/closing of the trades.
• Appearance of false signals for opening/closing trades due to short-term price changes.

TU Research Department Findings

To get a reliable answer to the question about the preferences of successful traders, TU specialists used the CAWI (Computer Assisted Web Interviewing) method and surveyed 2,800 active members of the Traders Union community. The survey error does not exceed 2.2% at a confidence level of 95%.

To be honest, I expected to see a higher proportion of automated trading among experienced traders, but the results surprised me. All survey participants showed profitable trading for at least one year and provided answers via a structured questionnaire sent by e-mail.

6.1. Surveyed traders by gender:

Respondents by gender, %

6.2. There are the following age groups in the sample:

• 45% of the respondents are aged 18–30;
• 34% — aged 30–45;
• 17% — aged 45–60;
• 4% of the respondents are older than 60.

6.3. In terms of their trading experience, the composition of the respondents was as follows:

• 3% of the respondents have been trading on Forex for over 10 years;
• 24% — more than 5 years;
• 43% — from 3 to 5 years;
• 30% — from 1 to 3 years.

6.4. In terms of the average monthly deposit growth for the last 12 months the results of the surveyed traders are as follows:

6.5. The responses of the respondents regarding their trading strategies were as follows:

6.6. The answers to the question about the use of Expert Advisors were as follows:

• 47% of the respondents say they do not use expert advisors for trading;
• 38% of traders prefer to use EAs;
• 15% of traders use advisors partially (not regularly or for trading part of their deposit).

6.7. The respondents who “use EAs all the time” or “partially use EAs” were also asked about their trading method with the use of Expert Advisors.

Their answers were as follows:

• 78% of the traders prefer fully automated EAs;
• 22% of the traders use semi-automated trading.

Findings

Based on the results of the research, the TU analysts have reached the following conclusions:

1. The majority of traders interviewed by the TU experts prefer manual trading.
2. The majority of the surveyed traders, who use Expert Advisors, prefer fully automated trading.
3. Experienced traders choose manual traders more often than other traders.
4. Traders who prefer short-term strategies choose trading with EAs more often than traders who use long-term strategies.
5. Traders with the highest average monthly return in the past 12 months, who use EAs for Forex trading, choose semi-automated trading more often than other traders.

More advice | Expert Opinion

Using automated EAs is a good alternative to manual trading, but traders need to keep in mind several factors that strongly impact the level of success of automated trading:

• the main rule of using an automated EA is full trust towards the strategy on which it is based;
• traders should take into consideration that interference with the trading algorithm while it is in use can often lead to losses;
• simple EAs do not take into account fundamental factors (statements by the central bank governors, decisions on key interest rates, unexpected macroeconomic news, etc.), which is why they often cannot react to them adequately and in a timely manner. Experienced traders that use automated EAs recommend turning them off on the eve of the release of serious macroeconomic information;
• before using an EA, you need to thoroughly test it in the strategy tester (using a long period) and on a demo or live trading account with minimum lots and leverage;
• regularly check all trades, which were opened and closed using an EA, and make corresponding adjustments to its operation, if and when necessary.

Observe the rules listed above and automated trading in the Forex market will bring you stable and high profit.