Human Brain Versus Automated or Automatic Trading

Statistics revealed that more than 90% of new forex traders lose all their money within their first three months of fading forex. The problem with those who lose may not be un-connected with the fact that they lack the right tools, called the ‘Secret Weapons’ to win at random. Put it this way, they are not outsmart by other traders, but they are outsmart by themselves, may be as a result of their weak point, or general weakness so to say.

The below human weakness can sometimes play pranks on careless traders un-noticed.

(a) Negligence: In general life, negligence if exhibited , no matter how small can cost one of a large opportunity. Same can be said of Forex Trading If that that is taken care of or put in check on time. In life, people may forgive you if mistakenly step on toes, miss an exit on the high way, take the wrong bus, misspell a keyword in a quote form for a VIP Customer, dialed the wrong number, ignore a no-packing sign, forget a typed resume at home while ma vital interview. Etc.

You may or could be pardoned or forgiven with above mistakes. Unfortunately, no one, not even yourself will forgive your negligence in Forex Trading. You will lose your money, leaving only pennies in your account, hence, a margin call to punish you for a little negligence.

(b) Inconsistency: Forex market is full of too many inconsistent information and methords , facts, news, and a lot derived strategies that ca easily cause human traders to make inconsistent decisions and judgments, resulting into failure, especially when you want to take position on short term or long term, over bought or over sold, depression or prosperity, resistance level or support level, technical analysis or fundamental analysis, manual trading or automated trading, and so on and so forth.

(c) Your lack of Self-Discipline: I’ve always let people to know that you cannot separate discipline from the rule you set for yourself. If you discipline yourself from doing something, that logically means that there is something that ordinarily other people will freely do, but because you have set that rule , you will not do it come what may. Lets read on how you can apply it to trading forex, because, you may think that you are smarter than the machines, and so use your smartness and freedom to chose at random, based on the feeling you generate and your knowledge of how the market works, then ignore discipline, you may end up shooting your feet, or ultimately head for disaster forex trading wise.

A writer describe going into the world of forex trading full of uncertainty and changes without self-discipline, is just like a soldier who cannot survive in a war without discipline. It is discipline that makes you apply stop loss, especially when all the market forces and trading factors are against you, and take profit, no matter how small it is.

(d) Hesitation: Almost every forex trader is guilty of this act, both the old-hands and the newbie a like hesitate to act promptly in the forex market, especially when faced or confronted with new situation that needed to think twice before making a very simple decision to take position. Some professional sometimes are quick to call to mind the saying that ‘past performance does not predict futures performance’ thereby ignore and lose the right time to act .

Confusion from trader usually lead to miss the fleeting chance to either buy or sell because they take too much, un-necessary time to them. This is not applicable to the newbie alone, both professionals or very experienced traders that has made many successful trades in his or her trading history to demonstrate this kind of traits.

(e) Weariness: Human nature will always call for rest. Imagine you working for 24, 48, or 72 hours to make sure no mistake is allowed through watching your computer monitor, forecasting, that even a superman has weariness too. So un-avoidable, weariness, to at least respect the call by nature to rest for some time, so that you can regain your body back.

(f) Lack of Confidence: This is a situation where a trader does not have confidence to go long in forex trading. There is a difference between greed and lack of confidence. Greed in trading forex is a situation where all the factors, both technical analysis and fundamental analysis are all against you, and still go ahead to trade. On the other hand, lack of confidence is where the factors are in your favor, but quit trading, only to see the market goes further and further along the right track- undisturbed.

(g) Fear: This is the advanced stage of lack of confidence when trading forex. It is normal, in fact, all people have fear in various cases peculiar to them. And so, in forex trading, because of the currency rate that is easily and always jump or drop hundred pips, it is normal for traders to entertain fear about not knowing how to make sure the market go well.

It may interest you know that in forex market, people all use leverage to trade, from 50:1 to 500:1, leverage will enlarge the profit or loss from 50 times to 500 times. Leverage is the wonderful feature of Forex and it pushes or lead fear into people’s heart too, almost every trading time, because if the market goes against people, big draw down comes, and so comes their fear too. Because of the tension not to lose money arising from the pressure of fear, people easily and often make wrong decisions, stop loss too early them normal, only to regret their action.

(h) Greed: Some expert classifies greed as one of the first big weakness of human being. It is greed that will push a forex trader to want more percentage profit even when the market forces are against his or her position to opt for larger percentage until he or she loses all, then receive margin call. Whatever you do, bear in mind that the market is so volatile that you cannot predict correctly and fully all the time. Can you imagine again that where you have got 1% profit, but feel it is not fat enough then go on to get 2% or 3%, and even wish for 10% until you loses all.

How Automated Trading (or Automatic) Forex trading is different from Human being. An Automated trading is the trading of Forex (Forex Currencies) using some trading systems, programs, software or robots.

(a) Automated trading can afford faster identification of signals and reaction to them. That is what human being t do. AT is good in terms of speed of identifying a trading signal and entry and execution of the corresponding orders, thereby eliminate the missing of a trading opportunity.

(b) Automated trading robots are very helpful tools to deal with high frequency of trades using tick data, especially for day traders or other short term trading fans, because day trading keeps traders exposed in market very shortly, so it is safer sometimes than long term trading, but it is really difficult for a human being to handle, hence, the automated trading.

(c) Multiple conditional entries and exits, profit targets, prospective stops, trailing stops, and more done synchronously through Automated Trading, running multiple programs simultaneously.

(d) The idea of weariness and negligence found in human being is not in Automated trading, because it can take trades a day and night, none stop. When you have a successful Automated trading in place, you only focus o0n optimizing strategies and money management rules that will enhance your trading forex.

(e) Emotions that usually drive human being into greed is ruled out Automated Trading does not have emotion, and so cannot be greedy. It is programmed to work as programmed, period! With automated trading, there is no fear, hesitation, and inconsistency. It just trade mechanically, but fully programmable, and not affected by trader’s psychology. It performs its program and task, and so this reduces the risk of panic trading, if you ask me.

(f) Automated Trading can calculated thousands of times faster than humans, workout logical computation without error and can store memory at incredible speeds with flawless accuracy within a short time. Conclusively, therefore Automated trading is not per4fectyet. Now, if the programmer’s skill are at a low level or the strategy idea is unfavorable or no logical that corresponding product will not succeed. All the same, testimonies received in practical terms have it that a high quality automated trading system always guarantees some kind of financial success for its owner working on forex trading.