Forex trading automation: replacement or assistance to manual trading?

Forex trading automation is an attractive option.

The benefits of automation are obvious – you are not chained to your computer and it gives you much less stress. To say nothing of the fact that a computer reacts to opportunities and executes trades way faster and better than you.

The downside of trading automation is also obvious. It is not that easy to develop an algorithm that fully replaces you in all sitiuations.

A question: why can’t we take the best of both worlds?

We tried it with our latest Smart Forex Tester 1.0 software. It has an option to manually override when an automated trading strategy is being run.

Trading automation was represented by a simple strategy that uses 3 RSI of different time frames to enter or exit the market, This strategy obviously only works well when the market is not trending.

For the calm markets, a typical situation where manual control was needed was around the peaks. There was usually a great deal of see-sawing there. And it was not clear whether a peak will hold.

Even such simple algorithm as we used could enter the market well. But fixing the profit was more efficient and easier manually. You could take less risk and if it was not sure the market goes where expected, you usually had a chance to close the trade with a small profit during the see-sawing. Or even small loss was a better option in an uncertain case than relying on a fixed automated stop-loss.

However, the main benefit of the manual control was during the beginning of the trends. Our simple 3 RSI algorithm works very badly on trending market. It will persistently try to enter the market in the direction opposite to the trend and will be stopped out a lot of times.

But even with such a simple system, you can still be successful. Once you notice a trend starting, you can disable the automated strategy and manually take a position in the direction of the trend and just hold it. When the trend is exhausted, you can return the control to the trading atomation.