Why be on the wrong side of the 80%?
80% of online trading is automated, only 20% (and shrinking) is still done manually
<chart intersecting 90/90/90 with automated 20%> (this is not you!)
When, and why, do you place trades?
Either:
this is your scheduled time to trade, and you’re “looking for opportunities”
or
this is some of the “free time” you have from “other activities”, and you decide to step into the market.
Now, what is wrong in this scenario?
Why would the market care about your schedule, or what you’re used to trading?
There’s only two reasons you’re placing that trade:
1. because you happen to be there now (your schedule),
2. because you’re “familiar” with the financial instruments you trade.
Face it, the primary reason you’re trading is because you happened to be in front of the computer at that time. So you place that trade, and you decided you’re going to be profitable.
It’s not the right instrument, you didn’t go and scan all existing markets in detail, it’s not the best time, it’s not the best entry, you just picked it because that’s the time you’re trading, you happen to be there now, and that’s in front of you.
You saw what you’re familiar with in trading, and you’re there now. Those are the two reasons.
All the while, in a very real parallel universe, markets are being scanned automatically for the exact conditions that fit a trade for certain machine-optimized parameters (right liquidity, momentum, direction, etc.), trades are being placed, hedged and closed by algos in the correct instruments, to maximize probability of success. Hundreds of instruments, every single minute with the same watchful eye, conditions are being evaluated tirelessly in a way that, statistically, you’re most likely to make money while you’re asleep than when you’re in front of the charts.
What you do everyday is to try to convert information into action. The catch is, the information game has been automated away – and you get left with the execution part – which has also been automated away.
Traders are encouraged (and rightfully so) to know the instruments they trade. They specialise in a certain number of pairs or markets. It wouldn’t cross your mind to open a position in a new pair you never tried before because the technicals look kinda right at the moment. And to be fair, it wouldn’t be prudent. But an algo does just that, no guilt or regret, just the statistical probability that success is to be taken in the long run.
You, on the other hand, try to manually force onto a chart whatever is your market view at the moment. Just because you’re there. You may correctly say “there’s no trade to be taken here”, but conditions may change as soon as you leave for lunch. Even without the guilt or regret, it’s the opportunity.
Imagine you have a competitor, and you try to level up. You try to put one more hour into your trading every day. “if you get 1% better each day, blah blah blah”. But your competitor learned about your new efforts. So instead of putting _two_ more hours to compete with you, he puts in a full extra day of work afterwards, right after you’re done, tired and depleted. Not only that, he triples the workday to the point where he sleeps no more. All the while, 100% caffeinated attentive, not missing a signal, a bar, or a beat. Then, he goes out and gets 127 new jobs.
That’s what you’re up against.
He can get 256 new jobs.
Or 512.
Or 1024.
There’s no beating automation, period. You might dip yours from the market now, but given time, the market will take its pound of flesh.
So, you are taking time out of your life, learning markets, Technical Analisys, allocating capital, finding a good broker, all of that so you can be rewarded with the chance to spend you entire day staring at charts? And on top of that, making mistakes that are costing you money?
No wonder the 80% that are automated are beating it. Would you rather be on this side, or that side?
Why would anyone consider manual trading, after knowing automated trading exists? Truth is, nobody does. There are no people that have gone from automated trading back to manual trading. Think about that.
It always amazes me, partially because automation in markets has been second nature for so long, when some some people new to trading come analysing their new “systems” manually hacking their way into a bumbling “trading setup”. What some people call a backtest, when doing manual trading, it’s actually laughable, if it wasn’t tragic. People fool themselves by having a couple of looks at a chart, and take decisions without any data to back it up. It’s just rolling the dice with extra steps. From all the technological evolutions we’ve had since the 90’s, people doing manual trading seem to have been stuck in the past. Using a browser from the 90’s, just because it “sometimes works”, it doesn’t mean you should be doing it. You’re getting yourself in harm’s way, and it’s 10x harder to do than what we have now. Things have gone a long way.
Don’t use a fishing pole against an industrial fishing trawler. It may be fun, but there’s really no comparison to each other. Most importantly, if you plan to make a living out of markets. Don’t go out there with a fishing pole.
Nothing wrong with taking a hybrid approach. Just know that, in the long run, you don’t want to be on the wrong side of that 80%.