trading bots vs humans
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Trading Bots vs Humans – Can Machines Beat Traders?

One of the most frequently asked questions when talking about trading bots is: Does manual or automated trading make more money? Comparing Trading bots vs Humans, who beat the market?

Manual, also called discretionary trading, requires a trader to place, manage, and close all the positions directly on the trading platform.

That means that the trader should spend a lot of time on:

  • Analysing the market, checking how market conditions evolve
  • Evaluating the impact of the market moves on the profit and loss of his positions
  • Waiting for a specific event or scenario to occur 
  • Execute the order to react to the price action
  • Update the profit and loss following the most recent order executed
  • Assessing the results looking for potential improvements or optimisations
  • Constantly review market analysis

If that wasn’t per-se a very challenging and time-consuming activity, the profitability of the trader is often directly proportional to the time spent trading. Of course, the more time the trader can analyse the market, the more opportunities he can catch. That translates into more opportunities for profit.

The relation between time spent trading and trading outcome is also not linear. If the trader is not using an appropriate trading strategy, or stress (just like other emotions) is impacting his decisions, the time allocated to trading would result in considerable losses.

What is needed for manual trading?

The main assets that every trader can count on to reach satisfying trading results are:

  • Available capital
  • Time
  • Trading skills
  • Stress management skills.

For many, the available capital is the harshest constraint and the most crucial variable to work with. At the same time, the other variables in this list are not easy to grow. 

The best traders are those that spend a reasonable amount of time running a profitable trading system and avoiding the influence of emotions.

How can a non-pro trader improve his returns?

If you are an experienced trader and you can get constant gains in all market conditions without spending a meaningful amount of time in front of your computer or looking at the charts, the chances are that you are already in a privileged spot. You probably don’t require any further advice.

Unfortunately, statistics state that around 80% of traders lose money or underperform the market. So how can you improve your profit?

A trading bot is an automated trading system that runs without the need for manual intervention. You can plan the bot only once, without employing a meaningful amount of time. The bot will trade for you according to the instruction 24/7 regardless of any stress or emotional interference. 

All the trades that the trading bot generates are based on decisions taken on your behalf following the logic that you’ve set up.

It takes a very advanced trading bot to beat the best traders, but on average, using trading bots can hugely simplify the life of ordinary traders and beginners. It allows everyone to start trading, catching the opportunities that the market offers every day.

Advantages of Trading Bots

Algorithms and trading bots already trade trillions worth of assets every day in traditional financial markets. Banks, Hedge Funds and large investors use them for their multiple benefits and efficiencies. Financial markets witnessed the advance of trading bots vs humans years ago, and nowadays algos traded almost 80% of US stocks.

Day after day, more investors are also deploying trading bots in the Crypto market to take full advantage of its volatility.

Here are the main features that make a trading bot a radically better solution to trade cryptocurrencies.

They never sleep. 

Just like markets run 24/7 with no pause, a trading bot can react to any market move at any time. It’s unpredictable when news can impact prices. A new regulation in Japan can have severe effects on the Crypto market for a long time, and, given the time zone difference, US investors could be at a considerable disadvantage while Japanese investors are reacting to the news. 

They are fast. 

Not only does it take no time for a bot to execute an order on the market, but the algorithm can decide on sending the order in a fraction of a second. A prompt reaction to price moves provides to algo-traders an advantage on manual traders. Time is money, and that applies strongly also when it comes to trading. Sometimes, just a few seconds of delay can turn a profitable trade into a loss.

They are smart. 

Trading bots can analyse a massive amount of data each second. That represents one of the greatest advantages of using an automated trading bot. Even the most experienced traders can keep an eye only on a handful of charts at the same time. A bot can screen the market constantly looking for a specific pattern, and it reacts promptly when the right conditions are met. More potential opportunities increase significantly the probability of being profitable in the long term.

They don’t have feelings. 

Feelings are the worst enemy of every trader. The first rule of trading is to buy low and sell high. That implies that the best times for buying are when the price drops and the best for selling is when the market moves higher. That seems to be a pretty logical approach. Unfortunately, our brain tends to advise the other way around. In times of drawdown, the trader tries to cut losses and often misses the price rebound. In times of euphoria, the trader starts to believe that the uptrend can last longer and falls into the FOMO trap.

A trading bot is not affected by fear or greed. It will only execute the assigned trading plan.

Are trading bots better than humans?

It’s probably impossible to beat a professional trader. Experience plays a crucial role in managing stress and developing an advanced trading system. Sadly, traders that reach these high level of proficiency are very few. Only a very low percentage out of millions of people trading cryptocurrencies or traditional assets every day are professional.

One of the main advantages of using a trading bot is to be able to stick with the preset rules of your trading system. Here you can read about some tips that can help you boost your returns. These advices sometimes are difficult to follow but if you incorporate them into an automated trading strategy, the bot will follow your instructions precisely without biases.

A trading bot may not be perfect but significantly helps those that don’t have the proper attitude or enough time to invest in trading. Trading is very challenging and needs adequate tools to tackle the market and get the best of it. The challenge of trading bots vs humans continues but watch out for a rise of machine in the future.