Most laymen consider crypto asset trading as a clear path to the highly coveted state of financial freedom. Sadly, some of the individuals who delve into the act with this mentality (particularly the newcomers) end up in months of stress as they find it an uphill struggle.
You may choose to start your cryptocurrency journey through trading automation, but there are still questions on who can trade better, a human or bot. Both have their advantages and disadvantages.
Success in speculation trading greatly depends on your analysis potential, the tools you adopt, and your years of experience in the game. Manual cryptocurrency trading could be a clear path of entry into the digital asset business. However, some speculators adopt speculative robots as a way of curbing the challenges associated with long years of manual trading.
Both entrants and the experienced operators are torn in between adopting the manual way and going the automated path in their pursuits. However, you are only better placed to make judgments if you are well-advised on the advantages and disadvantages of the two trading avenues.
Here is everything you must know when choosing between automated trading platforms versus manual crypto trading.
Human Manual Trading Advantages
The truth is that many people out there start out in the markets and take a manual approach to their speculation. As such, it is no surprise that they will use manual trading as their primary approach to the markets. They will begin their virtual currency speculation by stepping into the market in a manual fashion.
Did you know that manual speculation enables you to understand what is going on in the market? You can learn what is going by doing instead of merely watching the computer take the risks and actions by itself. At the present moment, it is necessary to know that firms such Rentech or Renaissance Capital led by Jim Simmons and others have fully artificial intelligence-oriented machines.
These machines look at patterns and make trades. At the same time, it is necessary to know that the firm has a slew of scientists behind it that continue to pore over the data and fine-tune the machines to ensure success. The firm has been up regularly over the past decade.
As you can see, the best of them still have manual inputs from humans to a small degree, yet, it is still present.
In essence, manual trading gives you the opportunity to have a first-hand feeling of what the market expects before making thorough commitments with your hard-earned dollars.
Even though manual speculation is known to be a great path for anyone planning to delve into the business, the agent of the market must be ready for long hours on the screen just learning and trading. Here are the advantages of manual speculation.
Genuinely Understand the Markets with the Manual Approach
Do you believe in the saying “you die when you close your doors to learning?” Well, success in crypto asset trading as a field comes through studying, learning, and even more hands-on learning. Remember that manually approaching the markets or taking it on by yourself without the use of any other tools besides your exchange platform pushes you to understand more about the market.
To be the best, you must understand the fundamentals of the market and how it works. Without the actual knowledge of the markets through hard work and general trial and error, you will not feel comfortable making the big bets that you may need to make a homerun.
The first point is that you must study the behaviors of the crypto market and the modes of digital asset markets you will be working with. Through the manual approach, you will get the experience and knowledge to study trends and make the best decisions.
What is best about this learning process? You realize that you must take full responsibility for what you do and correct yourself to be on the right path. When you generate a loss in the markets, you must find out why that was and re-orient yourself to minimize those types of mistakes in the future. As someone who takes the manual approach, you wake up every day or whenever you trade and approach the markets with confidence.
You learn by doing slowly but surely and can become one of the most legendary cryptocurrency movers if you make the right choices regularly.
Be More Involved in More Ways Than One
Computers lack the emotional or rational capacity matching that of the human mind. This explains why you are most likely to feel secure with the results you get when you are doing it yourself. Did you know that you are able to use your brain and be more aware, alert, and active when you are in the markets when you take the actions yourself? If you rely on a machine it can make it where you are less active in the markets.
Now, some people may want that after they have been in the markets for quite a while. At the same time, it is necessary to understand that those who are merely beginning should either have advanced knowledge of python, stats, and other factors to fine-tune their trading automatons for the best results.
On the flip side, if you do not find yourself to be a math genius, it might do you well, to the first start by learning the terms, paper speculation, and asset movement, and knowing about technicals and fundamentals before moving forward.
In the real sense, the human-oriented approach gives you direct control, allowing you to invest in yourself and in bitcoin, ethereum, and other legitimate assets like numerai for gains. Even with the immense control granted, manual asset speculators must pay maximum attention if they don’t want to miss any trading opportunity.
The Ability to Assess the Direction of the Digital Asset Market
The manual market participant has the ability to assess and know if the market is moving quickly or is not moving in the right way that it should base on fundamentals and other factors. Indeed, one can also study technicals, charts, and other factors to make decisions. If one sees that the market is overheating, that is to say, it is moving too quickly in one direction, one can sell or they can choose to short the digital assets that have run up too quickly.
Conversely, the digital asset enthusiast can easily analyze the market and know when the approach will yield maximum profits and presumes that it will operate in his favor. The skills and experience gained as the manual operator engages in the business with time and obtains the potency to yield results.
Human Manual Trading Disadvantages
Manual systems have multiple weaknesses despite the merits mentioned above. Here is an in-depth analysis of the disadvantages of human cryptocurrency trading.
The Need For More Money Quickly
Remember the saying, pigs get fat and hogs get slaughtered? That’s the problem in the digital asset realm. You can easily find that you are moving up in portfolio value quite quickly and may not want to sell until the right time. But that is something that gets you slaughtered. It is even worse if you find yourself stuck with quite a bit of leverage. The more leveraged long you are in the markets, the more you can find yourself in harm’s way when it turns against you.
The critical point here is that you should not succumb to the weakness of greed.
Lack of Conviction in Decisions
The manual market participant will only trust in their abilities when they see a small profit in their accounts. However, they will always develop worries whenever there are possibilities that the payoff may turn into losses.
The human digital asset enthusiasts are most likely to quickly pounce on the minor gain when they could hold out a little bit more to get a more hefty gain. At the same time, human enthusiasts must know why they are in the position and why they are pursuing it.
If they do know, they can find that they make their trades with more confidence. If they do not know, they will move forward and take action with hesitation and trepidation.
Fear is a Factor for Many
Everyone has a degree of fear, mainly when dealing with highly volatile virtual investments. The ETH/BTC pair or the BTC/USD pair will quickly jump or drop tens of basis points. Not many people are aware of the various factors that go into the market.
The truth is that the element of fear comes from the great uncertainty present within the markets. Due to the uncertainty, the pressure, and the overall stress, you can find that this will be a factor in the overall digital enthusiasts’ approach.
Even though leverage is a beautiful factor in any market, it may cultivate immense fear in people’s hearts too. Huge drawdowns and fear come any time the cryptocurrency market goes against their wishes. Through the pressure of fear to lose money, the manual market participant ends up making wrong decisions.
Humans are most likely to Think Twice before Making Moves
Both the wise speculations and newbies tend to fall and become victims of hesitation when it is necessary to act swiftly in trading. If you are an experienced crypto asset trader, you must have come across the phrase “past performance will not determine your future performance.”
Even the big wigs in the business fall victims of hesitation despite the many successful trades in their history. Every new speculation situation needs a new way of thinking and thorough questioning before making any significant move.
Amateurs may take longer to think in a situation that requires acting swiftly. Such kind of thinking will often lead to hesitations and confusion. The manual trader may then miss the fleeting opportunity just because they hesitated to make the right decision.
The Lack of Due Diligence
The truth about the market is that it will never forgive the lack of due diligence even if you did it out of ignorance. It punishes the slightest form of lack of due diligence that can hit you hard. You may end up with only pennies in your account just because of the lack of research, effort, and overall care you put into your decision.
Remember that you cannot be lazy in the markets.
Automated Trading Advantages
Automated trading strategies are operated by computers. Computers have become a new normal in human society. Advancements in computer science and information technology have raised the notion that computer systems are safe and highly effective partners in the world of trade.
The fact that computers can initiate real-time simulation and calculations over a thousand times faster than the human without errors reveals how effective they can be when used as trading tools. Similarly, trading automatons have a greater memory capacity with incredible computation speeds that yield greater accuracy.
Automated Systems Take Emotions out of the General Trading Sector
The truth is that humans can make mistakes because they are focused on a variety of factors. In addition to general distractions, humans can tend to act based on emotion instead of rigid analysis.
As noted earlier, if you act based on fear, greed, and other emotions, then you can find yourself in a world of hurt. Conversely, machines act based on their inputs. They do not feel anything and will only act based on triggers and inputs. That means that if you feed the machine the right inputs, it will ensure to execute accordingly.
That is where machines step in and save the day.
These bits and bytes and brains made out of chips step into the digital asset market and follow instructions and take actions in a specific way. The machine itself is not sentient so do not read the markets and take decisions on your behalf, instead present machines will follow your directions, strategies, and inputs and only stay within certain parameters.
These machines are programmed to take the instructions and execute them. At the present moment, the machines available to the masses do nothing more than following a few lines of code to conduct certain behaviors like scalping, arbitrage, and other modes of action.
As such, you can be sure that there is no panicking as it merely follows the plan.
Remember, it is necessary to know that present automated solutions for the digital asset market will not provide full speculation potential. That means that it does not work by itself fully, you still have to feed it data. Indeed, there are no fully sentient bots on the market, they are ranked by how smart they are but there are no full brain artificial intelligence tools that will do everything for you.
Computers Can Operate and Conduct Several Activities at the Same Time
These automated tools and options help because they can conduct several activities at the same time. For instance, it would be hard for you to be a market maker and a scalper in different markets at the same time. It would not be possible to do because you are a human being and will only be capable of doing one intensive task at a time.
As such, it would be beneficial to employ crypto automated bots that conduct these various tasks for you. It would understand the markets, get involved, and continue to operate as long as the conditions make sense for each strategy.
It is not only about exit opportunities but also about the ways to play the market without having to be too intensely involved in each aspect.
Humans Can’t Operate Quickly
Humans have difficulty in executing different transactions quickly. But computers do not have this problem. They do not have to answer nature’s call or have hangovers or cloudy brains due to lack of sleep. Further, the machine can conduct calculations fast and execute actions faster than humans. That is why various projects in the stock markets ensure to use high-frequency computers to gain an edge and move quickly.
More sophisticated players within the cryptocurrency market will also use different types of computers and systems to increase their overall speed. Whether you are running a DCA bot or are running other tools, it is necessary to note that digital asset automation can provide significant value in more ways than one.
Read the Market Patterns and Execute Actions According to the Inputs
Remember that these tools are effective because they can clearly read the markets, understand the strategies that will need to be employed in the market, take the actions and add to the position or trim the position as necessary.
This applies whether you are investing for the long-term or if you are trying to implement strategies for the short term only. These machines will adjust actions based on the strategy and your risk tolerance levels.
Further, if you connect them to feeds in the market, they can have more information, take action and build portfolio value.
Of course, these machines are being feed the information directly while the human brain must process various information related to speculation and other aspects of life.
As such, it is wise to invest in these automated tools even if there are a few disadvantages present with these bots. Now, speaking of tools, let us learn about them.
Automated Trading Disadvantages
Here are the disadvantages of using cryptocurrency automated platforms.
Structural Limitations
Did you know that automated platforms are a mere set of rules and processes that operate in a stand-alone fashion? In essence, computerized trading systems only adapt based on the set of fixed rules and procedures provided to it. So, if you are paying attention, you will see that it is a fixed system. It is not an adaptive system. Humans have the capacity to be adaptive and learn from their environment, process information, and make decisions.
Conversely, the inherent limitations in many of these bots are that they come with certain programs and ways to read the market. The fact that they can do so and act is progress but the masses do not have a bot that can adapt and make decisions by itself.
At the present moment, these tools help to execute more straightforward strategies from scalping to arbitrage to other aspects like DCA.
But did you know that even smart ones employed by large firms like Blackrock or Rentech also require fine-tuning from Ph.D.’s and specialized computer, statistics, and other data professionals?
Threats Are a Marginal Issue
Automated machinations are immensely exposed to a range of unpredictable macroeconomic occurrences that may yield adverse negative results. A small shift in the economic climate could convert your million-dollar investment in the asset market to pennies in a twinkle of an eye. Well, not necessarily millions to pennies but you can see significant changes.
This systemic financial risk is common to humans and bots but the cautious human may be able to take some actions like pulling money out of the market, stopping all investments, and other actions that may not readily apparent for the bot until certain parameters are hit.
The Markets Are Complex and More Evolution Is Necessary
The truth is that crypto markets are complex and machines must get smarter to provide gains and be relevant in more ways than one. At the present moment, they help to reduce manual action workloads from the human brain. But the truth is that they must provide so much more value to help individuals be readily competitive in more ways.
At the same time, if such systems were released to everyone, there would be no market edge, creating a net-net competitive situation. That is why more advanced automated bots that have more brains are usually kept under wraps and are quite confidential.
The Final Points on Manual VS Automated Crypto Trading
It is an uphill task to beat an experienced professional trader even with the most sophisticated computer trading platforms. Even though human nature is faced with diverse emotional issues, the experience gained from manual trading operations tends to yield some degrees of tolerance when dealing with these platforms.
Sadly, only a few manual operators will strive to attain the highest proficiency levels in the trading market. This explains why computer systems have been developed. One of the greatest advantages of an automated trading system is its ability to stick to the speculation platform’s preset rules.
As you can see, there are advantages to being a human and to using automation bots within your overall cryptocurrency speculation processes. The more you are able to get better as a human and use bots to your advantage, the better. Remember that the ultimate product is the adaptive human brain combined with more streamlined tools that will make a significant difference in the markets.
The lesson here is to keep learning, understand the markets, and use automated bots to simplify the process. But do not think for a second that they will provide everything you need to have a competitive edge. You must continue to tinker, learn, and gain knowledge each day to succeed.