Manual Trader

A manual trader is one who enters trades into a trading system without using computerized algorithms for automated order entry. In the fast-paced world of trading, manual traders may be at a disadvantage compared to those who use powerful computers to exploit pricing anomalies. They may also be more susceptible to trading based on emotion rather than relying solely on a trading program.

Advantages of manual traders include the ability to read market signals that algorithms may miss, such as breaking news. However, manual traders face the risk of making mistakes when entering orders by hand, which can have disastrous consequences if the error is significant. Currency traders are increasingly using automated trading systems that allow for efficient order placement and trade execution through an application programming interface (API).

To be successful, manual traders must maintain discipline and meticulously monitor trades to avoid mistakes. They must ensure they execute trades accurately with the right order types, prices, and quantities. In contrast, program traders rely on computerized systems that use algorithms and processing power to execute error-free trades quickly. Algorithms can process large amounts of data in a fraction of the time it takes a manual trader, allowing them to identify profit-exploiting anomalies or mispricings.

Manual traders can be influenced by behavioral biases and may make irrational decisions based on emotions like greed or fear. They may decide to let an upward-moving stock run in the hope of realizing larger profits, but if the stock quickly reverses, they could lose both additional profits and a portion of their initial investment.

However, manual traders can leverage market signals that algorithms may overlook, such as declining volume or wider bid/ask spreads. Unlike algorithms that rely on preprogrammed scenarios, manual traders can react quickly to breaking news, mergers, investigations, competitor news, or natural disasters.

As an example, Jane wants to trade ABC stock. She plans to short ABC when it reaches $60 per share, but currently, it is trading at $52. Being a manual trader, Jane observes the stock’s performance for a few days before placing a limit order to sell ABC shares GTC (good ’til canceled). Once the trade is executed, she will receive a notification to determine her next move. However, Jane faces competition from others who use advanced algorithms for instant buy and sell decisions. These algorithms have an information advantage and superior execution compared to Jane.