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Monday September 16, 2019 - 23:36:15 GMT -

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Forex Trading: Who Wins, (Wo)Man vs. Machine?

As I watch the forex market continually get jerked around by news algos, which react to headline keywords rather than the substance of a story, I wonder whether artificial intelligence can ever replace human traders. I call this man vs. machine and a search for the holy grail of trading. 

This comes in a market where the average trader wishes he/she could turn on a program that will trade for him/her and not blow up over time. One reason for the blow up is that markets rarely operate like a textbook and in my opinion human intervention is needed, at a minimum, to prevent an algo from getting chopped or wiping out an account when a market veers from its norm. So lwt's take a look at which is better for trading, (wo)man vs. machine. 

Advantage and Disadvantages

An advantage of automated trading is a program may put on trades a trader might be hesitant to do. One reason may be the emotional and or psychological factor. There are times when a trader may be hesitant to take a risk on a trade while an algo is not restrained by emotion or psychology.  

 On the other hand, an algo might execute a trade that a trader would likely never do as it was obvious that either timing, market trends or news indicated otherwise. In this case the human factor can avoid the chop that an algo may experience as it executes trades based on its program without taking into account other factors. 

So is there a happy medium?

Here is my experience as we have spent some time developing an automated trading algo using a strategy based on the patterns identified by our Amazing Trader.  

Our efforts showed great potential as the algo executed trades that worked perfect according to is logic. These were what I call textbook trades.

However, reaching that point was a challenge as there were times it would go into a period of chop until it reached the point when everything lined up. While the algo was able to produce profitable trades we were not satisfied with the net results. 

How to avoid the chop?

The question was then if our logic was sound how could we avoid stop outs until we reached the “perfect” trade setup? Our choices were to add a manual on/off switch to the algo or put ourself in the shoes of the algo and trade its logic manually.

Since the trading lines produced by our Amazing Trader were the inputs used by our algo to trade, we could use the logic behind the strategy to trade it manually. We decided to think like our automated algo by focusing on the highest probability and best forming trades and execute those type of trades manually.

In this way we only look to put on trades where we are satisfied with the risk and avoid what we see are lower probability trades, such as those during periods of chop.

So in the question of which is better for trading, (wo)man or machine, my answer is to look for the best of both worlds. What I mean by that, as you can see in this link, is to think like our algo and execute trades as a trader

Jay Meisler, 


creator, The Amazing Tradser and Common Sense Forex Treading


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