Manual trading is conducted by a human being, rather than a computer. Traders may work on the trading floor, participating in open outcry trading in a live environment. They can also put orders through on a computer, but do not rely on an automated program to process their trades for them. This process is typically slower than automated trading, which can create disadvantages for the trader and clients. Concerns about the use of automated trading in some markets have led to discussions about bans on certain kinds of techniques to even the playing field.
Traders who handle their own orders typically have a trading system, and may use their own personal algorithm for deciding how and when to make trades. While they can’t calculate as fast as a computer, they can respond quickly to changing market conditions to place trades. Typically they handle much lower volumes of shares, because high volume trading occurs primarily through automated means. They may represent brokerages, handling trades for clients, as well as trading for themselves.
Considerable analysis is required to execute trades. People using manual trading for their own accounts must consider what they want to buy or sell and when, while traders managing assets for clients need to time the trade for the best moment. For manual traders, not using computer systems can have some disadvantages. Automated trading creates an extremely high-paced environment, where huge volumes of shares may move in a blink of an eye, too fast for a manual trader to take advantage of a rise or fall in price.
The classic image of trading is of open outcry on the trading floor of a busy market, where people cram into a small environment to shout trades at each other. This is a form of manual trading, although many markets also have computer systems for people who would prefer to trade electronically. These systems can be installed at home or in a brokerage, allowing people to execute trades without being physically present at the securities exchange. Manual traders take advantage of tools like news reporting, continuous ticker updates, and other information feeds to keep up with the market and predict its movements so they can trade appropriately.
Some firms may use a mixture of automated and manual trading for different settings. People who want to be active on a financial exchange usually need to receive a license, which requires passing an examination that discusses manual trading techniques and makes sure traders are familiar with rules and regulations. Even if a trader prefers to use automation and algorithms, the ability to trade manually if necessary is an option.