Automated investing: Difference with manual investing

21 November 2023/inCrypto academy, Investing in crypto, Trading crypto

This article discusses two different ways of investing, namely: automated investing and manual investing. What do automated investing and manual investing mean and how do these processes work? What is the difference between automatic investing and manual investing and what are the advantages and disadvantages of both processes? In this article we provide clarity about these two ways of investing.

Index

What is manual investing?

Before we discuss the phenomenon of automated investing, we will first provide some clarity about manual investing. Manual investing is the opposite of automatic investing. This means that you will perform the actions that an automatic trading system would perform for you. In short, you are going to place trades yourself and determine buying and selling moments yourself. With manual investing, the choices are completely in your hands.

How can you invest manually?

Manually investing in cryptos can be done very easily via, for example, an exchange. An exchange is a platform where customers can trade their cryptocurrencies or digital currencies for other assets, such as fiat money or other digital currencies. You create an account on that exchange, after which you can transfer an amount of money to that account. After you have done this you can start investing in a cryptocurrency of your choice.

In addition, you can also trade manually by outsourcing everything to a so-called broker. This broker can be seen as an intermediary between you and the aforementioned exchange. The broker then, as it were, has additional knowledge and therefore acts as an intermediary in the buying and/or selling transactions of, for example, cryptocurrencies.

Advantages of manual investing:

You are and remain your own boss over your money.
You are in control of the trades that you do or do not execute.
You retain your independence and are not dependent on the choices of any third party.

Disadvantages of manual investing:

As a human being, you automatically act out of emotion, which makes you more likely to make wrong choices.
As a human being, in contrast to the cryptocurrencies market, you are not on 24/7.
A person can always make mistakes, so there are always risks associated with manual trading.

What is automated investing?

Automated investing is the second way of investing that will be discussed in this article. Automatic investing is the exact opposite of manual investing and you do this on the basis of an automated trading system. Auto trading systems or automated investing systems (Smart Dollar Cost Averaging) simply automate the trading proces. By this you can mean that the relevant trading systems place trades using a certain computer program. Investing is taken care of for you with automated investing. The trading system here determines the buying and selling moments and executes them all.

Why automated investing?

The main reason for using an automated investing or automated trading system is to structure the trading process without the need for a human being. Especially in the market for cryptocurrencies, which is very volatile and 24/7, an automatic trading system can offer the best way out. It is impossible for humans to trade day and night and also impossible to make emotionally empty trading decisions. Such an automated system can overcome these kinds of problems and serve as the perfect solution.

In short, trading in cryptocurrencies, for example, can be very intensive and time-consuming. In addition, people can miss good trading opportunities due to fear (of loss) or greed, for example. Automated investing can take over the role of humans in this.

Periodically investing in Bitcoin?

Read about smart investing via smart DCA; a strategy that tries to improve DCA (periodic investing).

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Periodically investing in Bitcoin?

Read about smart investing via smart DCA; a strategy that tries to improve DCA (periodic investing).

Read here

How can you invest automatically?

You do automated investing on the basis of a trading algorithm. So the first step you take here is to choose a party that offers such a trading algorithm. You can base this choice on your personal wishes, needs and situations. There are both free and paid trading algorithms that you can choose from. Make this choice consciously and always be sufficiently informed. Often, after an intake or onboarding, it is a completely automatic process and not much expertise is required from a person.

*Note that this process varies per batch. We are only sketching a general picture of this.

Advantages of automated investing:

With automatic investing via Smart DCA you are consistent and respond to both increases and decreases in the underlying asset.
Automated trading saves a lot of time. The work is, as it were, taken off your hands, so you don’t have to be on top of it all the time.
Algorithms act entirely on the basis of data, no emotions are involved.
An algorithm, just like the cryptocurrencies, is 24/7 on.

Disadvantages of automated investing:

Automatic investing in crypto or trading naturally happens without emotion, but that can sometimes turn out to be a disadvantage in such a volatile market. Sometimes that emotion is needed to make the right decisions.
An algorithm is developed in such a way that it knows what choices must be made based on previous data. This can of course never offer a 100% guarantee of a successful course.
Automated investing or trading does not guarantee a successful course, there are always risks involved.

*On the basis of this article, we do not encourage anyone to start investing. This article is not written for advisory purposes and is not intended as any form of expert (financial, tax or legal) advice. This article is purely for conveying knowledge and information. Thriven is therefore not liable for the correctness or completeness of the articles.

**Never do anything without gaining enough knowledge about it beforehand. Keep in mind that not all trading software can be trusted and that there are always risks involved. As appealing as the benefits may sound, realize that using these tools does not guarantee successful trading.