What is Semi-Automated Trading and How to Get Started?

Semi-automated trading combines the best of human intuition and machine precision. It enables you to leverage the power of automation while still controlling critical trading decisions.

This guide discusses how to use semi-automation to optimize your trades. We also explore semi-automated strategies, what best practices to consider, and how to get started.

What is Semi-Automated Trading?

Semi-automated trading is a versatile hybrid approach that combines the benefits of both automation and human oversight. It enables traders to automate certain aspects of their trading process, such as signal generation, order placement, and market monitoring.

At the same time, it also lets you retain control over key decisions. Semi-automated trading is ideal for traders who want to streamline their processes – without fully relying on automated systems. This approach can take various forms:

• For instance, some bots generate signals but allow the trader to decide when to act on them manually.
• Alternatively, it might involve manually identifying trading signals while the system automatically executes trades based on predefined rules.

The goal is to create a balanced system where the trader can still influence key decisions but benefit from automation. This provides a sense of security and reassurance about trading strategies.

Difference Between Manual, Automated, and Semi-Automated Trading

Let’s first differentiate between manual, automated, and semi-automated approaches.

Manual Trading

This is the traditional trading form in which the trader is fully responsible for making all decisions. Traders must examine the markets, find trading opportunities, execute orders, and adjust positions as necessary.

Undeniably, manual trading is time-intensive and requires constant attention to the market. It’s also prone to emotional decision-making, fatigue, and missed opportunities.

Automated Trading

Automated trading uses computer programs to carry out trades based on predetermined rules. Once set up, the system operates independently, executing trades faster than a human.

Automated trading can be highly efficient. However, it lacks the flexibility to adapt to unexpected market changes unless specifically programmed.

Semi-Automated Trading

This approach combines the best of both worlds. In a semi-automated style, algorithms handle the more repetitive and time-consuming aspects of trading. This could be anything from signal generation, order placement, or portfolio rebalancing.

However, the trader can intervene and make decisions, such as overriding automated actions, adjusting strategies, or reacting to market news. This approach provides a middle ground between manual and automated trading, offering greater flexibility while saving time.

Benefits of Semi-Automated Trading

Semi-automated trading offers several key benefits, making it an appealing choice for many traders. Let’s take a closer look at the core advantages.

Time Efficiency

Semi-automation can save a solid amount of trading time. Market analysis, signal generation, and order placement can be highly time-consuming when done manually. By automating these tasks, traders free up significant time that can be spent on other aspects – such as strategy refinement, research, or personal activities.

Automation also speeds up the trading process. It enables traders to take advantage of opportunities faster than they can manually. For example, in fast-moving crypto markets, the ability to execute trades quickly can make the difference between profit and loss. Automation can significantly streamline the process.

Reduced Emotional Bias

Emotional decision-making is one of the most significant challenges in trading. Fear, greed, and panic often drive traders to act impulsively, causing them to stray from their planned trading strategies. Semi-automated trading reduces the impact of emotions by automating repetitive tasks.

For instance, algorithms can find the right trading opportunities – so your emotional biases won’t influence the decision-making.

Instead, it provides clear signals derived from logic and market data. With less emotional interference, traders can stick more closely to their strategies and avoid making impulsive trades based on market fluctuations.

Enhanced Flexibility and Control

While automation provides many benefits, the human control aspect is what sets semi-automated trading apart. This way, traders can customize the level of automation and adjust strategies as needed.

For instance, traders can manually intervene if they feel the market conditions are changing or see a potential opportunity outside their automated strategy. This flexibility allows traders to combine the speed and efficiency of automation – with the nuanced judgment that only a human trader can provide.

Backtesting and Optimization 

Semi-automated trading also supports backtesting and strategy optimization. Backtesting lets you test how different strategies would’ve worked in previous market conditions. For example, suppose you’re using a mean-reversion strategy. Y

ou can test its performance on historical stock data to see how well it would’ve performed during volatile market conditions – such as the 2020 pandemic crash or the 2008 financial crisis. This approach is ideal if you’re using a specific strategy and prefer manual execution.

On the other hand, if you’re using algorithms to generate signals, these already come with backtesting results. This lets you analyze how the algorithm worked in previous market conditions, giving you more insight and confidence in its analysis.

Types of Semi-Automated Trading 

The level of human involvement in semi-automated trading can vary. Traders can choose between different configurations based on their preferences and goals.

Below are the two main types of semi-automated frameworks.

Algorithm-Generated Signals with Manual Execution

In this approach, the trading software generates signals based on predefined criteria. This could be an algorithm using established strategies, price movements, or trends. However, the trader is responsible for manually executing the trade based on these signals.

Here’s how it works.

• Algorithmic Signal Generation – The algorithm scans the market for specific conditions, such as Moving Average crossovers, RSI overbought/oversold levels, or other technical patterns.
• Signal Alerts – Once the signal is generated, it’s delivered to the user via Telegram or other types of alerts.
• Trade Execution – The trader reviews it and decides whether to place a trade. The trader might check for additional factors or market sentiment before manually entering the trade.

This semi-automated approach gives traders full control over whether to act on the signals. They can consider elements outside the algorithm’s scope, like news reports or financial analysis, before taking action.

Moreover, it reduces overtrading as the trader only executes signals aligning with their strategy and risk tolerance. This also prevents impulsive decisions.

Manual Signals with Automated Execution

In this strategy, the trader manually identifies trade signals or strategies. However, they use a bot to execute the trade once the signal is acquired.

The process goes as follows:

• Manual Signal Generation –  The trader sets up the rules for the system to watch for certain market conditions. These conditions could be based on chart patterns, news events, or other personal observations.
• Automated Execution – Once the conditions are met, the trading platform automatically places the buy or sell orders without requiring further input from the trader.

The main advantage here is the fast execution. It reduces slippage and missed opportunities due to delays. Moreover, traders can handle multiple positions or assets simultaneously without being overwhelmed by manual execution.

For instance, a trader sets up a system that buys crypto if it breaks above a specific price level. The algorithm then automatically places the order without any further intervention.

Which One to Choose?

As with all trading decisions, the right approach to semi-automated trading is subjective. It comes down to your trading style, preferences, and time commitment. For instance, let’s take algorithm-generated signals with manual execution.

This is ideal for traders who want to retain decision-making power and control over their trades. It’s especially the case when they value discretion and personal judgment.

On the other hand, manual signals with automated execution are best suited for traders who prefer to focus on identifying signals and strategies. Put otherwise, it’s more geared toward experienced traders with key market insights. 

However, traders still need the system to handle the fast-paced execution of trades, reducing the chance of mistakes or emotional bias. Both strategies offer a way to incorporate automation into trading while maintaining some control, depending on the style and preferences.

Bots for Semi-Automated Trading 

Bots are an excellent way to approach semi-automated trading. They monitor multiple markets and asset classes simultaneously. They also scan for opportunities based on predefined criteria such as technical indicators, chart patterns, or price thresholds.

Moreover, bots process vast amounts of real-time data. They provide traders with actionable insights far faster than manual analysis. For example, a bot might generate a buy signal when a crypto pair crosses a specific Moving Average. This allows the trader to evaluate the opportunity and decide whether to proceed.

Bots can also assist in executing the trade. They can automate processes like order placement, stop-loss settings, and take-profit levels, ensuring that trades are executed accurately and swiftly. This is especially useful in volatile markets where delays of even a few seconds can significantly impact results.

There are numerous types of bots available supporting semi-automation. While some let you automate the strategy, others handle execution. There are also copy trading bots that support semi-automation.

Copy Trading for Semi-Automation

Another way to enjoy semi-automation is via copy trading. In this approach, an investor selects and follows an algorithm or another trader. Trades are executed automatically in the investor’s account.

Here’s how it aligns with the semi-automation framework:

Human Decision in Strategy Selection

Copy trading requires human involvement to choose which trader or algorithm to follow. This decision is often based on performance metrics, risk level, and strategy style.

Automation in Execution

Once a trader or strategy is chosen, the system takes over. It automates the execution of trades in real-time. This eliminates the need for the follower to replicate every trade manually. This results in efficiency and speed, subsequently reducing errors.

Manual Intervention

Followers can adjust parameters such as position size, risk levels, or when to stop copying a strategy altogether. This manual control allows users to adapt based on risk appetite or market conditions.

Continuous Monitoring

While trades are automated, users must monitor the performance of the copied strategy. Suppose the chosen algorithm underperforms or market conditions change. In that case, the user can intervene, stop copying, or switch to a different strategy.

In summary, copy trading fits the semi-automated model by automating trade execution, while requiring human judgment for strategy selection and periodic oversight.

Challenges in Semi-Automated Trading 

Semi-automation can be a great tool when used correctly. However, you also need to know its potential challenges and how to deal with them. Below, we provide insight on how to deal with issues that might arise with semi-automated trading.

Over-Optimization 

Over-optimization, a common pitfall in trading systems, occurs when a strategy is excessively fine-tuned to perform well on historical data. However, this can lead to inconsistent results in live markets, often resulting in ‘curve fitting.’

This is when the strategy aligns perfectly with past data but lacks adaptability for future, unpredictable scenarios.

To make sure the automation tool you’re using isn’t overoptimized, do the following:

• Use Out-of-Sample Testing –  Divide historical data into in-sample (for strategy design) and out-of-sample (for testing). This ensures your strategy is evaluated on data it hasn’t seen during development.
• Incorporate Robustness Checks – Test your strategy across various market conditions (e.g. high volatility, low liquidity) and multiple asset classes to confirm its resilience.
• Use Demo Testing – Despite good backtesting results, try the algorithm in a demo mode before you launch it with real money.

Also, set realistic expectations. A strategy that delivers moderate but consistent returns is more reliable than one promising unrealistic gains.

Unexpected Market Events 

Markets are inherently unpredictable, with sudden events such as news and even tweets leading to rapid price swings. Automation may not always respond appropriately to these anomalies, potentially leading to significant losses.

As such:

• Set Risk Controls – Implement stop-loss orders, take-profit levels, and position sizing rules to limit potential losses during unexpected events.
• Diversify Your Portfolio – Spread trades across diverse asset classes and strategies to reduce exposure to a single market or event.
• Monitor Key Dates – Be aware of scheduled events, such as earnings reports, central bank announcements, or major economic releases, and adjust strategies accordingly.

Importantly, ensure you can monitor and intervene in your trades, even remotely. This helps you take over and control positions during unforeseen situations.

Hidden Costs of Subscription and Trading

Semi-automated trading often involves multiple cost components, including subscription fees for platforms, API access, and strategy marketplaces.

Additionally, trading fees, such as commissions, spreads, and funding rates, can eat into profits. These costs can accumulate over time, turning a seemingly promising strategy into a losing one.

• Compare Platforms – Evaluate different platforms for features and pricing. Opt for one that provides value without excessive fees.
• Monitor Trade Frequency – High-frequency trading can rack up considerable transaction costs. Analyze whether reducing trade frequency improves net profitability.
• Track All Expenses – Maintain a detailed record of subscription fees, trading commissions, and other expenses to assess their impact on overall returns.
• Opt for Cost-Effective Plans – Many platforms offer tiered subscription plans. Opt for the basic plan and upgrade only if necessary.
• Leverage Free Trials – Test platforms during their free trial periods to ensure they meet your needs before committing to a subscription.

By staying alert about costs and optimizing your usage, you can ensure that expenses don’t undermine your trading performance.

Best Practices for Semi-Automated Trading 

As with all trading types, investors require disciplined practices and careful execution. The following practices are crucial for achieving sustained success in semi-automated trading.

Start Small and Scale Gradually

When starting semi-automated trading, it can be tempting to go all-in. You might want to try multiple strategies or make large investments. However, starting small is crucial. Begin with minimal capital and test a single strategy to observe its behavior in real market conditions.

This cautious approach allows you to identify potential flaws in the algorithm. You will also understand how the algorithm reacts to market fluctuations without risking significant amounts.

Once you gain confidence and achieve consistent results, you can gradually increase your trading volume or explore additional strategies. Scaling up should be based on data-driven insights and measured progress rather than emotional decisions.

Stay Informed About Market Trends

While automation handles routine tasks, staying within the broader market is still necessary. Semi-automated trading thrives on the synergy between algorithms and human intuition. By monitoring news and economic indicators, traders can anticipate market movements that algorithms might not capture.

For instance, a sudden regulatory change in the crypto market could disrupt automated strategies relying solely on historical data. Being informed lets you adapt and intervene manually when necessary. This ensures your trading aligns with current conditions.

Regularly Review and Update Parameters

Financial markets are dynamic and influenced by evolving trends, policies, and technologies. A strategy that works now might become obsolete in the future. Regularly reviewing and updating your trading algorithms is essential to stay competitive.

Set aside time to analyze your strategy’s performance metrics – such as win rates, drawdowns, and risk-reward ratios. If a strategy consistently underperforms or exhibits new weaknesses, identify the root cause and refine it accordingly.

With the best trading bots, you can also adjust the parameters, such as risk level and time frames – based on market conditions. Additionally, as your knowledge and experience grow, you can explore more advanced strategies or diversify into different asset classes.

Test Strategies With Demo Accounts

Before deploying any new algorithm with semi-automation, test it on a demo account.

Demo accounts allow you to observe your algorithms’ behavior under different market conditions. This ranges from high volatility to prolonged stability. They also provide a safe space to experiment with adjustments and optimizations.

Here, you won’t be risking any real money. Instead, the platform provides you with paper funds. These accounts serve as a valuable first step in refining your approach.

Diversify Your Portfolio and Strategies

Irrespective of whether you use automation or not, the basic rules of trading still apply. As such, you shouldn’t rely on a single strategy or asset class. This can expose you to unnecessary risk.

Semi-automated trading makes it easier for you to diversify. For example, you might use a trend-following algorithm for forex, a grid trading strategy for crypto, and a mean-reversion approach for equities.

Diversification reduces the impact of individual losses and ensures more stable returns. However, monitor each strategy’s performance and allocate capital proportionally based on success rates and risk levels.

Keep Emotions in Check

One of the primary benefits of semi-automation is its ability to remove emotional biases from trading decisions. However, emotions can still creep in, especially during unexpected market events or drawdowns.

As such, it’s necessary to practice emotionless trading. Avoid overriding the algorithm impulsively unless there’s a clear, data-driven reason. Instead, building confidence in your semi-automated system comes with time and consistent results.

Be Prepared for Technical Glitches

As with all types of technology, semi-automation is also immune to glitches. Connectivity issues, server downtime, or coding errors can disrupt trading.

To mitigate these risks:

• Use a reliable internet connection and have backup plans for an outage.
• Monitor your systems regularly, especially during periods of high market activity.
• Have a contingency plan in place to manually intervene if automation fails.

Ultimately, keep an eye on things and be ready to react accordingly. 

How to Get Started With Semi-Automated Trading

Ready to test the waters with semi-automation? Discussed below are the typical steps required.

Step 1: Choose Your Trading Style

Before diving into semi-automated trading, it’s essential to define your trading style. Decide whether you want to day trade, swing trade, or invest for the long term.

Each approach will influence the types of automation tools and strategies you choose.

Step 2: Pick Your Asset

Next, select the asset class you want to trade. Whether it’s stocks, crypto, forex, or commodities, understanding the asset’s market dynamics and risks is important.

You can also choose more than one type of asset or multiple markets for diversification.

Step 3: Choose a Broker that Fits Your Needs

When selecting a broker, consider factors such as support for semi-automated trading, competitive fees, fast execution, and a user-friendly platform.

It’s crucial to ensure the broker aligns with your chosen automation tools and provides excellent customer support.

Step 4: Choose an Automation Tool that Suits Your Style

Choosing the right automation tool is essential, and your preferences are crucial in this decision.

Start by deciding whether you prefer a bot for automated execution or algorithmic signals for semi-automation, where you can still make manual decisions.

Then, consider these factors to make a choice:

• Customization – The tool should allow you to tweak risk levels, trade frequency, and asset selection to match your strategy.
• Ease of Use – Look for an intuitive tool that doesn’t require deep technical expertise to set up and operate.
• Compatibility – Ensure the tool integrates seamlessly with your broker and chosen trading platform for smooth execution and monitoring.

By selecting a tool that suits your needs in these areas, you can enhance your trading efficiency without sacrificing control.

Step 5: Test the Strategy

Before going live, it’s essential to test your semi-automated strategy using a demo account or with small amounts of capital.

This allows you to fine-tune your settings, evaluate performance, and ensure the automation complements your trading decisions effectively, giving you a sense of control and reassurance.

Conclusion 

For many traders, semi-automated trading is the perfect middle ground between manual and full automation. It provides a way to optimize trading strategies without sacrificing control. The right tools can exemplify this approach and make trading more efficient.

Algobot comes with real-time signals and adjustable risk controls – making semi-automated trading easily accessible. It also supports multiple markets and integrates across a wide range of brokers. By leveraging Alogbot, traders can strike the ideal balance between efficiency and adaptability. 

FAQs

Can you make money with semi-automated trading?

Yes, you can make money with semi-automated trading. However, success depends on the strategy, settings, and broader market conditions.

What are the advantages of semi-automated trading?

Semi-automated trading saves time, reduces emotional bias, and improves decision accuracy using algorithms. It also allows traders to maintain control and adapt strategies to changing market conditions.

How does semi-automated trading differ from full automation?

Fully automated trading covers everything from strategy to order execution. In comparison, semi-automated trading involves human oversight at critical decision points. 

Can beginners use semi-automated trading?

Yes, semi-automated trading is beginner-friendly, especially when using platforms with user-friendly interfaces and pre-built strategies. Many tools, like demo modes, help newcomers practice without financial risk.

Are there risks involved in semi-automated trading?

Like all trading, semi-automated trading carries risks, especially if strategies or parameters are poorly set. Proper risk management and continuous learning are essential to maximize benefits and minimize losses.