A Beginner’s Guide to Automated Trading in 2025

For a trader just starting out, the idea that an automated trading software can take over tasks once done manually might sound too good to be true.  

But in today’s fast-moving world, automation is no longer limited to tech experts or huge institutions; it’s accessible to individual traders as well. 

If you are a manual trader, this could be a good time to begin learning about one of the widely discussed developments in the modern trading world: automated trading. 

In this guide, we will walk you through what automated trading is, how it operates behind the scenes, and how traders, regardless of experience level, can begin learning about it at their own pace. 

The information in this article is provided for educational purposes only and does not constitute financial advice. Consult a financial advisor before making investment decisions.

What is automated trading? 

If you've been trading the manual way, then exploring automated trading can be a natural next step. It is an evolution of how strategies can be executed using a structured and software-driven approach of what many traders already do manually.  

Rather than manually placing trades based on individual analysis, you define your trading rules once, and the system executes trades on your behalf when the said conditions are met.  

Let’s take an example to understand the process using a concept many traders may already be familiar with: the golden crossover and death crossover.  

In manual trading, some traders watch for these patterns and may choose to act when they appear on the chart. In automated trading, it’s possible to build a system that identifies and responds to these technical patterns when they are detected.  

• A golden crossover occurs when a short-term moving average (like the 50-day) crosses above a long-term one (like the 200-day). It is often viewed as a signal of upward momentum. With automation, you can program this condition into your system to trigger a buy order.  
• On the other hand, in a death crossover, the short-term moving average moves below the long-term moving average. Traders often interpret it as an indication of weakening price action.

An automated system can be set to recognise such patterns and place a short trade based on the predefined logic.  

Since the system operates based purely on the rules you provide, this approach is often called algorithmic trading, systematic trading, or rule-based trading.  

These days, automated trading software can be used to trade across different markets like equities, commodities and forex, and is accessible to anybody with a computer and a stable internet connection. 

Expert Advisors (EAs) vs. Trading robots 

Let's clarify a common misconception before we proceed further. Many traders assume that automated trading, Expert Advisors (EAs), and trading robots as the same. But there are some important differences. 

Though both EAs and trading robots are developed based on algorithms to search for possible trade opportunities, they have differences in the way trades are executed. 

• Expert Advisors function more like trading assistants. They follow a pre-established set of rules to generate trade signals, but the actual decision to enter or exit a trade lies with the trader. However, there are also fully automated EAs that can execute trades independently, without any manual intervention. 
• Trading robots, however, are designed to be completely automated trading programs. They can place, handle, and close trades automatically based on the logic embedded within them. Though their performance can vary depending on market conditions. 

With that being said, it’s important to remember that automated trading strategies are not set-and-forget solutions. Even with the most advanced systems, regular monitoring is essential to ensure everything is running smoothly. 

The building blocks of automated trading  

Building a trading strategy  

The initial step in creating an automated trading system is to begin with a trading idea. This can be the identical strategy you follow when trading manually. The aim is to translate that idea into a definite, rule-based logic that the automated software can stick to to execute trades on your behalf. 

All automated strategies are built on conditional statements like, “If X happens, then do Y.” These conditions can be as simple or as complex as needed. But what matters is that they are specific and testable. 

Coding vs No-coding 

Not all traders are familiar with coding, and that’s completely fine. It’s still possible to set up an automated trading strategy.  

If you’re using Admirals’ MetaTrader 4 or MetaTrader 5, which are widely used automated trading platforms, you can use the built-in strategy wizards to set rules without coding. 

But for traders who want more customisation with control, they can programme their own trade logic using the platform’s programming language called MetaQuotes Language 5 or MQL5.  

Whichever method you choose, whether it's using no-code strategy wizards or writing your custom scripts, the point is to have clear, testable conditions that your system can execute. 

Backtesting  

Once your rule-based strategy is ready, the next step is backtesting. It is basically checking how your setup might have performed in the past. 

On automated trading apps like MetaTrader 5, this is straightforward. The built-in strategy tester lets you run your system across different timeframes and instruments, giving you a snapshot of how your strategy may have reacted under various market conditions. 

But, backtesting isn’t just about checking how the strategy would have performed in terms of gains and losses. What matters more is how the strategy behaves under pressure. That’s where a few key metrics come in: 

• Drawdown: This indicates the highest fall your strategy would have experienced during a backtest before bouncing back.  
• Win Rate: This is how many trades closed in profit, as a percentage. A 60% win rate means 60 out of 100 were winning trades. 
• Risk-Adjusted Returns: This measures how much return a strategy generates relative to the risk taken.  

All these metrics help you better understand your strategy’s past performance and overall risk profile. While backtesting results don’t guarantee future outcomes, but they can support more effective risk management. 

Optimisation 

Once you’ve backtested your trade idea, the next step is optimisation or refining your setup to explore more effective combinations. This could include testing different inputs like entry filters, stop losses, take profit or time-of-day triggers to see what works best. 

To get a better understanding, let’s see how filters can improve a trading strategy. During backtesting, you may find the setup performs poorly on sessions with low volume or when trades are entered too early in the day. 

In such cases, applying filters can be useful. These could be avoiding trades prior to 10 AM, skipping high-volatility periods, or applying volume-based conditions. These adjustments may help limit exposure to less-probability setups while maintaining the core logic of the strategy.  

Over-optimisation of a logic 

One common pitfall in developing automated strategies is over-optimisation. Too many traders feel the urge to constantly adjust until the backtest appears perfect. This, however, results in curve-fitting, where the setup is way too specific to historical data and not flexible enough for future market conditions. 

Markets move in cycles, and no system will catch every cycle perfectly. Some variation in results is natural and expected. 

So instead of aiming for perfection in past performance, focus on developing a strategy that may remain reasonably effective across different market conditions.  

After you've tested and optimised the logic, it is advisable to run it on a demo account before considering live execution. 

Real-time implementation 

If the system behaves consistently during demo testing, traders may decide to transition to live trading. Starting with small trade sizes allows traders to observe how the system performs under actual market conditions, such as slippage, spreads, and delayed execution. 

Monitoring the system from time to time is important to make sure that it continues to do its job as expected, as market conditions change. 

When might a trader pause an automated strategy? 

Regardless of how successful your trading strategy has been so far, it's never a good idea to become too emotionally invested in it. 

Keep in mind that there is no perfect system, and successful strategies can become less effective due to shifting market conditions. That's why some traders use their strategy like a tool. If the tool fails to work as intended, it might be time to stop. 

One method is to set performance thresholds ahead of time. For instance, if your system hits a given level of drawdown or falls below a given win rate for a specific interval, that could be a signal to stop and re-evaluate. 

Planning these rules beforehand can help in disciplined decision making and preserve your capital when the market no longer suits your system's logic.  

Advantages of automated trading 

Here are some of the advantages of automated trading: 

Emotionless trading 

The most significant benefit of automated trading is taking emotion out of the equation. The system will enter and exit positions as soon as the conditions are met without hesitation or second-guessing. This can help a trader stay disciplined. 

Ability to backtest 

Prior to executing a strategy in real-time, automated trading systems provide traders with the ability to backtest their configuration on historic price data. This can help in reflecting strengths and weaknesses and providing insights into how the system might have performed under different market conditions. 

Speed and accuracy of order execution 

Markets can be volatile, especially during news events. Automated trading systems place trades the moment predefined conditions are met, along with stop-loss and take-profit levels. This level of precision might be difficult to achieve consistently when trading manually.  

It also eliminates the possibility of missed opportunities because of distractions, fatigue, or hesitation, allowing consistency across trading sessions. 

Disadvantages of automated trading 

Here are some disadvantages of automated trading: 

Automated systems demand constant supervision 

The most natural reaction to learning about the existence of automated trading is to assume that you can turn on your system and forget about it. But that is a very misconceived notion. Automation is not completely hands-off. 

Technical problems such as internet disconnections, platform malfunctions, or bugs in the code may occur and could cause missed trades, double orders, or unwanted actions. Hence, active monitoring is necessary. 

Slippage and execution delays 

Despite the speed of automated systems, trades are still influenced by market conditions such as slippage and execution lag. The price at which a trade is initiated may not be the price at which it is executed, which impacts profitability. 

A Practical Take on Automated Trading 

If you prefer learning by watching, watch this beginner-friendly video on automated trading by pro trader Jens Klatt on Admirals’ YouTube channel.  

Final thoughts 

Automated trading provides speed, discipline, and efficiency. But it’s not a magic fix. A good strategy, periodic system checks, and an awareness of risks continue to be necessary. 

If you’re curious to explore automation in a risk-free environment, you can start with a demo trading account from Admirals. Click the banner below and begin testing your ideas with live market data, without the pressure of real capital. 

Other articles you may find interesting 

Top Free Backtesting Software for Strategy Testing 

Getting started with algorithmic trading strategies 

Ultimate MQL5 guide 

Frequently asked questions

About Admirals 

Admirals is a multi-award-winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today! 

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