Automated trading can sound risky, and in some cases, it is. Handing execution over to software can feel uncomfortable, especially if you’re new to trading or have been burned by “black box” systems in the past.
But here’s the reality: automated trading isn’t inherently more dangerous than manual trading. In fact, when done properly, it can reduce many of the risks that cause traders to fail, including emotional decisions, inconsistent execution, and poor discipline.
The real risk doesn’t come from automation itself. It comes from bad strategies, poor risk controls, and unrealistic expectations.
In this beginner-friendly guide, I’ll break down the actual risks of automated trading, explain why so many traders still lose money, and show you why our Weekly Trend system offers a beginner-friendly way to get started.
If you want consistency without guesswork, this is where to start.
Why Automated Trading Feels Risky—And Why It Doesn’t Have to Be
At its core, automated trading removes human emotion from decision-making. That’s a huge win for consistency—but it also means you’re putting trust in technology and predefined strategies. And yes, that comes with some risks. However, most of these risks can be controlled with proper planning, risk management, and broker selection.
The Biggest Risks in Automated Trading
1. Technical Failures
Automated trading systems rely on technology, which means they’re vulnerable to software glitches, server crashes, or internet outages. If your system loses connection or malfunctions during a trade, it could result in missed opportunities—or worse, losses.
2. Market Volatility
Markets can be unpredictable. Automated systems may not always adapt well to unexpected news, price gaps, or black swan events. That’s why strategies need built-in safety features like stop-losses and defined-risk trades.
3. Strategy Risks
A strategy that works in one market may fail in another. Some bots also rely on “black box” algorithms, which can make them hard to monitor or adjust. This is why I prefer strategies I can review, understand, and control.
4. Over-Optimization
Backtesting is great—but if a system is too “perfectly” tuned to past data, it may struggle in live markets. This is called curve fitting, and it’s a common pitfall for traders who only rely on backtested results.
Automated vs manual trading risks:
| Risk factor | Manual trading | Automated trading |
|---|---|---|
| Emotional decisions | High risk | Low risk |
| Execution errors | Common | Rare |
| Overtrading | Frequent | Rule-limited |
| Strategy discipline | Inconsistent | Enforced |
| Catastrophic loss risk | High if unmanaged | Lower with defined-risk rules |
How To Reduce Automated Trading Risk
Automated trading becomes far less risky when you:
- Use a reputable broker like Interactive Brokers or Tradier.
- Automate with trusted tools such as Global AutoTrading or AutoShares—no coding required.
- Limit risk per trade (we recommend no more than 5% of your account).
- Choose defined-risk strategies like credit spreads, which cap your potential losses.
For beginners, starting with automated options trading using credit spreads is one of the safest ways to learn automation without overexposing yourself to market chaos.
What Makes Our Weekly Trend System Safer?
Our Weekly Trend service is built for traders who want a simple, rules-based system with capped downside. We don’t trade naked options. We only use defined-risk spreads, meaning you always know your maximum loss before entering a trade.
Here’s how we’ve performed with 5% risk per trade since 2013:
| Year | ROI | Total Trades | Winners | Losers | Win Rate |
|---|---|---|---|---|---|
| 2024 | 159% | 157 | 90 | 67 | 57% |
| 2023 | 429% | 136 | 91 | 45 | 65% |
| 2022 | 76% | 84 | 43 | 41 | 51% |
| 2021 | 325% | 140 | 86 | 54 | 61% |
| 2020 | 318% | 141 | 95 | 56 | 61% |
| 2019 | 192% | 151 | 88 | 63 | 58% |
| 2018 | 97% | 124 | 70 | 54 | 57% |
| 2017 | 243% | 151 | 91 | 60 | 60% |
| 2016 | 136% | 127 | 79 | 48 | 61% |
| 2015 | 242% | 116 | 69 | 47 | 58% |
| 2014 | 367% | 126 | 79 | 47 | 63% |
| 2013 | 535% | 124 | 89 | 35 | 71% |
Want to learn more about the earning potential? Check out our detailed guide:
Can You Really Make Money With Automated Trading?.
Key takeaways
- Automation itself isn’t the risk — poor risk management is
- Defined-risk strategies dramatically reduce downside
- Most traders fail due to emotion and over-leverage
- Automation enforces discipline, not profitability
- Start small and scale only after validation
So, Is Automated Trading Worth the Risk?
Here’s the truth: all trading involves risk. But automated trading, when done with the right tools and strategies, can actually reduce your exposure compared to emotional, manual trading. The key is to start small, use defined-risk strategies, and pick reliable automation platforms.
Frequently Asked Questions
What are the risks of automated trading?
The main risks are technical failures, poor strategy design, over-optimisation, and oversizing trades. These risks can be reduced with defined-risk strategies and strict position sizing.
Why do 90% of traders fail?
Most traders fail due to emotional decision-making, inconsistent execution, and risking too much per trade — not because of automation.
Is automated trading a good idea for beginners?
Yes, if beginners start with small position sizes, defined-risk strategies, and proven systems.
What is the 2% rule in trading?
The 2% rule limits risk on any single trade to 2% of account equity, helping prevent large drawdowns.
Can automated trading reduce risk compared to manual trading?
Yes. Automation removes emotional errors and enforces discipline, which are two of the biggest causes of losses in manual trading.
Is automated options trading legal?
Yes, automated trading is legal, as long as you’re using a licensed broker and your strategies comply with market regulations, automated trading is 100% legal in the U.S. and most global markets.
Is AI trading legal?
Yes, AI trading is legal when it’s used through regulated brokers and follows market rules set by bodies like the Securities and Exchange Commission and the FCA.
Ready to Trade Smarter?
Stop guessing, start trading with confidence. Our Weekly Trend system delivers up to five high-quality credit spread trades per week—designed for beginners and fully automatable with brokers like Interactive Brokers or Tradier.
