Automated trading brings great amount of convenience to the trader. It helps with consistent and systematic execution of a strategy with little or no human intervention. There are already few commercial algo platforms, chrome extensions etc which allows the retail segment to automate their strategies. Any one can also subscribe to an API from a stock broker and create their own custom automated strategies as well. But automation is not without its fair share of problems. It can crash and burn along with your capital at the blink of your eye, even before you know or can intervene to prevent it. 

Lets see the different sort of automation risks that you may encounter in market. Lets see what you can possibly do to cover for such risk. Lets appreciate the fact that automation helps but is not intended to run without any human intervention. 

• Your infrastructure failure - You can run your strategy in you local PC / Server and then use broker APIs to get datafeed and execute orders. But your local computing resource could crash or your internet connection could fail landing you in a soup. Its better therefore to keep redundant computing resources and internet connections. You can switch over when needed to a working system when the other one fails. An alert mechanism to warn you when a failure happens is also imperative in a manual switch over scenario. If you are bit tech savvy then then you can deploy automated switch over system. But still you could have line flapping issues which prevent auto switch over in case of internet failure. Also both systems could fail at the same time which renders the redundancy useless. You can think of deploying your strategy in a cloud server or use a commercial auto trading interface for better reliability, ease of deployment and maintenance. But their infrastructure and internet connectivity may also fail. In short, there is no running away from a tech failure at your end. It can hit you anytime and all you can do is to cover your risk as much as possible. 
• Stock broker infrastructure failure - The broker infrastructure includes the front end application, the backend order and management system, the leased lines connecting to the exchange etc routing data packets to and fro from your side to the exchange. A failure in any of these critical components would mean your strategy is grounded. This is also inevitable and we have seen several such instances in the past years. A possible workaround is to keep a trading account with multiple brokers to enter / hedge open trades if your main stock broker infrastructure gives away. 
• Exchange  infrastructure failure - The exchange servers and connectivity systems could crash as well as it did on 24 Feb 2021. There is nothing you can do in this scenario. As no trading is happening when the exchange itself is down you probably don't need to worry about missing entries and exits. But you need to keep yourself aware about the next exchange opening time and any follow up actions the broker or exchange has done. 
  
• Software bugs - A bug in your strategy code can lead to misfired orders, high frequency orders, high position size orders etc. It can eat and exhaust your capital pretty fast. Its necessary therefore to test your strategy code first in a paper trading environment and then in live market with small capital before you go all in. 
• Liquidity blues - If several people use the same strategy in an automated environment like in commercial auto trading platforms, it can create a liquidity squeeze. One may not be able to enter and exit at favourable prices as there may not be enough supply or demand. The order book depth could be shallow as the existing ones could have already an been used by other users. This could be the case even with highly liquid instruments if there are significant number of users following an automated strategy. For scalping, option premium eating strategies the slippage due to liquidity crunch would be enough to wipe out the small profits made per trade. Its always better to deploy automated strategies at individual end to counter this effect. Auto trade with liquid instruments only and use limit orders as much as possible instead of market orders. 
• Margin cash crunch - Option sellers, Futures traders need to maintain margin money with the exchange. As the exchange dynamically changes the limit through out the day your margin limits may be hit and a margin penalty could be levied from your account. Your position could even be auto squared off by the RMS team of the stock broker. Always maintain sufficient capital in excess of what your strategy metrics would tell you. Also you would need some sort of alert mechanism in case the margin requirement reach near your account capital ceiling. 
• Manual authentication blips - Broker APIs need you to reauthenticate your credentials every day for security reasons. If you forget to do this process everyday, your auto trading strategy won't run.