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"You can lose everything overnight with automated trading."

Didn't your father teach you about "Stop orders"

You can't have your algorithm cranking away without supervision. And to be extra sure, lots of testing and LIMITS.

Limit the amount and value of orders.

With stocks, worst case: you lose the face value of stocks in your portfolio

Derivatives: you can lose more, even 'infinite liability' (still, it's constrained by the stock market inertia)

Stop orders don't guarantee execution or any specific limit to the loss; During a flash crash, you'll realize that a "10% stop loss" order CAN become a 50% loss.

This. I'm very familiar with stop orders. They're useless once the market goes to hell (the exact conditions you need them in).

I don't disagree with you, still, 50% losses are not 100% losses (or even more than 100% losses)

So I guess they have a role in limiting losses (which had they not been there would be much bigger)

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