Automated Trading Bots. A Broker’s Field Guide
- Felix La Spina
- Nov 17
- 6 min read
Automated Trading Bots. A Broker’s Field Guide For Real Investors
Author’s Note
Years on a desk teach you a few things. Tools can steady your hand when the tape gets jumpy. Bots can also push you offside if the rules are sloppy. Think of automation like an order router with a helper, not a pilot. Use the software. Keep your hands on the risk.
What Are Bots, Simplified
Automated trading bot
Software that reads your rules and sends orders.
Needs clean data, clear logic, firm limits, and full logs.
AI trading bot
A bot that also scores signals or adapts weights using machine learning.
Useful for ranking and triage. Still needs human oversight.
Where traders use them
Stage a large order across time.
Run a trailing stop that never forgets.
Rebalance a sleeve on a set schedule.
Scan for setups and alert, then you confirm.
Who This Guide Is For
Private investors and active traders who want automation without surrendering control.
People comparing automated trading bots, ai trading bots, and ai trading bot crypto with a focus on risk, size, and workflow.
Quick Definitions
HHI. Herfindahl Hirschman Index. One number that shows portfolio concentration. Higher means more concentration.
Sandbox. Small live sleeve for tests. Real money. Tiny size.
Kill switch. One click that disables orders and flattens risk.
AI vs Automation At A Glance
Automation
Follows fixed rules.
Great for repeat tasks.
Risks: rule drift and latency.
AI helpers
Summarise updates.
Rank lists by learned scores.
May change weightings as data shifts.
Risks: overfitting, data leakage, false confidence.
Use AI to brief and rank. Use automation to execute simple, pretested rules. You still make the call.
Strengths And Weaknesses
What bots do well
Repeat simple tasks on time.
Slice orders to reduce footprint.
Enforce exits you have tested.
Watch many symbols at once.
Log every action for review.
Where bots struggle
Markets change and rules age.
Feeds lag, quotes gap, fills partial.
Costs bite. Spread, fees, and slippage turn edges thin.
Black box logic breaks quietly.
Backtests look perfect and trade poorly.
Start with the first three strengths. Expand only after months of clean logs.
Five Bot Safety Rules
Small size. Keep a sandbox sleeve at one to five percent.
Writable rules. Entry and exit fit on one card.
Limits on risk. Cap per trade and per day.
Live logs. Time, symbol, price, reason.
Visible kill switch. Know where it lives.
Security Basics For APIs
Use exchange sub-accounts with withdrawal blocked.
Scope API keys to the minimum needed. Read or Trade, not All.
Rotate keys and store them in an encrypted vault.
Keep the bot in a network sandbox.
Never paste keys into shared docs or chats.
If a key leaks, revoke first and then investigate.
The AI Workflow That Works
Brief. Rank. Plan. Execute. Review.
Brief. Ask the tool to summarise the last update in five lines and list three risks.
Rank. Sort your watchlist by rules you set. Trend, liquidity, earnings quality.
Plan. Open the AI Portfolio Learning Tracker on StockEducation.com. Add the planned position. Review sector mix, diversification, HHI, and a plain English risk summary. If the new trade tilts the account, cut size.https://www.stockeducation.com/ai-portfolio-learning-tracker/
Execute. Use a limit order. If a bot submits it, attach stop and target.
Review. Screenshot the ticket. Set alerts. Pick a date to grade the trade.
If a term slows you down, the Investing Glossary keeps you moving: https://www.stockeducation.com/cheat-sheets/investing-glossary/
Prefer pictures. Use Free Visual Lessons to see the steps on screen: https://www.stockeducation.com/free-visual-lessons/
Figure 1. AI Workflow Loop Brief → Rank → Plan → Execute → Review
Your 30-Day Bot Launch Checklist
Days 1 to 3
Write rules on a card.
Create the sandbox sleeve.
Connect read-only keys. No orders.
Days 4 to 10
Run in simulation.
Fix noisy alerts.
Confirm logs capture time, symbol, price, reason.
Days 11 to 20
Turn on live orders at the smallest size your broker allows.
Manual stop stays active.
Change only one variable per day.
Days 21 to 30
Scale to normal test size if logs are clean.
Add the account to the AI Portfolio Learning Tracker.
Decide to keep, cut, or scrap. Be decisive.
What To Track In Reviews
Win or loss ratio. Simple hit rate is fine at first.
Average slippage. Fill price minus decision price.
Spread paid. Use ticket reports.
Cost per trade trend. All in costs over time.
Rule drift. Are signals firing in new places.
Time in market. Useful for risk exposure.
Max adverse excursion. Largest drawdown per trade.
Fifteen minutes per week is enough if the logs are clean.
Crypto Specific Risks
Exchange reliability. Prefer venues with uptime history and clear incident reports.
API throttling. Respect rate limits or the bot will stall when you need it most.
Custody separation. Keep long term holdings off exchange in cold storage.
Pair liquidity. Thin pairs widen spreads without warning.
Weekend risk. Crypto never sleeps. Your kill switch must.
Two Practical Playbooks
A. Equity swing with bot exit Brief: earnings beat and guidance raised. Rank: top five on your list. Plan: tracker shows sector weight rises but HHI stays in range. Execute: manual entry near support. Bot runs the trailing stop. Review: two weeks. Keep the stop rule. Cut size if P and L swings exceed your norm.
B. Crypto time slicing Brief: network upgrade due next month. Rank: volume stable and spread acceptable. Plan: tiny sleeve. Tracker confirms equity remains the core. Execute: bot slices one order into six small buys over one hour. Manual stop set. Review: three days. If slippage plus spread beats your cap, stop slicing.
Costs To Count Before You Click
Spread on the pair or name.
Platform and data fees.
Routing and borrow costs if short.
Fund expense ratios for ETFs.
Slippage on entry and exit.
Check the order preview. If the spread looks wide, reduce size or wait.
Red Flags To Walk Away From
Promises of fixed returns.
No audit logs.
No user controlled limits.
Hidden data sources.
Backtests without costs.
Sales copy that leans on secret or guaranteed.
For neutral reference, see FINRA’s algorithmic trading materials and the SEC’s investor resources. Investopedia has balanced explainers on automation and robo advice.
Mentor FAQ
Do I need a bot at all No. Many profitable traders never use one.
How big should my first live size be Small enough that one trade cannot move daily P and L beyond your rule.
Can AI rank my list for me Yes. Let AI rank and summarise. You still confirm levels and size.
How do I stop one idea from taking over Use the tracker. Watch HHI and sector mix. Cap single position size in writing.
Bottom Line
Bots are tools. Use them to automate simple, written rules. Keep risk with you. Consistency beats complexity. Logs beat memory. Small and clear beats big and vague.
Explore more on StockEducation.com Investing Glossary: https://www.stockeducation.com/cheat-sheets/investing-glossary/ Free Visual Lessons: https://www.stockeducation.com/free-visual-lessons/ AI Portfolio Learning Tracker: https://www.stockeducation.com/ai-portfolio-learning-tracker/
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{"name": "FINRA. Algorithmic Trading", "url": "https://www.finra.org/rules-guidance/key-topics/algorithmic-trading"},
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"faq": [
{"q": "Do I need a bot to trade well?", "a": "No. Many traders do fine without one. Clean notes and a calm list come first."},
{"q": "How small should my first live bot be?", "a": "Use a sleeve of one to five percent and cap daily loss. One trade should not move daily P and L beyond your comfort rule."},
{"q": "Can AI pick trades for me?", "a": "Use AI to brief and rank. You still confirm levels, size, and timing."}
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"disclaimer": "Investing involves risk. Start small, diversify, and set exits before you enter. Automation requires strict limits, clean logs, and secure API practices."
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