This is a slightly unusual problem because the passcode lock should not activate until after the screen blanks. There are a few things you can try, but first some questions...
Is this a new problem which appeared on a watch that used to work normally?
When did it appear or is this a problem since the watch was new?
Is the problem associated with any events like loading a software update or a new app?
Is the watch (or it’s paired iPhone) associated in any way with any work-related functions which might have exposed it to your employer’s Mobile Device Management policies? Even just reading a work email account can do this :(
Assuming for now this is a new problem and not work linked.
- Swipe up on the watch face to open Control Center, and look for the manual lock button (a little padlock). This should only appear if Wrist Detect is not enabled. You want Wrist Detect enabled so the watch only locks when it can’t see your arm, so if necessary turn it on, Settings/Passcode/Wrist Detection.
- Forced reset the watch. It’s a computer, so a restart is always a good place to start. Press and hold the Digital Crown and Side Button (together, at least 10 seconds) until the Apple logo appears, then release the buttons and let the watch restart.
- Unpair and re-pair the watch. This should force reloading all the software, so it takes a little time. You have 2 options, either restore the backup made during unpairing, or setup as a new watch - go for the backup on the first attempt, and if that fails try again as a new watch with default settings.
If you are still seeing the problem after these steps your watch might have a failed wrist sensor. Any Series 4 is still in warranty so Contact Support and arrange a hardware check before it reaches its first birthday and end of warranty.