What if we back test one of those forex trading
strategies, which are generated by ChatGPT in real market conditions?
Well, that's what we did, and the results left us
speechless.
We begin with a $1000 account.
Let's see what happened next.
Artificial intelligence has become one of the most prominent topics
in recent times, particularly in the context of trading.
It possesses the capability to analyze and process massive volumes
of data within a fraction of a second, aiding us
and making informed decisions.
A quick search on YouTube shows us numerous videos discussing
topics such as ChatGPT algo, trading, day trading with the
help of ChatGPT, or even ChatGPT stock trading.
The majority of these videos share a common idea.
They seek guidance from ChatGPT for a profitable trading strategy
that balances high profitability with minimal risk.
They indeed appear to be highly profitable, but what if
we were to test one under real market conditions?
That's what we're going to do today.
Stay tuned to see if using ChatGPT to make a
trading strategy is a good or bad idea.
Will many still raise concerns about artificial intelligence, particularly for
forex or stock trading?
For instance, I once asked ChatGPT whether it excels at
trading forex.
As you can see, this isn't truly the case.
The tool openly acknowledges that it depends on information accessible
online.
Moreover, it's common knowledge that ChatGPT isn't current, implying that
it only processes data published before a specific date.
However, numerous videos claim that they've discovered a profitable trading
strategy by relying solely on ChatGPT.
I won't pass judgment on any of those claims, but
I decided to conduct a back test of one of
those strategies 100 times.
Thus, I selected one of these videos and thoroughly reviewed
the strategy first.
We need to put two simple indicators on the chart,
and they're both totally free.
To start, open up Trading View and go to the
indicator section.
Find the K's reversal indicator and add it to your
chart.
For those who are new to this, Trading View is
a really popular tool for making charts.
The basic version is free, but if you want extra
stuff like replay mode, you can sign it for one
of their plans.
I'll include a link in the description if you want
a big discount.
Once you've added the indicator to the chart, let's make
a quick change to the settings.
We just have to switch the slow section from 26
to 50.
Here's pretty much how to use this technical indicator.
It's not too hard on the chart.
This indicator shows either a signal to buy or to
sell.
These signals are shown with two parallel lines and a
triangle that either points up or down.
You can think of these lines as levels where the
price might not go past in the short term.
When the price breaks above the top line, that's a
sign we could think about buying.
And if the price goes lower than the bottom line,
that's when we might think about selling.
The triangle makes it easier for us to decide.
For example, here we can see that the indicator gave
us a sell signal A few pips after the price
is clearly broken below the lower line.
Well, if we went down here, we could have made
a significant profit.
But again, relying on one single indicator is never a
good idea.
So let's add the second technical indicator needed for this
ChatGPT trading strategy.
It's called volatility bands.
If you do a quick search here, you might be
confused by the number of indicators holding the same name.
So it's better to type star C and then select
this one.
DEP 0TY OXXX.
Not sure how to pronounce this so I'll just display
it on the screen.
Anyway, let's now adjust the settings.
We just need to change two values under the input
tab.
One is the top factor from 2.3 to 2 and
then the bottom factor from 2.1 to 2.
Then we just need to apply some quick settings.
Simply hit on settings and head towards the Style section.
Uncheck all the sections except the first and last plots.
I'm going to change the color of the first plot
to yellow as I want it to look clear on
the chart.
Well that's all.
Before we move on to the strategy, make sure to
select the one minute timeframe as this strategy seems to
be more effective on the lower timeframe.
Before we start testing the strategy, let's go over this
ChatGPT trading strategy.
It's quite easy and clear.
Let's begin with the by setup.
When the K's reversal indicator gives us a bullish signal
which is represented by this green triangle that shows up
together with the instant support and resistance parallel lines, we
should wait for the price to break up and close
above the upper line.
Once done, we should look at the Star C indicator.
The yellow line has to be above the white one
as this indicates A bullish uptrend.
If it's not the case, we could wait for another
5 minutes which is represented by 5 candles.
When these conditions are all met, we go long.
The lower line could be used as a stop loss
level and the goal is to aim for at least
a 1 to 1.5 risk to reward ratio.
Remember, this is the one minute chart and definitely a
scalping strategy.
That was the by setup.
Let's look at the condition to go short.
1st we need to wait for the indicator to give
us a red triangle.
This indicates that the market is about to go down.
But that's not enough.
The price should close below the support line.
What I like about this indicator is the fact that
the support and resistance lines are only visible for a
short period of time.
That means that if the price doesn't break below the
line when it's still visible, the setup becomes irrelevant.
The last condition is having the yellow line below the
white one.
That's the case here.
So we go down and aim for a profit rate
of at least one to 1.5.
That's another successful trade.
All right, I hope the strategy is clear.
Now it's time to begin testing this trading strategy.
By the way, I'd like to introduce Trader Edge, the
game changer tool that kicks spreadsheet struggles to the curb.
Trader Edge helps users back test indicators and trading strategies
with results up to three times faster than using spreadsheets.
Trader Edge makes back testing easier than ever.
Back testing allows traders to assess the viability of a
strategy using historical data, ensuring they can move forward with
confidence and realistic expectations.
The Trader Edge software includes a built in profit and
loss calendar slash trade journal.
Users can track and analyze their weekly and monthly performance,
giving them an edge over the competition.
The tool cost $11.00 per month.
You can save more money if you choose the different
plans.
Also, there's an opportunity to test it free for seven
days before opting for a paid membership.
If you're interested, I put a link in the description
box so you can give it a try.
It's one of those trading tools that can really make
a difference.
To get started, we simply need to establish our initial
balance and consistently enter our trades as we advance through
the testing of this ChatGPT Trading strategy.
Let's use $1000 this time and see whether this strategy
generates profits or results in a capital loss.
With that being said, let's begin back testing.
While waiting for the results, don't forget to hit the
thumbs up button and subscribe if it's your first time
on this channel.
All right, we've just finished back testing.
We ran this ChatGPT trading strategy on Euro USD and
Pound USD and these are the results.
What I like about this strategy is the fact that
it gives us multiple entries per day and we basically
have up to 20 minutes to decide whether to enter
the market or ignore the entry signal.
This could be enough to check other indicators such as
the currency meter or any fundamental news.
Anyway, this strategy recorded a notable 13% drawdown within a
relatively short three-week time frame.
While the profit factor of 1.63 indicates a positive expectancy,
suggesting that the strategy generated more winning trades than losing
ones, and the PNL of 76.35% is impressive, the 52%
win rate raises concerns about consistency.
The substantial drawdown might indicate vulnerability to market volatility, potentially
causing excessive losses.
At this stage, it's advisable to assess the strategies, risk
management mechanisms, refine entry and exit criteria and extend the
back testing period to gain a more comprehensive understanding of
its performance under diverse market conditions before considering its implementation
in life trading.
This strategy is definitely not the best trading set up
we've seen on this channel up until now.
Tell us in the comments section what you think about
the strategies generated by artificial intelligence.
Do you want us to optimize this strategy even more?
Feel free to submit your strategies for testing@tstlife.com/submit.
Thank you for watching if you enjoyed this content.
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Happy trading.