Artificial intelligence (AI) is making waves in many industries and crypto is no different. The latest success story comes from an experiment where an AI model ChatGPT was tasked with devising a trading strategy.
The goal was ambitious yet straightforward: turn $100 into $10,000 as quickly as possible. The results were nothing short of astonishing.
What you'll learn 👉
The Strategy
The AI-based strategy utilized an indicator known as ‘The Machine Learning kNN based strategy’. This strategy uses historical market data to predict future price movements. It’s simple to read, printing blue (buy) and pink (sell) labels depending on the signal strength.
To enhance the strategy, two additional tools were used: ‘EMA Ribbon by Dominic Osi’ and the ‘Relative Strength Index’ (RSI). The EMA Ribbon helps identify market trends, providing a visual ‘ribbon’ of stacked moving averages to show the trend direction. Meanwhile, the RSI measures the strength of a security’s price action, helping to identify oversold or overbought conditions.
The Rules
For a long trade, the following conditions were required:
- The price must close above the 200 EMA, and the ribbon must be above it too (and yes, it must be green!)
- The price needs to pull back into the ribbon but shouldn’t close below the long-term EMA.
- The Machine Learning strategy should then print a blue label.
- Lastly, the RSI must be oversold before the buy signal.
For short trades, the process was simply reversed. The key takeaway is not to enter the trade if the RSI turns oversold when a sell signal appears. Only go for a short trade when all the rules align!
The Results
Starting with $100, after 100 trades, the strategy yielded a staggering $19,527! This impressive result demonstrates that higher risks can potentially lead to higher rewards. However, it’s crucial to stress the importance of forward testing these strategies on a paper account first.
Conclusion
The success of this AI-powered strategy showcases the potential of AI in the crypto trading world. As AI continues to evolve, it’s exciting to imagine what new strategies and opportunities it will unlock for traders. As always, remember to test new strategies thoroughly and trade responsibly.
