I Put $50,000 into AI Bot Stock Trading: My Results

I Gave an AI Bot $50,000 to Trade Stocks: An In-Depth Experiment

Introduction: AI Bot Stock Trading

AI bot stock trading has become a buzzword in the financial world. With AI systems outperforming humans in games like chess and poker, it seemed logical to test their capabilities in the stock market. My goal was to start from scratch, create an AI trading bot, and give it $50,000 to see how well it could perform. After securing the budget approval, I also wanted to put our AI bot up against some renowned human traders to measure its effectiveness against their stock trading expertise.

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Developing the AI Bot for Trading

First, I needed to develop the AI bot. As someone who doesn’t code, I found the task daunting. Luckily, recent advancements in AI, particularly ChatGPT, offered a solution. This AI assistant could perform a variety of tasks, from writing essays to creating code. To begin, I used ChatGPT to generate a simple Python script, which resulted in a basic game where you guess a number. This code was rudimentary but demonstrated the AI’s capability to create functional scripts.

I soon realized that ChatGPT could be a valuable tool in coding a more complex trading bot. I initially attempted to use ThinkScript, a language for coding on TD Ameritrade, but the results were inadequate. The code snippets were either incomplete or too simplistic to be effective. So, I decided to leverage ChatGPT’s capabilities to devise a trading strategy for the AI bot.

Crafting a Trading Strategy with AI

To create an effective trading strategy, I consulted ChatGPT for advice on which stocks to trade and how much to risk per trade. The recommendation was to limit the risk to $1,000 per trade, which seemed prudent. Additionally, I sought suggestions on useful indicators, settling on one that would guide the day trading strategy. With this strategy in hand, I handed it over to a developer to write the code and implement it on Robinhood.

Competing Against Human Traders

To assess the performance of our AI bot, I compared it against several well-known trading gurus who offer paid signal services. These services typically charge around $300 per month and claim to provide real-time buy and sell signals. The first competitor was The Daily Trader, promising a 489% annual return. Unfortunately, after joining their Discord group for $300, I discovered that their trading signals were infrequent, with no updates for weeks.

Next, I explored Andrew Tate’s stock trading program. Despite its engaging role-play environment, it lacked the necessary trading signals. My search continued until I stumbled upon a signal group run by Gary Vaynerchuk, which boasted a large membership. This group provided real-time trading signals, making it a suitable competitor for our AI bot. Another competitor was Kevin Trades from Boiler Room Trading, known for flashy presentations but questionable credibility.

Testing the AI Bot

With competitors in place, I was ready to test the AI bot. I allocated the $50,000 from my Robinhood account for trading. The AI bot was programmed to scan the market, focusing on three stocks at a time and committing $40,000 per trade. My hope was that it would execute trades efficiently and profitably.

On the first day, the bot performed three trades. One was a loss, and the other two were profitable, leaving us $300 down for the day. Although the results were not ideal, I was pleased that the bot was operational. I requested the developer to make adjustments to improve performance, such as reducing losses quicker and securing profits at a set amount.

Analyzing the Trading Results

The bot’s performance over the week was a mixed bag. On Day 2, the bot executed two profitable trades and a third trade that required manual intervention, ending the day with a $600 profit. Day 3 saw the guru’s signals resulting in a mix of profitable and losing trades. The bot managed four trades, with two profitable and two losses, netting a $400 profit.

Day 4 was challenging, with the bot struggling due to a market downturn, resulting in a significant loss. Conversely, the signal group delivered solid trades, providing some relief. On Day 5, the guru’s signals were absent, but the bot managed to secure two profitable trades, ending the week with a positive balance.

Comparing AI and Human Performance

By the end of the week, the AI bot’s account stood at $50,441, surpassing both the human traders’ results and the market itself. The signal account ended at $48,899.67, slightly below the initial $50,000 investment. If we had invested the $50,000 in the S&P 500 ETF, it would have grown to $48,950. The AI bot’s performance, despite market fluctuations, demonstrated its potential to outperform traditional trading methods.

Conclusion: AI Bot Stock Trading Insights

This experiment highlighted the potential of AI bot stock trading. While the AI bot performed well, surpassing human traders and the market, it also faced challenges and limitations. The results suggest that AI can be a powerful tool in trading but should be used alongside traditional methods for best outcomes. The journey from coding to live trading offered valuable insights into the future of AI in the stock market.

As we continue to explore AI in various fields, the success of this trading bot could be a glimpse into a future where AI plays a significant role in financial markets. The ability of AI to process large amounts of data and execute trades with precision positions it as a formidable player in the world of stock trading.

FAQs:

Is there an AI bot for trading?

Yes, there are several AI bots available for trading. These bots use artificial intelligence to analyze market data, execute trades, and optimize trading strategies. AI trading bots can vary in complexity, from simple ones that follow predefined rules to advanced systems that use machine learning to adapt to market conditions. Popular examples include tools integrated with platforms like MetaTrader and proprietary trading algorithms developed by financial firms.

Can I use AI to trade stocks?

Absolutely, you can use AI to trade stocks. AI-driven trading systems can automate trading decisions, analyze large datasets, and execute trades with high precision. These systems use algorithms and machine learning to identify trading opportunities and manage portfolios. Many brokerage platforms offer AI-powered trading tools, or you can develop custom solutions using APIs provided by trading platforms.

Is it legal to use bots to trade stocks?

Yes, it is legal to use bots to trade stocks as long as they comply with regulatory standards. Financial regulatory authorities, such as the SEC in the United States, have established rules for algorithmic trading to ensure fairness and transparency in the markets. It’s important to ensure that any trading bot you use adheres to these regulations and is not involved in manipulative practices or market abuse.

Which AI is best for trading?

The “best” AI for trading depends on your specific needs and trading goals. Some popular AI systems used for trading include:

Trade Ideas: Known for its advanced AI and real-time scanning capabilities.
MetaTrader’s Expert Advisors (EAs): Offers customizable AI trading solutions.
Kavout: Uses machine learning and data analytics to provide trading signals.
Sentient Investment Management: Specializes in AI-driven investment strategies.

When choosing an AI for trading, consider factors such as the system’s ability to analyze data, adaptability to market conditions, and integration with your preferred trading platform.