The AI Stock Trader Revolution

On November 30th, 2022, the world changed forever.

Artificial intelligence, or AI, became accessible to the general public for free.

And this happened because of a little thing called ChatGPT. ChatGPT montage

AI is getting more and more powerful every single day.

It’s starting to beat actual professionals in chess, poker, video games, and even camel racing.

Yes, believe it or not, that is a robot on that camel’s back, controlling it in a camel race.

I didn’t even know they raced camels.

We strongly recommend that you check out our guide on how to take advantage of AI in today’s passive income economy.

The AI Stock Trader Hypothesis

So, it got me thinking.

If artificial intelligence can beat humans in very advanced activities like chess, could it beat humans in something as advanced as trading in the stock market?

Which if you really sit down and think about it, there are multiple reasons why AI would be better than humans at trading.

Speed and efficiency – AI can analyze vast amounts of financial data in the matter of seconds, which a human obviously cannot do.

No emotions – Unlike humans, AIs don’t experience emotions such as fear, greed, or excitement, which when trading, those types of emotions cloud your judgment and lead to poor trading decisions.

Continuous monitoring – AIs don’t need to sleep. They can trade 24 hours every single day, which obviously we cannot do. I need my beauty sleep, ya know?

Consistency – One of the hardest parts about trading is sticking to a set trading plan. For one reason or another, we’ve all diverged from our trading plan at least once. Whether that’s moving a stop loss, entering early, exiting late, or whatever it is, you’ve probably done it. The thing about AI is that it will always stick to that trading plan no matter what.

Putting the AI Stock Trader to the Test

So I wanted to put it to the test.

I coded a trading bot from scratch with all the trading knowledge I’ve learned from the past 8 years.

I coded everything I know into this bot – the ability to read market structure, momentum, volume, level II data, everything.

I basically wanted to create me and my trading style and how I would personally trade into a little baby robot.

This bot will automatically enter, exit, and make every single trading decision for me, while I eat a peanut butter and jelly sandwich on my couch watching AI camel racing.

So I wanted to know what would happen if I put $30,000 into a brand new trading account and completely left the bot alone and let it trade for me for 1 week.

Would I actually make money on autopilot? Or would I lose the $30,000 within seconds?

Now I had to make some rules for this video.

I’m not allowed to interfere with this account at all. I can’t help the bot trade in any way. All I can do is turn on the bot and let it trade.

It’s kind of like a game show. I’m going to call it “Does this AI Stock Trader Strategy Really Work? Or Is It a Money Loser?” game show by TradingLab.

The AI Stock Trader Setup

So the code we are going to be using for the AI is from my own personal private indicator from TradingLab.ai.

Now my indicator is only available on MetaTrader 5, which is a charting platform.

And to be honest, it’s probably one of the worst looking trading platforms out there. Like it literally looks like 2001 Excel.

So you may be asking, why are you using this absolute abomination of a charting platform?

Well, there is one specific reason why I like MetaTrader so much, and that reason is they make it extremely easy to connect bots to automatically trade for you.

Because normally, you would need to code an indicator, have that indicator send its signals to a trading bot, then have that bot send its signals to a stock trading API, and have that API execute the orders.

Which if you have no idea what I’m talking about, this may sound slightly easy. Let me tell you, it’s not.

Which I’m going to be completely honest, coding all of this is probably the worst thing on planet Earth.

On MetaTrader they make it really easy to do it.

You essentially connect what’s called an EA, which stands for Expert Advisor, which is basically another word for bot. I guess it sounds more professional though. Ahhh yes, I’ll have my expert advisor take care of it.

Anyways, as long as you have the indicator or whatever is providing the signals, connecting it to a broker is infinitely times easier on MetaTrader than creating it manually.

So that’s the main reasoning for why we are using MetaTrader.

So it’s quite simple actually.

After I have the EA set up, every time my indicator gives a buy signal, the EA will note that, send an execution order to my broker, my broker will then buy it.

Then once the indicator gives a sell signal, the broker will automatically sell it, completing the trade. Pretty simple.

So now that we know what code I’m using and how I’m going to use that code to automatically trade for me, we move to the next step, which is funding my brand new account.

Funding the AI Stock Trader Account

So when I originally thought of this video idea, I was originally just going to trade with $1,000.

But if you’re watching this video now, you’ll see in the title it says I gave the AI $30,000. Hmm, weird right?

So how did I go from $1,000 to $30,000? Let me explain.

So my indicator gives both long trades and short trades.

Which if you don’t know, long trades you make money as the chart is going up, short trades, you make money as the market is going down.

In order to short stocks, you need to be able to use margin, which is borrowing money from your broker.

And I completely forgot there is the stupidest rule on planet Earth that the SEC made called the Pattern Day Trading Rule.

Which basically means in order to use both margin and do more than 3 consecutive day trades a week, I need a margin account.

Which if I want a margin account, I need to add $25,000 or more into the account.

I ended up putting $30,000 in so I had some wiggle room.

So I went from wanting to only put $1,000 to putting $30,000.

Which means if this AI stock trader strategy goes terribly wrong, well, pray for me.

So once I realized this rule, all I have to do is fund $30,000 into my trading account.

I feel like this is a great time to talk about today’s sponsor, HankoTrade.

HankoTrade is who I personally use as my forex broker.

It’s kind of funny because I used them way before they asked to sponsor me, so when they did, I frantically said yes.

They are overall just a good forex broker – low fees, low spreads, easy to use platform.

And one of the main reasons why I like them so much is because they are one of the few brokers you can hook up directly to the EA I was talking about before on MetaTrader.

So they make it really easy to set up automatic trading bots.

If you use the link in my description, they will match whatever you first deposit. So if you deposit say $100, they give you $100. Thank you HankoTrade for sponsoring this video. I love you.

Alright, so the account is now funded.

But we ran into a slight issue.

If you’ve ever watched one of my videos before, I always say time and time again to never follow the private indicator blindly by just following the signals.

Which is essentially exactly what we are about to do.

There are multiple reasons for why this is not a good idea.

One being if the market is super bearish and is falling, the indicator still might give you a long entry buy signal, which as we all know, is a big no-no.

So what I usually always recommend is using the indicator as more of a tool rather than blindly following it.

Use the trend table it provides, use the order blocks, and all of its other features, and use them as tools to HELP you make trading decisions rather than it making the trading decisions.

Which as I said, if the bot is trading for us, it’s blindly following the signals, which is kind of a bummer.

And I thought that would ruin the whole video if I was helping it make decisions on which specific signals to put more weight on.

So I had to do some brainstorming, because the indicator can’t really read market sentiment by itself. That is, until now.

I added a feature that you can manually or automatically adjust the market sentiment.

So for example, if for some reason you think the market is going to be very bearish that week, because of rising interest rates, bad economic news, a war is breaking out, or Donald Trump made another tweet, you can just go to the indicator settings and say the market sentiment is bearish.

Which then, the indicator will automatically give you less long trades and more short trades, giving the short trades more weight during this period.

If you said the market sentiment is bullish, it will show you more long trades compared to short trades.

Adding just this one little tool to the indicator has greatly increased the profitability of it, at least when it comes to just blindly following it.

It also makes me feel way more comfortable letting the AI stock trader bot follow the signals blindly with $30,000.

As I’m editing this now, it’s now Saturday. And I plan to start this 7-day challenge on Monday.

But to be honest, I have no idea what’s about to happen. And I’m kind of scared. No, I’m really scared.

It will be cool to see if the bot can make money completely on its own without me doing absolutely any work, because it’s almost kind of my baby and it would be like a proud dad moment.

Like imagine if you birthed a baby and made the baby go into work for you as you watched AI camel racing, and it came home every day with a bag. Like, that would be the definition of a cool life.

The AI Stock Trader Experiment Begins

So as the clock ticked down, I got more and more anxious about what was about to happen.

Then, Monday morning came. I woke up at 6:30, went to my computer, and set the parameters for each trade.

For one, I made it so the bot can go above $5,000 for any single trade.

Two, it will only be trading stocks. I gave it a list of 10 stocks to choose from.

Three, it’s going to be using the 3-hour timeframe for its signals as that is the timeframe that performed the best.

Once the parameters were entered, I nervously started the bot. And then something crazy happened…absolutely nothing.

I waited for about 4 hours and the bot didn’t take one single trade.

The reasoning behind this was because we were using the 3-hour timeframe and that ended up being a mistake. At least for this experiment, because we weren’t getting a lot of signals, so the AI stock trader bot wasn’t making a lot of trades.

So I decided to make the bold and rash decision to change the timeframe to the 1-hour timeframe.

I also looked at the chart history, and if we were going to do the 1-hour timeframe for a week period, the bot would only take around 10 trades.

So I decided I would now change the time period to one month of testing, just so we can better understand this experiment and get a lot more trades in to see if this thing actually works.

Which kind of sucks because I wanted to upload this video right away, but it looks like we’ve got to wait a month, which is kind of crazy, because a lot can happen in one month and that’s a lot of time to purely let an AI stock trader bot trade.

So changing from a one week testing period to one month makes me feel even more nervous. But f** it.

I set the bot to trade on the 1-hour timeframe and completely left it alone for one whole month.

The AI Stock Trader Results

Fast forward…alright guys, it’s been one month.

I started this bot on January 17th and it is now February 18th, and the results are in.

As I’m talking right now, I’m looking at the balance. I’m still in absolute shock. I can’t believe this happened.

So the bot traded 10 different stocks: Apple, Google, Microsoft, AMD, NVIDIA, Tesla, Disney, Amazon, Visa, and Costco. And one of these gave some pretty interesting results. Can you guess which one it was? intense music That’s a little foreshadowing.

First, we’ll start with Apple. So just so you guys know what the signals mean:

A green arrow means a long entry. These 1 and 2’s are take profits. If you see a green x, that means the bot exited, but it was a losing trade. And it’s the same thing with shorts – a red arrow means entry, 1 and 2s take profits, red x means the bot exited but it was a losing trade.

So how did the AI stock trader bot do for the very first trade it took? The first trade to set the momentum for this whole experiment?

It was a loss.

It tried entering a short and it looks like it miscalculated a bit. It printed this red x which means it exited the short and hit our stop loss.

Great start. And this loss was a 2.3% loss, which means, with a $5,000 entry, that makes this a $115 loss. I could have bought 10 Chipotle burritos with that money.

But if you look a little bit closer, something interesting happened. Right as the bot exited the short, it also entered into a long trade. And this long actually ended up being a winning trade for a 3.5% win, making all of our money back, plus $60.

So now we are in profit, baby!

As we move throughout the month, the bot took 4 more trades on Apple, totaling 6 trades – 4 being winners and 2 being losers.

The bot actually did exceptionally well on Apple, as if we total up all the percentages it made, it made a whopping 5.85% profit for the month. And this is just for Apple, which is absolutely insane. I’m so proud.

But since we set a max of $5,000 per trade for risk management purposes, this 5.85% isn’t 5.85% of the $30,000, it’s 5.85% of $5,000. So we made a total of $292.50 on Apple during this one month.

Even if it’s just $292.50, it’s so cool to think that the AI stock trader bot did this completely on its own. You did good sport, you did good.

Next we move onto Google. For Google, we took a total of 3 trades – 2 being winners, one being a loser. It ended up being a great win as we made a total of 6.9% for the month, making $345.

Onto the next one – Microsoft. Microsoft was an interesting one, purely because the bot took the most amount of trades on Microsoft.

So the bot took a total of 7 trades – 5 being winners, 2 being losers. For one of the losses, the bot entered a long up here, but it took a little profit before it hit the stop loss, so the loss ended up not being that bad.

After all the trades it took, it profited a staggering 13.25%, making a total of $662.50.

Our next candidate was Tesla. If you know anything about Tesla, it is extremely volatile. And as the test was running, I was watching this one live a lot because both the winners and losers were super big, so it was very nerve-racking watching it live.

Tesla took a total of 5 trades, and profited 24.2% during the month, making a total of $1,210. That’s absolutely beautiful.

Our next ticker was AMD. And AMD was kind of a heartbreaker. It actually was the bot’s big loser, having a total of 3 trades and 2 being losses. It totaled a 3% loss, losing $150.

FAQ:

Is there an AI that can trade stocks?

Yes, AI is increasingly being used in stock market trading. These AI systems utilize various techniques like machine learning and complex algorithms to analyze vast amounts of financial data, identify trends, and execute trades. Some AI tools are designed to assist human traders, while others operate more autonomously.

Is it legal for AI to trade stocks?

Generally, AI-powered stock trading is legal. However, regulations may vary depending on your location and the specific functionalities of the AI tool. In most cases, human oversight is still required, especially for critical investment decisions. It’s crucial to research and understand the regulations surrounding AI trading in your region.

Can AI learn the stock market?

AI can learn from massive datasets of historical stock market data, identifying patterns and trends that might be difficult for humans to discern. However, the stock market is inherently complex and unpredictable. While AI can be a valuable tool, it’s important to remember that it cannot guarantee successful trades.

How much stock trading is done by AI?

Estimates suggest that AI-powered trading accounts for a significant and growing portion of overall stock market activity – some figures suggest as high as 80% of trades involve some level of AI assistance. This percentage encompasses various applications, from basic trend analysis tools to fully automated trading algorithms.

We strongly recommend that you check out our guide on how to take advantage of AI in today’s passive income economy.