EPT is getting absolutely crazy this AI service can create apps websites meal plans it can even teach you how to code but what about trading? Can ChatGPT create a highly profitable trading strategy with low risk? A strategy that can grow a small trading account fast? We jumped ahead and asked it to do so. We also mentioned the names of the indicators our strategy should be based on. ChatGPT wrote a full trading strategy with entry rules and money management in seconds, which truly blows our minds. So we stepped ahead and followed the instruction. The first step was to choose a trading instrument and a time frame. ChatGPT suggested that we should apply this strategy to a daily or hourly chart. We know a lot of you guys love day trading on shorter time frames, so we will select the Euro against US Dollar on a five-minute time frame. We will have a look at how well the strategy works on other time frames as well, so stay tuned for that.
The next step will be to add our technical indicators to the price chart. So open the indicators menu and search for the first indicator, which is the Money Flow Index created by Dreams. The Money Flow Index (MFI) is a technical analysis indicator that measures the flow of money into and out of a financial instrument such as stocks, Forex, or Commodities over a specified period. It is an oscillator that ranges between 0 and 100, providing insights into the strength of buying and selling pressure in the market. MFI is considered a momentum indicator and is often compared to the Relative Strength Index (RSI). However, while RSI only considers price changes, MFI incorporates both price and volume data, making it more comprehensive at capturing the flow of money. The MFI is typically analyzed using overbought and oversold levels. A reading above 70 indicates overbought conditions, suggesting that the instrument might be overvalued and due for a price correction. Conversely, a reading below 30 indicates oversold conditions, implying that the instrument might be undervalued and due for a price rebound. We are using a modified version of the Money Flow Index, which means that red or green circles indicate oversold or overbought conditions.
The next indicator we’re going to add is the Engulfing Candle indicator. The Engulfing Candle indicator is a basic yet powerful technical analysis tool used to identify potential trend reversals in financial markets. The Engulfing Candle pattern can be either bullish or bearish, signaling a potential change in market sentiment and future price direction. The bullish engulfing pattern occurs during a downtrend and signifies a potential trend reversal to the upside. The first candle in the pattern is a bearish candle with a relatively small body. The second candle is a bullish candle with a larger body that fully engulfs the body of the first candle. The bullish engulfing pattern indicates that buying pressure has overcome selling pressure, suggesting that bulls have taken control and that the price may rise. The bearish engulfing pattern occurs during an uptrend and signifies a potential trend reversal to the downside. The first candle in the pattern is a bullish candle with a relatively small body. The second candle is a bearish candle with a larger body that fully engulfs the body of the first candle. The bearish engulfing pattern indicates that selling pressure has overcome buying pressure, suggesting that bears have taken control and that the price may fall.
For the third indicator, let’s add the Exponential Moving Average (EMA). The default length is 9, but since we need a longer-term moving average to filter out minor price fluctuations, let’s change the length to 200. The Exponential Moving Average is a technical analysis indicator used in trading to help identify trends and potential entry or exit points in financial markets. Unlike the Simple Moving Average, which assigns equal weight to all data points in the calculation, the EMA gives more importance to recent prices, making it more responsive to recent changes in the market. In trading, the EMA is often used to identify trends and potential support or resistance levels. When the EMA is rising and the price of an asset is trading above it, this could indicate a bullish trend. Conversely, when the EMA is falling and the price is trading below it, this might suggest a bearish trend.
Now, once we have all the indicators on the chart, let’s proceed to the entry conditions. For a long trade, ChatGPT suggested that we should first identify a bullish trend. As we already know, a bullish trend is present when the price is moving above the 200 EMA. The next condition is to have the Money Flow Index oversold, confirmed by a green circle. Then, a bullish engulfing pattern should form, suggesting a potential trend reversal. A bullish engulfing candle is confirmed by a green triangle below the price bar. As soon as the bullish engulfing pattern has been formed, we should enter a long position on the next candle. ChatGPT suggested that we should place the stop loss below the low of the bullish engulfing pattern. As for risk management, target one to two or one to three risk-reward ratio, but just a stop loss to break even once the price has gone in your favor. This will secure the trade. If you want to increase the win ratio of this strategy even more, you can enter a long trade at the retracement of the price to the EMA. This way, you’ll get an even better price.
For a short trade, ChatGPT mentioned that we should first identify a bearish trend. A bearish trend is present when the price is moving below the 200 EMA. The next condition is to have the Money Flow Index overbought, confirmed by a red circle. Then, a bearish engulfing pattern should form, suggesting a potential trend reversal. A bearish engulfing candle is confirmed by a red triangle above the price bar. As soon as such a candle has been formed, we should enter a short position on the next candle. Place the stop loss above the high of the bullish engulfing pattern. Apply the same money management rules as for long positions.
We tested some of the signals given by this strategy on Euro/USD on a five-minute time frame. The strategy wins almost every single time. Now let’s check how well it works on higher time frames. As we can see, this trading strategy has a high success ratio. It uses smart money management as well, which is 70 to 80 percent success in trading. Discipline is also very critical if your goal is to grow a trading account fast. ChatGPT mentioned that we should stick to our trading plan and maintain discipline when executing trades. Avoid overtrading and emotional decisions. Evaluate your strategy’s performance regularly and make adjustments as needed. Remember, no trading strategy is perfect or guarantees. It’s essential to backtest and demo trade the strategy before using real money. Additionally, be prepared for periods of drawdown and always trade with proper risk management.
Traders, our video has come to an end. We hope you find it useful. Be sure to leave a like and subscribe to our channel for more strategies in the future.
