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ChatGPT Trading Strategies: Can ChatGPT Help You With Trading?

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chatgpt trading strategies
KEY POINTS
  • ChatGPT is an AI natural language processing tool that can be used in trading to find market information, write trading scripts, and program automated trading machines.
  • Building a trading strategy with ChatGPT can be done in TradingView and MetaTrader 4 and 5.
  • Although ChatGPT is a revolutionary tool, traders still must develop and backtest a solid trading strategy for ChatGPT trading strategies to succeed.

ChatGPT is officially the most trendy word since the Bitcoin craze started in the early years of the previous decade.

This artificial intelligence chatbot application, which was released just a few months ago in November 2022, has been making headlines since then, and for a good reason. Content writers, copywriters, programmers, musicians, students, and even lawyers and doctors – are looking for ways to take advantage of this revolutionary AI chatbot. Everybody is trying to find out how to exploit ChatGPT, and they want to be the first to do that.

And traders obviously want to join the party. But trading is a bit more complex, right? The human aspect has a significant role in trading, even for those who wish to create an automated trading system.

So the big question is, can you really trade with an AI bot like ChatGPT? Is it possible, and if so, what is the right way to use ChatGPT in trading? And how, technically, can you do it?

In this guide, we’ll explore everything you need to know about ChatGPT in trading. We’ll take a look at whether you can use it, what are the risks and advantages of using it, and what are ChatGPT’s different trading strategies you need to explore to use this tool effectively.

What is ChatGPT, and How Can You Start Using It?

ChatGPT is an AI natural language processing tool that essentially gathers market data from the internet and can then answer users’ questions using a computing algorithm. In other words, it’s a robot. 

The AI chatbot was developed by OpenAI, an Artificial Intelligence research company that was co-founded by Ilya Sutskever and Greg Brockman and was partially owned by Elon Musk until 2018. As of mid-2023, its basic version is free to use. The premium version, ChatGPT Plus, is available at $20 per month. The main difference between the two is that ChatGPT Pro can respond much faster and more precisely than the free ChatGPT version. 

In technical terms, Chat GPT uses NLP (Natural Language Processing) to source data from websites, textbooks, and many other sources and store the data in its system. Then, the AI application can generate human-like responses to any questions you may think of.

People use ChatGPT for various purposes such as content writing, cooking and finding recipes, developing code and algorithmic scripts, creating business plans, generating personalized content and ads, emailing, copywriting, writing song lyrics, music chord progression, language translation, writing love letters, and more. 

Also, the process of using ChatGPT is straightforward. It has a user-friendly interface and can be used by anyone and from any device (although ChatGPT is not yet available as a mobile application, it can be used on any web browser).

To start using ChatGPT, here is what you need to do:

  1. Go to OpenAI official website and open a free or paid account
  2. Once you have opened an account, navigate to the New Chat button at the top left corner of the screen
  3. Type in your query in the Send Message box
  4. Wait for the answer
  5. Hit the regenerate response button if you wish to get another answer from ChatGPT

That’s it. Using ChatGPT is extremely simple, as you can see. From that point, once you have set up ChatGPT, you can ask around 600-800 questions in an hour (depending on your settings). And you can ask any question you would like, literally any question.

ChatGPT Trading – How Does it Work in Trading?

Clearly, the big question is whether you can use ChatGPT in trading. So, yes, you can. ChatGPT, like many other language models, can potentially help traders build automated trading strategies and find valuable information. However, it is not yet clear how one should use the most sophisticated AI chatbot in the market right now to get an edge over other market participants.

So far, we have heard many stories about individual traders or financial firms that have already developed a profitable trading system using ChatGPT. Yet, though ChatGPT is undoubtedly an outstanding machine learning application, you need to know its capabilities and flaws. Furthermore, to exploit ChatGPT in trading, you must first ask yourself what is the purpose of using it. For example, do you plan to create a ChatGPT trading bot or script via ChatGPT? Or just find market news, forecasts, or any other valuable information? 

In short, don’t expect to make money in trading using ChatGPT without any backtested trading strategy. As a matter of fact, it can generate false trading signals if you have no trading plan or no clue about the way you are going to use it.

Below is a video made by one of our trading coaches to explain why using ChatGPT on its own cannot make you rich:

Taking the above into consideration, let’s see how ChatGPT can help traders and the trading strategies they can utilize when using ChatGPT.

ChatGPT – Find Market News, Information, and Decode Financial Data

As mentioned earlier, ChatGPT can be a highly sophisticated algorithmic tool; however, it can also simplify your process in many cases. For example, let’s say you are using ChatGPT to find market news and forecasts, or you just want to find fundamental analysis information about a specific market or an asset. So, you can write stock market news as a query. Here is what you get:

ChatGPT find market news

Pretty nice, right? But it’s also fairly basic information.

We want to know more than that. So, one of the best methods to use ChatGPT is to utilize it so it can interpret financial news and parse complicated contexts. 

For instance, according to Alejandro Lopez-Lira, a finance professor at the University of Florida, ChatGPT might be able to predict stock price movements based on the news headlines ChatGPT analyses. In his experiment, Lopez Lira tested over 50,000 headlines from a third-party data source about public stocks on leading US stock exchanges. Then, Lopez basically told ChatGPT to analyze the news of each stock and pretend to be a financial expert. The bot then answered ‘Yes’ if the news is good, ‘No’ if the news is bad, and ‘Unknown’ if there’s unclarity.  

Ultimately, Lopez Lira found that ChatGPT can accurately predict the stock price direction in the next trading day. 

Another example is the use of ChatGPT to decode speeches from central banks and politicians. Recent reports show that ChatGPT can allegedly transform articles, social media posts, speeches, and tweets into trading signals. So, for instance, let’s say the Federal Reserve Chairman, Jerome Powell, speaks about the US economy and the next rate hike decision; ChatGPT might be able to interpret the text and determine whether the announcement has been hawkish or dovish. ChatGPT can also be used to analyze economic data announcements such as GDP, unemployment rate, CPI, and Non-Farm Payrolls.

Still, this is not something new or revolutionary for algorithmic and quantitative traders. As a matter of fact, many algo prop trading firms have been using this AI technique for years. But now, this tool is in the hands of the average Joe trader who can (with much effort) use ChatGPT to find trading signals from financial text and speeches. 

ChatGPT for Algo Trading

Let’s be honest; finding news and other information on ChatGPT is nice, but you don’t really need ChatGPT to find this type of information. Google and other search engines do a pretty good job for that purpose. You can always use financial websites and popular forums to gauge market sentiments and find tips from other traders. 

When it comes to AI bots, what every trader is really aiming for is to develop an algorithmic trading script. Now, is it possible to make an algorithm trading system with ChatGPT? Yes, it is. And that is a huge advantage of ChatGPT. It simplifies the process, enabling anyone to build a trading script without programming or technical knowledge

Yet, you must remember that in order to use ChatGPT effectively, you must develop your own strategy. ChatGPT can help you implement this strategy; however, it cannot create a profitable strategy for you. From our research, the best method to use ChatGPT in order for it to write a code for you is to set predefined parameters and request the bot to write the code.

That, of course, must be in the programming language model of your trading platform. Bear in mind that there are many trading platforms, each with its own programming language. For example, the programming language of the popular MetaTrader 4 and 5 is MQL4 and MQL5, respectively. For TradingView, the coding language is PineScript. NinjaTrader, another extremely popular trading platform, is built on the powerful C# programming language.

Therefore, you must know what programming language your trading platform is built on and request ChatGPT to write the code in the specified coding language. Then, once ChatGPT has generated a trading strategy script for you, you must backtest it on your chosen trading platform and verify that it actually works. Additionally, in order to run an automated trading system without having to worry about power outages, lack of internet connection, and high latency – traders also need a reliable VPS service.

“I think it’s an incredible technological advance in terms of showing what we can do. This is extraordinary but I don’t know if it’s beneficial.”

Warren Buffet

How to Create a ChatGPT Trading Script (in a Few Easy Steps)

As noted above, ChatGPT can be used to create an automated trading script. This essentially means you can request the chatbot to write a script in a specific programming language to match your chosen trading platform.

Below, we will show two examples of requesting an automated trading script from ChatGPT. First, we’ll show you how to build a trading strategy in TradingView. Then, we’ll show you the complete process in MetaTrader 4 & 5.

Build a ChatGPT Trading Strategy in TradingView

If you are a TradingView user, you must ask ChatGPT to write the code for TradingView specifically. This means you are requesting ChatGPT to write the script in PineScript, the programming language of TradingView. 

Here’s a step-by-step guide on how to build a trading strategy with TradingView.

1. First, you must decide on the trading strategy you want ChatGPT to create for you. For example, we asked ChatGPT to create a trading strategy based on the Moving Average crossover.

ChatGPT trading strategy tradingview query

2. ChatGPT will then provide you with a PineScript code with the above requirements.

ChatGPT pinescript code

3. Next, copy the generated code from the clipboard, go to the TradingView trading system, and backtest the indicator. To do that, open a chart on TradingView and navigate to the Pine Editor tab below the chart. In there, paste the ChatGPT code and click the ‘Add to Chart’ button in the left-right corner.

ChatGPT tradingview backtest strategy

4. Finally, you must backtest your strategy to ensure it’s profitable. To do so, navigate to the strategy tester, where you can analyze the strategy performance (as you can see in the image below).

TradingView strategy tester

Build a ChatGPT Trading Strategy in MetaTrader 4 and MetaTrader 5

MetaQuotes Language 4 and 5 (MQL4 and MQL5) are the built-in languages for programming trading strategies on MetaTrader. But no worries, you should not be concerned about knowing any programming language. And that’s the primary advantage of using ChatGPT to build a trading strategy. You can ask the chatbot to write a code for you in the specific language of your trading platform.

You can see an example of how you should use ChatGPT to create a trading strategy for you on MetaTrader in the section below.

As of now, for individual retail traders, ChatGPT can only be used as an extra tool to create a trading script, find valuable information, or analyze financial headlines. Don’t expect it to be a magic tool that can make you rich.

How to Build a Trading Strategy with ChatGPT

Most traders wonder if it is possible to build a trading strategy using ChatGPT. The answer is yes and no, at least for the time being. Right now, ChatGPT is not likely to tell you what asset you should trade and when is the right time to get in and out of positions. Despite all the fake videos online, you cannot ask ChatGPT to find a trading strategy that may turn X sum of investment into Y. It just doesn’t work this way, and most likely, it’s for the best. 

However, it can certainly be a great source to detect a trading script to help you build an effective strategy or use it to find trading signals. Still, we say it again and again: you have to do your own research and set the parameters for ChatGPT to construct a strategy for you.

In other words, to create an effective trading strategy via ChatGPT, you must request it to program a specific plan with your parameters and trading conditions. 

For example, let’s say you ask ChatGPT for a fundamental strategy of the 50 and 100 Moving Average crossover to use on MetaTrader4. For those unfamiliar with this technical analysis strategy that is often used by scalpers and day traders, a bullish signal is given when the 50-day MA moving average rises above the 100-day MA (also known as the golden cross). Conversely, a bearish signal is given when the 50-day moving average crosses below the 100-day moving average (this is known as the death cross).

So, let’s see how it works. We asked ChatGPT to create a trading script for MetaTrader. In the chat box, this is what we entered:

ChatGPT MetaTrader query

Now, here’s the ChatGPT response:

At first, it provides an intro explaining how to add the script to the MT4 platform:

ChatGPT instructions MT4

Then, ChatGPT provides a code with the requested parameters.

ChatGPT mt4 code

Here’s the entire code ChatGPT has generated for us:

//---- indicator settings

#property indicator_chart_window

#property indicator_buffers 2

#property indicator_color1 LimeGreen

#property indicator_color2 Red

//---- indicator parameters

extern int fast_ma_period = 50;

extern int slow_ma_period = 100;

//---- indicator buffers

double ma_fast[];

double ma_slow[];

//---- initialization function

int init()

{

   //---- indicators

   SetIndexBuffer(0, ma_fast);

   SetIndexBuffer(1, ma_slow);

   SetIndexStyle(0, DRAW_LINE);

   SetIndexStyle(1, DRAW_LINE);

   SetIndexLabel(0, "MA Fast");

   SetIndexLabel(1, "MA Slow");

   SetIndexShift(0, 0);

   SetIndexShift(1, 0);

   return(0);

}

//---- deinitialization function

int deinit()

{

   return(0);

}

//---- calculation function

int start()

{

   int limit;

   int counted_bars = IndicatorCounted();

   if (counted_bars < 0) return(-1);

   if (counted_bars > 0) counted_bars--;

   limit = Bars - counted_bars;

   //---- calculate moving averages

   for (int i = 0; i < limit; i++)

   {

      ma_fast[i] = iMA(NULL, 0, fast_ma_period, 0, MODE_EMA, PRICE_CLOSE, i);

      ma_slow[i] = iMA(NULL, 0, slow_ma_period, 0, MODE_EMA, PRICE_CLOSE, i);

   }

   //---- generate trading signals

   for (int i = 1; i < limit; i++)

   {

      if (ma_fast[i] > ma_slow[i] && ma_fast[i-1] < ma_slow[i-1])

         Alert("Buy signal at bar ", i);

      else if (ma_fast[i] < ma_slow[i] && ma_fast[i-1] > ma_slow[i-1])

         Alert("Sell signal at bar ", i);

   }

   return(0);

}

At last, ChatGPT gives us some explanation on how to implement the code into the trading system. You will then need to add the code to your trading platform and backtest the strategy in MT4 by scanning historical market data.

Trading with ChatGPT – Pros and Cons

Here are the pros and cons of using ChatGPT in trading.

Pros

  • ChatGPT can help retail traders find market news, forecast, and perform sentiment analysis
  • With the AI bot, new traders can get trading educational material and understand the meaning of economic indicators and trading concepts
  • ChatGPT is a great tool to aid traders in extracting trading scripts/algorithms on various trading platforms
  • According to recent reports, ChatGPT can be used to decode financial news, speeches, and any other content and provide trading signals
  • Excellent tool for those who wish to start automating their trading strategies

Cons

  • The code generated from ChatGPT may contain bugs, misleading and unstructured data, which could result in significant losses
  • Due to its high popularity, access to the ChatGPT free basic version is limited and largely depends on the time of the day and the number of users logged in to the chatbot’s system
  • ChatGPT still lacks extensive domain knowledge and programming language capabilities

Is It Possible to Trade with ChatGPT?

To sum up, despite the hype and the claims made by some analysts and experts, ChatGPT is not yet a revolutionary trading tool that can make you rich or successful. It could be a handy tool, especially if you are not a programmer; however, you must have a solid trading strategy that has been tested and delivered successful results so that ChatGPT can help you. To test your strategy, it would be best to use a trading journal template to record all your ChatGPT trades.

Furthermore, ChatGPT may help you create an automated script; however, you should be extremely careful when using the AI bot and backtest it before you implement it in the market. The use of ChatGPT in trading involves many risks, so you must take this into consideration.

Ultimately, as of now, for individual retail traders, ChatGPT can only be used as an extra tool to create a trading script, find valuable information, or analyze financial headlines. Don’t expect it to be a magic tool that can make you rich.

It is not yet intelligent enough to replace a financial advisor or make informed trading decisions for you. That, of course, unless you’ll come up with an outstanding idea and be the first to crack financial markets using this AI bot. If that happens, please tell us how you did it.

Frequently Asked Questions about ChatGPT Trading

Here are some of the most frequently asked questions regarding ChatGPT in trading.

Can ChatGPT help with trading?

Yes, ChatGPT certainly can help with trading. At first, it can be used to find basic information, including trading explanations, educational material, and market news. Moreover, it can be used to gauge market sentiment and identify potential trading opportunities. Finally, traders can use ChatGPT to develop automated trading scripts. 

Having said that, you must remember that there are many risks in relying on ChatGPT in trading. Its data is not entirely accurate, and there’s a high potential for bias and error.

Can ChatGPT predict future price movements?

ChatGPT cannot make any predictions and forecasts regarding financial asset price movements. Moreover, if you request the AI bot for a price prediction, it answers that it cannot predict future events or market trends with certainty. Therefore, ChatGPT cannot directly help you with trading or investment decisions.

Can I use ChatGPT for forex trading?

Yes, it is possible to use the ChatGPT NLP algorithm to find news and currency pairs trading signals. Additionally, in case you have a predefined trading strategy, you can also use ChatGPT to write a trading script and add it to your trading platform. This way, you can automate your trading by using a computer algorithm.

What are the alternatives to ChatGPT?

There are many AI alternatives available for ChatGPT. These include Google Bard, Jasper Chat, Bing AI, Perplexity AI, and Chatsonic.


Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.

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