Use AI to Build Your Strategy?
By Dave Mabe
Here's a question from Simon B. (name used with permission):
Simon B:
Quick question: Have you tried using AI to find signals for you yet?
I'm about to build a new "open claw" AI bot and was wondering what your thoughts were on this?
Dave:
I've only been trying that for 20 years or so.
In this context, the current iterations of AI are a new way to solve an old problem:
Creating profitable strategies in a finite amount of time.
But zoom out and think about the big picture.
If you could snap your fingers and have open claw or wizbang AI model $X create you a profitable strategy, what happens when it goes into a drawdown?
Here's the thing:
You will NOT be able to trade through a drawdown because you don't truly believe in the strategy.
Because you didn't create it, you don't truly understand it.
It's the same reason traders don't get rich from trading rooms or following someone else's stock picks.
There's a ceiling to how much confidence you can have in a strategy you didn't create.
This is exactly why the Strategy Cruncher doesn't give you the "final answer" when you optimize your strategy.
I could absolutely make it do that easily, but that would sidestep the real path to confidence in your strategy.
Every trader who has ever quit trading did so during a drawdown.
Having someone else (or a magic AI model) tell you what to trade will not create the confidence required to trade through a drawdown.
Does that mean AI is useless for trading? Absolutely not!
Tomorrow I'll share realistic ways you can use AI to improve your trading business.
Thanks for the question, Simon. This is a very important concept for traders to understand.
Maybe the most important.
-Dave
P.S. Here's a quote from MabeKit user Scott J., who recently went live with some strategies he created with the Cruncher:
"The Cruncher gives answers quickly and can run a lot of different scenarios. It would often push the profit factor into the 1.6 to 2.0 range. These are really simple strategies. It’s nothing complex. The Strategy Cruncher added the edge.” - Scott J.