{"id":583,"date":"2023-06-19T15:48:31","date_gmt":"2023-06-19T13:48:31","guid":{"rendered":"https:\/\/inv.jp\/?p=583"},"modified":"2024-12-24T01:51:43","modified_gmt":"2024-12-24T00:51:43","slug":"f003","status":"publish","type":"post","link":"https:\/\/inv.jp\/en\/fx\/f003\/","title":{"rendered":"I tried asking ChatGPT4 for recommended mechanical trading methods."},"content":{"rendered":"

“Portrate of trader with serious face at home 1”
\nImage extraction: stable diffusion<\/p>\n

"Speculation should not be trading based on the profit you want to make, but trading more mechanically according to market conditions."
\nThe justification for this common sense in terms of mentality is as stated on this page<\/a><\/strong>, but then what does “mechanically trading” mean?
\nSo this time I had ChatGPT4 recommend three mechanical trading options.<\/p>\n

Then the following three were raised as mechanical trading strategies:<\/p>\n

1. Trend following strategy
\n2. Mean reversion strategy
\n3. Breakout strategy<\/strong><\/p>\n

To summarize their descriptions briefly…
\nThe trend-following strategy trades according to the long-term trend of the market.
\nThe mean reversion strategy trades in the opposite direction when prices deviate greatly from the long-term average.
\nThe breakout strategy trades when the price breaks through a certain level.
\nDeciding on trading rules for this (or these) and trading according to them is what is meant by "mechanical trading."<\/p>\n

By the way,
\n1. Enter when the recent low\/high price breaks or the support\/resistance changes in a trend environment.
\n2. Counter trade at the upper and lower limits of the range.
\n3. Wait for the range to break and the support\/resistance to change, then enter.
\nIt might be easier to understand if we put it this way (although this does cut out part of the strategy).<\/p>\n

We asked more about each of these three strategies.<\/p>\n

Methods that might be useful in a trend-following strategy:<\/h3>\n

Bollinger Channel Breakout Strategy:<\/strong>
\nAdd a band of 2.5 standard deviations to the 350-day moving average.
\nBuy when the price closes above the top of the channel, and sell when it closes below the bottom.<\/p>\n

Dual Moving Average Strategy:<\/strong>
\nUse two moving averages, the 100-day and the 350-day.
\nBuy when the shorter moving average exceeds the longer one, and sell when it falls below.<\/p>\n

Triple Moving Average Strategy:<\/strong>
\nUse three moving averages: 150-day, 250-day, and 350-day.
\nBuy when the 150-day moving average exceeds the others, and sell when it falls below.
\nUse the 350-day moving average as a trend filter. Determine that the long signal needs to be above and the sell signal needs to be below the 150-day and 250-day moving averages.<\/p>\n

Explanation of Mean Reversion Strategy:<\/h3>\n

When the price greatly deviates from the long-term average, the strategy is based on the idea that it will return (revert) to the past average.
\nIt’s about targeting the return during overheat\/oversold times.
\nThe average price is calculated from the moving average. The threshold for “deviation” is determined by the market volatility and your own risk tolerance. For example, if a long-term range appears in more than a daily chart.
\nThis strategy, because it is a strategy to take advantage of the market’s “overreaction”, should always take into account the fundamentals (basic economic indicators) and market sentiment (emotions of market participants).<\/p>\n

Explanation of Breakout Strategy:<\/h3>\n

A breakout is "a way to evaluate the market interest (supply and demand) in that asset and the possibility of future trends."
\nYou should choose assets with clear support\/resistance lines and check whether they are getting attention in the market, i.e., the volume size.<\/p>\n

By the way, the indicators that can be used for volume measurement are:<\/p>\n

Volume Indicator
\nOn Balance Volume (OBV)
\nVolume Weighted Average Price (VWAP)
\nChaikin Money Flow (CMF)
\nVolume Rate of Change (VROC)<\/p>\n

If you really want to trade mechanically, it’s probably good to build a system, theoretically speaking, i.e., automated trading.<\/p>\n

The reason I’m not particularly interested in such trading methods is that, when it comes to day trading, I want to be able to intervene at any moment right before my eyes – I’m a bit of an old-fashioned(?) type in that sense. Of course, there are also aspects like writing code or outsourcing that are both bothersome and not feasible for me.<\/p>\n

However, given that there are quite a few generative AIs these days that specialize in coding, I might muster the motivation to give it a try at some point.<\/p>\n","protected":false},"excerpt":{"rendered":"“Portrate of trader with serious face at home 1” Image extraction: stable diffusion "Speculation should not be trading based on the profit you want to make, but trading more mechanically according to market conditions." 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