I Asked ChatGPT to Make Me a Day Trading Strategy, and It Did! Sort Of…
What’s up, everyone? All right, so we’re going to see if we can use ChatGPT to develop a day trading strategy. Let’s start here by asking some basic questions about day trading and see what ChatGPT knows.
Explain day trading to me like I’m five years old
“Day trading is when you buy something like a toy or candy in the morning and then sell it later in the day for more money than you paid for it.” Brilliant. “It’s like when you trade your toy car with a friend for his toy airplane.” Sort of. “But, instead of playing with it, you sell it back to the store for more toys.” Not really. “Day traders do this with things like stocks or cryptocurrency instead of toys, but just like when you trade toys with your friends, it’s important to know when to sell so you can make a profit.”
That doesn’t seem like a great answer. Let’s try to up it a little bit.
Explain day trading to me like I’m 38 years old
Let’s see if we get a more real answer.
“Day trading is a type of investment strategy where traders buy and sell financial assets. To be a successful day trader, you have to have a solid understanding of market fundamentals and technical analysis, as well as a disciplined approach to risk management and capital allocation.”
This is like a good kind of Wikipedia or Google search of what day trading is. Let’s see if we can ask it a hard-hitting question.
How do I tell my parents I’m a day trader?
“Telling your parents that you’re a day trader can be challenging, especially if they’re not familiar with the concept. Here are some tips to help you have an open and honest conversation with them. Explain what it is. Show your commitment. Be honest about the risks. Share your goals. Listen to their concerns.”
You know, to be honest, this isn’t that bad. Okay, so we’ve gotten through the hard things, telling our parents and knowing the basics about day trading. Now, why don’t we see if maybe ChatGPT can help us come up with a strategy?
What is a good day trading strategy?
“There are many day trading strategies, and the best one for you will depend on your style, risk tolerance and market conditions. Here are a few strategies that are commonly used by successful day traders.”
Okay, so scalping involves making lots of small trades throughout the day. Momentum trading, which is also usually scalping. Breakout trading, which is buying for breakouts. That’s also kind of momentum and scalp trading. News trading, that’s momentum trading, and swing trading, buying and holding overnight. So, ChatGPT has given us five different possible day trading strategies. I asked it the best. It seems to think scalping is number one.
I mean, in no particular order, but it doesn’t say in no particular order. So, is this ordered based on which one is best? Well, I would say swing trading is the least interesting to me. News trading is difficult in terms of actual breaking news. So, I’d say this might be pretty close. Okay.
How do I scalp trade?
Let’s see if that’s too general. Okay, well, now this is helpful. We’re going to start taking some notes. We know we want a strategy that gives us a daily goal of $0.15 a day with a thousand shares. That’s $150 per day. That’s a high-level strategy. We’ve got to start figuring out what can we do here. ChatGPT says
“Choose a highly liquid market. To scalp trade effectively, you need to choose a highly liquid market that has a tight bid-ask spread and high trading volumes.”
Now, I don’t think that that’s correct because if you’re just trying to scalp one penny, I don’t think that that’s going to be enough profit to justify the risk of catching a flush. As a seasoned trader, I agree that you want high liquidity, but I don’t know that you want a $0.01 spread. I think there’s a little bit of a confusion there, but we can forgive ChatGPT. So, let’s see, “use a short-term chart.” That’s true. Okay, so now we know we want to be using a one-minute chart.
One-minute chart to identify short term price movements, identify key levels, identify key support or resistance levels using technical analysis. These levels can help you identify potential entry and exit points.
Okay, that’s great in theory, how do I actually do it? “Use a trading plan. Develop a trading plan that includes entry exit stop loss.” I should say…
Can you write me a day trading plan for scalp trading?
“Sure, here’s an example of a day trading plan for scalp trading. Market and timeframe: choose a highly liquid market such as the S&P 500 or NASDAQ in a short term timeframe, such as a five minute chart. Entry and exit rules: use a 1 to 2 risk to reward. Position sizing: use proper position sizing. Risk management: use proper risk management. Trading hours: determine the best time to trade.”
It’s using the same general stuff. This is definitely a template. It’s good stuff. “Keep a trading journal,” but it doesn’t have the meat.
So it’s a skeleton of what you need, which is helpful. Everyone needs a good skeleton, but you also need something to put on the skeleton, like the meat and stuff. This doesn’t have a lot of meat to it.
What’s a good momentum stock today?
Okay, so they don’t have real time market data. “To identify potential momentum stocks, you can look for stocks that have shown strong movements in price…RSI.” Well, we know that. They’re recommending a couple of these free scans, but they’re not always good for intraday stuff. That’s more for swing trading and daily watch lists.
What we certainly know here is we want to use a one minute chart and we want to look for liquidity. I don’t know if we understand looking for something that’s moving quickly. That’s more on the momentum trading side of things. What about this…
Can you design a momentum day trading plan for me?
It’s giving me almost the same exact answer as the scalp trading plan. That’s tough. We’ll stop generating that. “How do I tell my boss I want to quit and start day trading?”
“Potential risk.” Okay, so now it’s giving us a little bit of advice here. It’s saying, hey, remember, day trading can be challenging. Don’t be too stupid here. You know, success isn’t guaranteed, so you probably shouldn’t quit because that was a stupid question that you just asked. If you’re thinking about it, you’re stupid, but also, be professional, give notice, make sure you could probably get that job back because you’re probably going to need it back because you’re probably going to lose money, and that’s about it. Okay, so that was a positive answer.
Let’s see, “how do I know if a stock has momentum?” Okay, so for relative strength, they’re recommending some indicators and just defining moving averages here. Google should be scared because this is a better Google in a lot of ways.
If I was going to compare Google, the nice thing with Google is that you can really get a lot of different potential search results and answers. This is just kind of giving you one which may produce inaccurate information. It may not be accurate. That’s the risk about it.
I think that if we were going to ask ChatGPT to design a strategy, it’s not going to do that. It’s just going to give us high level things, which is interesting and helpful, but there’s just not a lot of detail there. For example, “what’s a bull flag for day trading?”
“A bull flag is a common chart pattern used by technical analysis day traders.”
Okay, so “what are the most popular chart patterns for day traders?” Let’s ask it this way.
“Traders often look at a breakout pattern from the bull flag as a potential trading opportunity. Traders may enter a long position when the breakout occurs.”
Bullish and bearish flags. Head and shoulders. Double top and double bottom. Cup and handle. Wedge pattern. If you wanted to focus on scalp and momentum trading and you wanted to dial more into these patterns, it is all really good scratching the surface.
“Can you write a 1000 word article about how to start day trading?” It just took a deep breath. It’s like, really? My guess is that it’s so general. It’s super general, which is helpful if you’re Googling how to start day trading. But, if you’ve done more than Googling and you want to start really getting into it, then that’s when you’re going to kind of come up short here.
So there’s a little bit of a limit to what this can do right now. Do you think that this could design a strategy that would make $750,000 in three days? There was someone on YouTube that was asking about that. He seemed like he maybe owed somebody some money. Well, why don’t we ask it?
“Can you design a trading strategy that can make me $750,000 USD in 3 to 4 days?”
So it’s giving a good answer that it’s very unlikely that would be possible. That’s bad news for the fellow that made that comment on YouTube. “It’s not recommended to pursue day trading with the sole goal of making a large profit within a short period of time.” That is 100% true. Rather, go slow with long term strategy and focus on risk management.
Is day trading a marathon or a sprint?
Oh, “day trading is often likened to a marathon rather than a sprint.” You know, I’m starting to really like this ChatGPT stuff. I feel like it kind of knows what it’s talking about.
Is Ross Cameron from Warrior Trading pretty handsome?
Now, let’s just get real here for a second.
Come on! Come on! That’s not an answer. “It’s important to focus on an individual’s knowledge, expertise and track record when evaluating their abilities as a trader or an educator.” Well, they’re not wrong about that part, and I do have quite a track record. So $583 to $1 million in 3 years, and then to $10 million in about five years. Of course, you guys can check that out over at the bottom of the website.
I guess at this point, I think we probably know what we need to know about ChatGPT. It doesn’t seem to be able to recognize beauty when it sees it, and it does a lot of surface level chit chat. But, you know…
How do I tell my wife I lost money trading GameStop?
Yeah, it can be. It says it can be a hard conversation. They’re not wrong about that. That can be a hard conversation. “Explain what happened.” This is all good stuff. You know, it may be worth checking out, but it can’t tell me what stocks I should look at today, because it doesn’t have market data.
So, is it going to be the next Google? Is it going to take over Google? I don’t know. These are pretty good answers. It just might. Hope you guys enjoyed this blog. If you want to check out the video version of this blog, you can find it here.
Stay Social with Ross & Warrior Trading
If you want to learn more about my momentum day trading strategy, you can check out my website, and of course you can follow me Warrior Trading’s YouTube channel. You can also check me out on Warrior Trading’s Instagram, on Warrior Trading’s Twitter profile, and on Warrior Trading’s LinkedIn.
Oh, and if you haven’t checked out my book “How to Day Trade” be sure to check it out! It’s a must read. I also have a full reading list over on Good Reads.
I also recently did an Interview with IdeaMench which you may enjoy reading. Check it out!
