15 November 2024
Today, I’m going to test the results and go through exactly how you can set up a similar AI crypto trading bot. Welcome back to the Virtual Bacon Channel, where I teach you how to build wealth in crypto. AI crypto trading bots have long been a hot topic in the crypto space. But before we get too far, it’s important to make something crystal clear. AI crypto trading bots are not magical crystal balls. They cannot predict future price movements with 100% certainty, and they definitely cannot guarantee profitable trades. So, if you’ve heard promises of guaranteed high returns, consider that myth busted.
Real AI crypto trading bots are, in fact, complex algorithms built to follow specific sets of rules that you have to define. They execute trades based on these rules, often faster and more accurately than a human could. This saves you time and energy and ensures you never get the trade wrong. But don’t worry, you don’t need to be a coding expert to set up these bots. With ChatGPT, you can explain your strategy in plain English, and ChatGPT can help translate that into a form your AI crypto trading bot can understand. It’s like having your personal developer.
Stick with us as we guide you through this process step by step. To get started, we’ll be using the Pionex platform to set up our AI crypto trading bots today. Pionex is the first exchange that has integrated ChatGPT to help their users create their own AI crypto trading bots. Also, a special thanks to Pionex for sponsoring this video. If you want to set up bots similar to ours today, sign up to Pionex with the link in the description, and you can also receive a special sign-up bonus. The other tool you will need is a TradingView account, the most popular charting and trading platform in the world.
To do this, we will go through three steps. First, go to the Pionex website, and under the “More” section, you can find PionexGPT. You’ll see a similar interface to ChatGPT but with some prepared prompts for making AI crypto trading bots. Let’s start by first creating a simple trading strategy. I’ll be using the pre-made prompt called “Give me a momentum strategy,” and the code for the bot will be automatically generated for you. You just have to click the button you see here. It works just like a ChatGPT chat. You can tell the bot to give you any sort of trading strategy, describe it, and it will give you the code automatically.
Now, a quick word: This type of momentum trading aims to capture trend continuations in price and continues to go long in an uptrend and tends to go short in the downtrend when the momentum shifts. You can also click on “Explain the code,” and a description will be generated for you that explains not only the trading strategy but why the code is formatted this way. So, you can get a much better sense of what this AI crypto trading strategy and the bot actually do.
Next, copy the script code, then head on over to TradingView and pull up whichever chart you want to trade, for instance, Bitcoin. Then, on the bottom here, you see a Pine Editor’s button. Click on that, and this will bring up a text editor. Paste in the code we just copied from PionexGPT, and this is our AI crypto trading bot’s software code. Click “Save,” then click on “Add to chart.” You can see here the strategy is listed on the integrator section as “Momentum Strategy,” and we see all these buy arrows and sell arrows.
Then, in the bottom here, you see the strategy tester section. This is where you can use to actually backtest the strategy to see if it’s actually generating profits and how much. We see the summary of the net profit, the maximum run-up, so the maximum profit at any given time, and the max drawdown, which is the maximum loss, and how much it will compare to a simple Buy and Hold strategy.
Now, depending on the time frame you set, you’ll see that not only does the chart change, but the actual performance of the strategy will also change. This is a good time to mention that no AI crypto trading bot has a perfect record in the long term. You really need to understand which type of strategy fits the current market conditions to actually make profitable AI crypto trading bots.
For instance, the dip-buying strategies that worked well in a bull market will lose all of their gains in a bear market, and vice versa. The real deciding factor is still you, and you have to decide which type of market conditions we are in and pick the right type of AI crypto trading bot that fits the market best.
Some basic rules to follow: In a boring sideways market, a grid trading strategy might be what you are looking for, where the bot will buy low and sell high within a defined range but does not want to hold positions if the price runs further in either direction. So, as long as the price stays about the same in the same range, a grid trading strategy will be profitable. But this same type of strategy will not apply to, for example, a trending bullish or bearish market. In those cases, perhaps a momentum-based strategy or one that aims to catch channel breakouts will be a better fit.
Now, back to the current market: Since the Bitcoin chart is starting to show an uptrend since the beginning of the year, we want to avoid a sideways strategy like the grid strategy and try to focus on catching the new uptrend with the likes of a momentum strategy.
Okay, now let’s break down the actual performance of our AI crypto trading bot. In order to backtest this algorithm to see Its Real Performance, we need to set some parameters first. We’ve got to decide how often we want the bot to trade by changing the time frame. I recommend checking out the one-hour time frame and the 15-minute time frame. Why do we want to pick these two time frames? This is because picking different time frames would change the period that the strategy is tested on.
To see this, go to the strategy tester again, and under properties, you see there is a backtesting range and a trading range. Whenever you change the time frame of the chart, you see that this backtesting range changes. For instance, for a 15-minute chart, the range becomes the beginning of the year to right now, which is about six months. But if you use a longer time frame, you see the testing range also becomes longer. In this case, from the end of 2021 to right now, which is one and a half years.
Now, because the market conditions have dramatically shifted between the end of 2021, which was the start of the bear market, to now, kind of the beginning of a new bull market, we want to specifically target from the beginning of this year to right now, which was somewhat of a beginning of a bull market. And this type of market condition is, in my opinion, likely to continue. So, we want a strategy that has outperformed the market in this kind of six-month period. And that’s why I’ll be using the 15-minute time frame, which sets us at the end of January to June of 2023.
Next, we want to change some parameters. So again, in the strategy tester section, around the “Momentum Strategy” name, you see this cogwheel settings. Open that, and first, we want to change our initial capital. Let’s just say we have one thousand dollars to put in. And also, what’s important is to change the order size. So, I’m just going to put 100% of our equity to deploy into each trade. And now, we’re set.
Then, go to the performance summary page, and you’ll see how this trade strategy is doing. From this trading period of January 31st, 2023, to June 4th, 2023, this strategy has netted a profit of 113%. And a couple of important comparisons here: First, look at the maximum drawdown, which is 137 dollars. This is the maximum loss that this strategy has incurred in this period. Which means when you have put in one thousand dollars, for example, how much of a potential loss could you have seen in the strategy in this period? So, sometimes the strategy will go underwater. In this case, the strategy has only gone as low as 860 of your portfolio. So, it’s not too stressful, and the max drawdown is not too bad, which is a good sign.
Then, we want to look at the Buy and Hold return. So, this is simply if you used this thousand dollars to buy and hold during this period, how much profit would you have generated? In this case, buying and holding Bitcoin in this period only gave you 18% profits. So, this is also good because our AI crypto trading strategy actually outperformed simply buying and holding Bitcoin. If I, sometimes you see that your strategy is generating less profits than simply buying and holding, that strategy is not worth using.
Next, you can go to the overview section and see exactly how this strategy has been performing over time. And you see, in this six months period, there were 1,000 total trades being executed. And you see, gradually, you know, in this uptrend, the strategy has been consistently generating profit. So, this is definitely good. Feel free to play around with the chart to see exactly where the buys and sells are happening. And you can see a list of all the trades that it has made, all 1,000 of them, in this “List of Trades” tab as well.
Okay, now that we’re happy with the backtest results, we can move on to the next step. We are ready to put real money into the AI crypto trading bot and let Pionex execute our trades automatically. To do this, we have to go back to the Pionex website, and under the “Trade” section this time, go to the “Spot to Bot” page. And scroll down on the menu here, and you find, at the bottom here, “Signal Bot.” Click “Create a Signal Bot,” and here it says “TradingView Custom Signal.” Click to create a new one. Give it a name that fits the strategy we’re using. For example, “Uptrend Momentum.” And there will be a simple tutorial. Check this box after you have watched this tutorial to say “I have edited and saved the default settings,” and then click “Continue.”
And here are some of the key information we’ll need. So, first is the webhook URL. This is the link that you need to connect Pionex with TradingView to let TradingView send custom trading signals to Pionex and let Pionex execute the trades. And the message tab here is also important, which sets the bot up.
So now, we’re going to copy the webhook URL with this button. Then, go back to TradingView again, go to the strategy tester section, and you see this little alert icon with the bell icon. Click on it, and you see there is a notification tab. And here is a webhook URL box. So, first, check the webhook URL box under this input tab here. Paste in the webhook URL we just copied from Pionex. This essentially will let TradingView send custom trading signals to Pionex.
And go back to Pionex again, and copy the message information here. And similarly, go back to TradingView, and in the alerts pop-up here, go back to settings, and you see there is a message input box here. So, paste in the message that we have copied from Pionex into this box. And now, you can create the trading alert, which will send the signal to Pionex to execute the trades.
You can also get other types of alerts whenever a trade is executed, whenever the strategy takes a trade signal. So, in the notifications, you can also check “Notify an app” or “Show you a pop-up” or “Send you an email” to “Play a sound” to “Send you SMS,” etc. Once you’re happy with this, click “Create,” and you’ll see, with this again bell icon here on the top right, open that, and you’ll see this page is already populated with your bot triggers. So, this first one here is the momentum strategy with the message and executing on the Bitcoin 15-minute chart.
Okay, once you have set up this alert on TradingView, we can go back to Pionex and check that “I have finished setting up the alerts” and click “Confirm.” And now, you see it has created this “Uptrend Momentum Strategy BTC” using the alerts coming from TradingView. And click on “Use the Signal.” So now, this panel pops up on the left side here. And first, we want to pick the trading pair that we are using this bot on. Remember, the AI crypto trading bots only apply to specific trading pairs. In this case, we tested the strategy on Bitcoin, so we’re going to type in BTC. And you can select the leverage. I’m just going to use 1X leverage to keep it at a low risk.
You can choose how much money you want to deploy to this AI crypto trading bot. So, for the sake of following our backtest, I’m going to put in a thousand dollars as investment. And click “Create the Bot.” Click “OK,” and the bot is created successfully. So now, you see this AI crypto trading bot has popped up in the list here. And you can click into the detail page, and you see this trading bot right here.
So now, what happens is, whenever a buy or sell order is triggered from TradingView based on our strategy and our alerts, TradingView will send you the alerts and send Pionex the trade signals, and Pionex here will execute the trades with the money that you have deposited automatically. So here, you can follow the AI crypto trading bot with all of its previous transactions, all the signals, and all of its history, and how the margin is doing right now. And at any time, you can follow how much of your initial investment is and how much profit has generated, or if it even lost money. So, you can see that all in real time.
Last bit of note: This momentum strategy does work for the specific Bitcoin new uptrend period from the beginning of the year to right now. But even this strategy applied to the past two years will not work that well because the market has shifted dramatically from a bear market to a sideways market to now an uptrend. So, we have to reiterate again, no AI crypto trading strategy is applicable and profitable 100% of the time in the long term. You really have to know which type of bot works well in the current market and know the exact parameters to tweak it. Otherwise, you should just stick with proven strategies made by other traders.
But don’t worry, Pionex has you covered with their GPT Bots Marketplace, which you can find back on the GPT page. This is where you can find pre-crafted algorithms made by other experienced traders. Each one would state the different type of strategy it’s using, and you can also check their past performances and even rank them based on the one-year performance, 90-day performance, etc. And you see, some of these have done quite well. In fact, in the past three months or so, a lot of these have done more than 100% in profits.
With my only intuition, I know that in this new Bitcoin uptrend, we want to look for strategies that focus on following a strong trend. A good example is this Ichimoku Cloud-based type of strategy. So, this one by Trade Tactics looks pretty promising. You see, in each of these strategy pages, it will explain exactly what the strategy does. For instance, this Ichimoku Cloud strategy is used to detect how volatile the market is and how strong a trend is, depending on how thick the cloud becomes. Using this, it can find strong trends even on lower time frames while also avoiding trading during poor price action and low volatility. Pretty much exactly what we’re looking for.
Scrolling down, you can also see it has the performance against just holding Bitcoin. And you see, in the one year, in the six months, it has definitely outperformed just holding Bitcoin. It has actually outperformed our momentum strategy by a lot as well. However, keep in mind that these custom-built bots usually only support one coin to trade that can give good results. For instance, this Ichimoku Cloud strategy only lets you trade on the Frax Shares (FXS) token. So, this same strategy may not have such dramatic results when applied on Bitcoin. Make sure to pick one that fits your portfolio.
And if you want to follow this strategy, it’s also really simple. Just scroll down on the page, and you see you can select your leverage, select how much you want to put in, for instance, again, a thousand dollars. And down here, you can click “Start Copying.” Click “OK,” and similarly, this FXS Ichimoku Cloud bot is added to your list of bots, and you can track all of its previous performance.
Looking at the GPT Marketplace, I’m mainly looking to trade Bitcoin and Ethereum in this current period because Bitcoin and Ethereum are super cheap right now, especially in the beginning of the new bull run. So, you can search for ETH or BTC or Bitcoin to find some of these strategies that apply for these. Some interesting strategies that I found is, for example, this Ethereum Liquid Smart Huddle, which has done 26% in 90 days and 85% in one year. That’s definitely outperformed the market. This is one that I would like to try actually for Ethereum specifically.
And this strategy seems to balance your position between Ethereum and cash. And this says when the buy-side liquidity is high, it increases the coin position, and when the sell-side liquidity is high, it increases the cash position. Basically, it rebalances between Ethereum and USD to give you the best exposure in both market conditions.
Another one for Bitcoin is this MA Cost strategy. You see, this strategy is developed based on the difference between the short-term higher low and the moving average, and it will reduce the loss in fluctuations but also earn profits when the market surges. Essentially, this is another a trend-following strategy. So, when the market is starting to make higher lows and it diverges from the usual market averages or moving averages, it tends to signal a new uptrend, and the strategy will go, you know, more long on the assets that it’s following. In this case, it applies for both Bitcoin and Ethereum. So, definitely an interesting one, and one that fits my usual investing style, which is to follow the new uptrends in Bitcoin and Ethereum. So, this is one that I’d like to test out for the next couple of months to see how it actually plays.
Overall, there are some pretty interesting strategy bots that you can follow in the GPT Marketplace, even if you don’t want to do your own ChatGPT-type style by generating your own code and going to backtest it on TradingView to make sure you’re happy. That stuff is quite advanced. And again, unless you are serious about creating your own AI crypto trading bot and know exactly what you’re doing and understand the current market conditions and understand which type of strategy fits the market conditions best, you are probably best off following a proven strategy in the pre-built section.
Remember, just using a generic AI trading bot or automated trading bot will not give you guaranteed profits. Like the examples we’ve shown, you have to be very meticulous in how you pick the parameters and which type of strategy you use. AI is not a magical tool that can just help you to trade profitably. Profitable strategies still have to come from your research and come from your mind in the end. However, AI and ChatGPT as a tool is super handy, and it has really leveled the playing field for creating these advanced trading bots. Trading and investing profit is still depending on the person, but the implementation and automation of these trades are much more accessible now, and anyone can do it. So, don’t be afraid to get out there and try it.
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