I Backtested Three Viral AI Trading Rules

0:00Let's build an AI training bot that can trade stocks while you s-

0:02Let's fact check this video.

0:05And we're pulling all of our data from the Yahoo Finance API

0:06which gives us access to all the training data since the year 2000.

0:09If Yahoo Finance even thinks you're using their data like this, they are going to cook you.

0:16If you move in silence, don't tell anyone,

0:19have VPNs, then you'll probably get away with it.

0:22But also, why would you want to?

0:24Yahoo Finance data isn't all that good.

0:26It really only has open, high, low, close data and other sources of data like fundamental data,

0:32intraday data, options data, economic data.

0:36All of that's not really accessible on Yahoo Finance.

0:38I'm catching all my data locally so everyone I don't have to

0:40repool the data and reprocess it all over again.

0:42This is great if you're using open, high, low, close data like he says in the video.

0:46But if you're using anything like quote data, intraday options data, alternative data sources,

0:50you're not going to be able to fit it on your computer unless you have a 20 terabyte drive.

0:54So you're going to need a new strategy.

0:56The data I'm pulling is from four funds.

0:58The S&P 500, the NASDAQ, international stocks and government bonds.

1:00And I built out four small programs that each work together to determine how much

1:02of the market we should own today.

1:03And the first program I kept pretty simple.

1:04And it's basically just an if statement with 25 years of data.

1:06So the way that it works is that if the NASDAQ is above the average of its last 200 days,

1:09it stays in and if not, it gets out completely.

1:12The thing that bothers me about this is this strategy is so simple that he knows

1:17you can go and claw right now and back test the exact strategy

1:21and compare it to any baseline you want.

1:24In fact, I sent the exact rules to my trading agent.

1:27If QQQ is above a sooner day average price, buy 100% of my buying power in QQQ.

1:32Otherwise sell all my positions.

1:35Let's see what my AI agent cooks up for me.

1:38And we can see the return.

1:40The green line is his strategy, right?

1:43The gray line is if you bought the S&P 500 and did nothing at all, you bought and held.

1:49And this green line is not only worse in every single way,

1:53but we also have to pay taxes, fees, and it's just not a good strategy.

1:58I mean, look at it.

2:00For program two, it runs once a month and it compares US stocks to international stocks

2:03over the past year and it buys whichever one of those are winning.

2:05And if both of them are losing, it stops everything in bonds and it just waits.

2:08Create a strategy that uses the international ETF and spy ETF and buys which one is winning.

2:14If neither is, we go to bonds and wait.

2:17And even though my AI created different definitions of the word winning,

2:24not a single one of these portfolios even outperformed doing nothing at all.

2:32Program three was pretty simple and it basically just buys the dip.

2:33So if the market drops a ton for two days straight,

2:35but the trend is still up, it buys and it sells as soon as it bounces back.

2:38Buy the dip doesn't work.

2:40In many cases, you lose a whole bunch of money.

2:44Like why would you do this?

2:47When you can do this.

2:50He then goes on to create an ensemble of different portfolios,

2:53basically combining all of these weak trading strategies

2:58to see if it can create a profitable trading strategy.

3:01So if you want to see the results of that, like and follow for part two.

3:05But from what I've seen so far, I'm very much not convinced.

3:09It seems like you'll make a lot more money just doing nothing at all.

3:14Like why would you not just buy spy?

3:17Let me know down in the comments.