GPT For Building Trading Strategies

  • January 14, 2025
  • Larry Connors
GPT For Building Trading Strategies

GPT is poised to be the greatest alpha creator we’ve seen in financial markets.

 
In the previous issue of my Trading Lesson of The Day, I listed 135 ways traders could use ChatGPT to improve their trading.
 
I’ve listed the 135 ways below for you to continue to look at. Please note that I could have easily doubled and even tripled this list because ChatGPT (especially with its new o1 series, which applies logic and reasoning) is so vast.
 
In upcoming issues, I’ll touch upon a handful of the ways my team and I are currently using ChatGPT for trading and investing.
 
We’re not the only ones doing this (the hedge funds are, too). We are, though, a very early mover, and you will be too if you decide to take advantage of this once-in-a-generation revolutionary opportunity. 
 
Today, I’m going to touch upon number 1 – Having ChatGPT Build Trading Strategies For You. This is immense, and in fact, I’m teaching a 3-week course on this topic to professional traders beginning on January 22.
 
For today, though, I’ll share key features within ChatGPT with you. Please note that many of these require you to subscribe to their o1 Pro version, which currently costs $200 a month.
 

In my strong opinion, it may be the best $200 a month you’ll ever spend.

 
As I mentioned in the previous issue, I’ve been on a Bloomberg terminal since 1989. Last month, I canceled my $30,000-a-year subscription because of ChatGPT. 
 
I loved my Bloomberg. Early in my marriage, it used to sleep in the room with us until my wife told me it was either her that moved to another bedroom or Bloomberg. 33 years later, a great marriage proves I made the right decision – at the time, I definitely gave it a lot of thought!
 
As great as Bloomberg still is, in my opinion, ChatGpt is better in many ways. And as the technology within ChatGPT and AI rapidly expands, it’s pulling further and further ahead of Bloomberg, especially for traders.
 
Let’s first discuss strategy development.
 
I’ve been developing trading strategies since the 1980s and began publishing quantitative (data-backed) strategies since the 1990s. Along the way, there were a number of breakthrough discoveries made, many were published in books, others were taught to private groups of professional traders, and a handful were sold to institutions: one that now manages over a trillion dollars.
 
Awards were also won along the way for the research. I give Bloomberg, along with a very strong team of researchers who worked for me, a lot of the credit.
 
The process was that I planted the seeds, and they grew the trees.
 
Today, I still plant the seeds. ChatGPT not only grows the trees, it builds the forest!
 
As an overview, here is just a small number of ChatGPT’s capabilities:

1. Build trading and investing strategies for Stocks, ETFs, Options, Futures, Volatility, Crypto, and literally any market that has a public exchange.

2. It can do so in all time frames: day trading, swing trading, intermediate-term trading, and long-term trading.

3. It can build trading strategies for every level of traders. It literally ranges from beginners all the way up to “PhD Quant Hedge Fund-Level” strategies.

Over the past 18 months, I’ve developed sophisticated trading strategies that I could never have imagined doing so in the past. What would have required a team of PhD researchers and analysts, along with a cost of millions of dollars a year, can now be done in only a few days and, in some cases, in only a few minutes.

4. It can optimize position size based on your personal goals, suggest adjustments as the positions move, calculate, and also point out potential risks in the positions. It did so on an options strategy which I had been trading for years – I thought I knew it inside and out. GPT pointed out a weakness in it that neither I nor anyone else had found, and then it provided a simple, elegant solution to strengthen the strategy.

5. ChatGPT knows every trading style – in some cases, better than the most experienced professionals. 
 
Do you trade momentum? Not only does it understand it as well, if not better than the hedge funds do, it also supports it with research, academic studies, and additional professional-level knowledge for you to learn from and then apply to make your trading strategy even better.
 
6. It searches and identifies ALPHA in places that professional individual traders would never think about. 
 
It picks up tone inflection during earnings calls and it identifies minuscule yet powerful changes in messaging that CEOs and CFOs make on the call versus previous earnings calls. It can even read body language. When Fed Chairman Powell speaks after the Fed meetings it will, in real-time, read his body language and analyze for you his tone inflection. 
 
Think about this for his November 2024 meeting. There was a massive sell-off during and after his presentation. Imagine having AI telling you early on that he was nervous, inconsistent, and out of character. Get there early and even first and you’re legally front-running the global money that moves markets for days, as it did from that meeting. 
 
Welcome to the future!
 
7. One of my favorite ways to apply ChatGPT to my strategy development is to put in academic studies and portions of professionally written trading books, have GPT interpret it for me on a high level, and then suggest the best ways to take advantage of this information. Over a short period of time where I go back and forth with it, I’ve developed dozens and, likely now hundreds of new trading strategies with this approach.

In the past, this would have taken me days, weeks, and even months. Now it’s done in minutes. 

This same process is available for you.

 
This brief example offers a glimpse into the broader scope of its ability to uncover ALPHA and craft trading strategies designed to capitalize on it. There are, of course, no guarantees in trading, and everyone’s results will vary based upon their prompting skills, their existing and then future knowledge, along with the way they structure their trades and time, execute, and exit their trades. Overall though, GPT is poised to be the greatest alpha creator we’ve seen in financial markets. 
 
After being professionally part of the financial markets since being hired by Merrill Lynch shortly out of school in 1982, I’ve seen a lot, and it’s been a heck of a ride. 42 years later, it’s literally not only Day One – it’s “Nano-Second One” because of AI and the incredible amount of knowledge, tools, and technology built into ChatGPT and also a handful of the other models out there.
 
Use it to your advantage. This is beyond anything the world has ever seen before, especially for trading, and I encourage you to move forward with it because many others already are.
 
You can listen to the webinar I did on the upcoming course I’m teaching, How To Build High-Performing Trading Strategies With AI.
 
 
In my next issue, we’ll look at how to use ChatGPT to read charts for you at levels that equal, if not exceed, the best chart readers in the world. And from there, have it make suggestions on potential trades you can make based on the analysis.
 
Stay tuned! In the meantime, I hope you enjoyed this lesson. Enjoy watching the webinar (you’ll learn a lot), and I’ve included the list again below for you.
 
  1. Strategy Development & Brainstorming (ChatGPT excels at this)
  2. Rapid Technical Pattern Analysis (professional level chart reading and analysis, plus generating trading suggestions)
  3. Customized Indicator Creation
  4. Automated Backtesting Script Generation
  5. Advanced Options Strategy Generation
  6. Sentiment Analysis on Tweets & News
  7. Crypto Project Whitepaper Summaries
  8. Headline Sensitivity Analysis
  9. Optimal Stop-Loss & Take-Profit Levels
  10. Trading Journal Assistant (you can create and customize one that exceeds anything currently available on the marketplace)
  11. Automated Watchlist Generation
  12. Sector/Industry Rotation Analysis
  13. Customized Market Insights Briefings
  14. Correlation Breakdown
  15. “Smart Filter” for Scans
  16. Event-Driven Trade Ideas
  17. Regulatory Filing Summaries
  18. Unusual Volume Detection
  19. Expert-Style Q&A on Market Topics
  20. Code Review & Optimization
  21. Multi-Timeframe Analysis
  22. Risk Parity Modeling
  23. Intraday Pattern Recognition
  24. NLP-Driven Macro Trend Analysis
  25. High-Level Thematic Investing Insights
  26. Customized Position Sizing Models
  27. Scenario Stress Testing
  28. Cross-Market Arbitrage Ideas
  29. Momentum Stock Alerts
  30. ETF Construction or Basket Trading
  31. Tail Risk Hedging Strategies
  32. Option Greeks Analysis
  33. Cross-Asset Seasonality
  34. Automated Pair Trading
  35. Live Support & Resistance Mapping
  36. Event-Flow Trading
  37. In-Depth Sentiment & Social Analytics
  38. Coding Machine Learning Indicators
  39. Price Action Explanation
  40. Crypto On-Chain Data Breakdown
  41. Hedge Strategy Optimization
  42. NLP-Based Trading Education
  43. Market Microstructure Analysis
  44. Automated Beta Weighting & Hedge Ratio Calculation
  45. Special Situations Scanner (Spin-Offs, Reverse Splits, Rights Offerings)
  46. Deep-Dive Algorithmic Trading Strategy Dissection
  47. Whale Watching: Large Institutional Order Flow Insights
  48. Voice Commands & Analysis (no more typing!)
  49. Crypto Derivatives Funding Rate Analysis
  50. Real-Time Anomaly & Outlier Detection
  51. Advanced Sector Correlation & Hedge Tactics
  52. Thematic Portfolio Construction
  53. Swing Trading “Pullback & Continuation” Analysis
  54. Long-Term Momentum Factor Screening
  55. Thematic Crypto Basket for Long-Term Holds
  56. Options LEAPs Strategy Generation
  57. Global Macro ETF Rotation
  58. Multi-Week Sector Momentum Pair Trades
  59. Geopolitical Risk Assessment for Holdings
  60. Institutional Accumulation Detection (Weekly Charts)
  61. Covered Call & Cash-Secured Put Scheduler
  62. Thematic Options Spreads
  63. ETF “Momentum + Thematic” Hybrid
  64. IPO Lockup Expiration Strategy
  65. Event-Focused Thematic Investing
  66. Quarterly Hedge Adjustment _ Risk Management
  67. Swing Trading “Extreme Volume Spike” Filter
  68. Relative Rotation Graph (RRG) for Swing Traders
  69. “World Tour” Thematic Rotation – Likely Alpha Here
  70. Personal Mentor –  Interactive Q&A & Trading Concept Mastery (this one is endless!)
  71. Personalized Quizzes & Progress Checks
  72. Academic Paper & Research Report Summaries
  73. Interactive Trading Books Tutorials and Strategy Creation (one of my favorite)
  74. “Teach-Back” Sessions
  75. In-Depth Book Chapter Analysis
  76. Practical “How to Trade This” Tutorials
  77. Multi-Market Education (at all levels) for Equities, Options, Futures, Crypto, FX, and more.
  78. “Explain It to Me at 3 Levels” Feature (Beginners, Intermediate, Professional)
  79. Advanced Strategy Refinement
  80. Development for Trading Teams
  81. Quant & ML Pipeline Teaching
  82. Trading Psychology & Mindset Coaching (GPT goes deep here – further than anything I’ve seen available in the marketplace)
  83. Contrarian & Sentiment Analysis Lessons
  84. Math & Statistics Tutor for Finance
  85. Code Generation & Debugging (Educational Mode)
  86. Interactive Case Studies & “What-If” Scenarios
  87. Historical Backtest Explanation
  88. Multi-Day Gap & Go (Extended Timeframe)
  89. Risk Analysis from Beginner to PhD Quant Hedge Fund Level
  90. Thematic Sector Seasonality
  91. Currency Pair Swing Analysis
  92. Seasonality Over Multi-Week Periods
  93. Longer-Term Economic “Regime” Tracking
  94. Long-Term Trend-Following Signal
  95. Portfolio Factor Exposure Analysis
  96. Insider Trading Trends (Multi-Month)
  97. Long-Term Crypto “HODL” Analysis
  98. Swing Trading Gaps on Weekly Charts
  99. Defensive Portfolio Construction for Extended Bear Phases
  100. Weekly or Monthly “Relative Strength Rotation”
  101. Multi-Week Mean Reversion in Commodity Markets
  102. Multi-Quarter Earnings Season Strategy
  103. Mid-Term Swing Combination Indicators
  104. Position Sizing for Multi-Day Swing Trades
  105. Portfolio-Level Volatility Targeting
  106. Multi-Week RSI Mean Reversion
  107. “Big Picture” Macro Data Sentiment
  108. Chat-Based Debugging & Diagnostics for Trading Systems
  109. Automated Cycle Analysis
  110. Multi-Month Breakout Projections
  111. Synthetic Short Positioning via Inverse Instruments
  112. Automated Portfolio Rebalancing Logic
  113. Contract Roll Analysis for Futures
  114. Target Price Heatmap Creation
  115. Delta-Neutral Strategy Proposals
  116. Behavioral Stop Placement Analysis
  117. Automated Walk-Forward Optimization
  118. Intermarket Analysis for Confirmation
  119. Price-Volume Footprint Synthesis
  120. Real-Time Implied Volatility Breakout Detection
  121. Institutional Flow Parsing (Dark Pool Prints)
  122. Special Options Order Flow Filtering (Sweeps, Large Blocks)
  123. Elevated Short Volume Detector
  124. Intraday Event-Driven Options Strategies
  125. Newsflow Speed Arbitrage
  126. Volatility Surface Exploration (Multi-Asset)
  127. Macro Data Release Forecasting
  128. Alternative Data Integration
  129. Personal Behavioral Finance Checker
  130. Multi-Factor Alpha Generation
  131. Momentum Shifts Detection via Volume-Weighted Metrics
  132. Crowd-Funded Research Aggregator
  133. Whale Transactions on Blockchain (For Crypto)
  134. Systematic Trading Style Matching (it will customize this for you after asking you a series of questions)
  135. Sector & Industry Macro Shifts (timely, especially now)
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