Automated Trading Strategy #85: A Spread Strategy Created With The Help of LLMs
Important: There is no guarantee that ATS strategies will have the same performance in the future. I use backtests and forward tests to compare historical strategy performance. Backtests are based on historical data, not real-time data so the results shared are hypothetical, not real. Forward tests are based on live data, however, they use a simulated account. Any success I have with live trading is untypical. Trading futures is extremely risky. If you do trade live, be prepared to lose your entire account. There are no guarantees that any performance you see here will continue in the future. The best way to trade is with a simulated account on live data. I recommend using ATS strategies in simulated trading until you/we find the holy grail of trade strategy. This material is for educational purposes only and should not be viewed as investment advice.
These Are Exciting Times
When I first started ATS, it was out of boredom and bit of grief. I got together with two other traders during COVID lockdowns and we hammered out a few strategies. While we had no confidence in our programming ability, Ninjatrader filled the gap. To be clear, what attracted NT8 to me and so many other retail traders is that it did not require the need to learn programming.
That was four years ago. Little did I know that in 2024 I would have access to a suite of tools that would allow me to create automated strategies using human language. LLMs have given us the ability to create trade structures that “non-coders” could never do with the Strategy Builder or even with a programmer.
This is truly a golden age for traders. Every day another model is introduced (Devin, Aider, Cursor) that does something better. I am particularly interested in an academic application called Sakana that allows LLMs to conduct scientific research. But getting back to what LLMs can do for trading, a subscriber recently asked about a spread strategy that I discussed about a year ago (thanks for the nudge Cora). At the time, I was told the strategy could not be done.
It took a few days, but I figured out how to do it. These are the backtest results for the spread strategy created with the help of two LLMs and NT8:
These are promising results, especially given the time period. Due to the nature of the strategy, the performance data above is only for the dates: 6-30-24 to 8-20-24.
Now let’s review how I created Strategy 85.