Hello r/bitcoin!
I'd like to share my story about how I made an AI-powered Twitter bot that predicts Bitcoin's price. There's a TL;DR at the bottom for those who don't have time.
First of all, I'd like to introduce myself. I'm a student who loves cryptocurrency, artificial intelligence, and coding. I've been coding since I was 15-years old. I made several AI projects like face mask detector, image captcha solver, etc.
I was always getting rekt during Bitcoin's corrections. I'd always buy high and sell low. I was so frustrated because every time I long, the price dumps. Every time I short, the price pumps. It was mainly because of my fear and greed emotions.
I tried to look up ways to control them, and I stumbled upon an article that mentioned that I should use trading bots. "How I didn't think of this?" I said to myself, "Lemme try making one".
I spent the next week trying to make a trading bot that should score at least a 51% win rate. It used MACD and RSI indicators to predict whether the next candle is green or red. Around 600 lines of code later, it was the time for backtesting.
"Backtesting is the general method for seeing how well a strategy or model would have done ex-post. Backtesting assesses the viability of a trading strategy by discovering how it would play out using historical data. If backtesting works, traders and analysts may have the confidence to employ it going forward.", quoted from Investopedia.
How did the backtesting go? Let's say it didn't end up very well. After testing the bot on all of the top ten cryptocurrencies' historical data, it scored 50.72%. It's not bad, you might think. But wait until you see what I discovered.
I ran the backtesting simulation with a $1,000 demo balance. After running the bot through Bitcoin's historical data, it ended up being around $100,000. I was so happy until I discovered that if the bot had bought and HODLed, it would have ended up being $300M.
I tried changing the indicators the bot uses, changing the trading timeframes, I even tried to train the bot on chart patterns, but it just wouldn't pass that $300M mark. I give up.
Around two months later, after I learned how to code programs that use artificial intelligence, I decided to try again. This time, the bot will use an artificial intelligence model, and it should take care of everything. I have to give it Bitcoin's last candlesticks, and it'll generate predictions for me.
Weeks later, after I successfully trained the AI model with around 80 years of candlesticks data, it was time for backtesting. I still remember that I was sweating as I had just done a chole ting workout. I ran the bot through Bitcoin's historical data, and the $1000 demo balance ended up being $1M.
I was going to punch my computer, but I noticed something weird with the bot's trend accuracy. I ran a more detailed test and found that the bot's predictions direction accuracy is around 60%. It means that the bot is not bad at predicting what direction will Bitcoin's price go. But still, it's not accurate at predicting the exact price Bitcoin will be.
I knew that it was impossible to make such a bot that passes that $300M mark, so I decided to use my current one with 60% trend accuracy to help me do technical analysis. I decided to make a Twitter bot out of it to share my bot's forecasts with my crypto-friends.
I thought it would be easy to create a bot that generates accurate forecasts as those blogs said. It was a tuff journey. It took me at least a month of late nights to make it. The lesson I learned is to never ever give up. I know you hear that a lot, but nobody takes it seriously. If I had given up after failing on my first try, I wouldn't be writing this Reddit post now to inspire others.
TL;DR: Before I learned about using artificial intelligence, I made a price predictor bot for Bitcoin that burned weeks of my time in exchange for inaccurate predictions. It was a horrible fail. Months later, after taking AI courses, I decided to try again. This time, it worked. But it wasn't as accurate as I expected. I accepted that there's no such thing that can predict a cryptocurrency's price with 100% accuracy. I left my dream of letting that bot trade for me and I used it to create something useful, a Twitter bot that helps me in my technical analysis.
EDIT: Sorry, I forgot to add the bot's Twitter profile link. Here's it
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