I built a crypto trading bot. It lost to doing nothing.
Every trading bot post ends the same way: a green equity curve and a suspicious silence about whether it made real money. This post is the other one. I spent months building an algorithmic trading system, tested it as honestly as I know how, and here is the headline result: My best strategy returned +4.33% over three years of out-of-sample testing. Buying Bitcoin once and holding it returned…
A crypto trading bot created by the author turned out to be inferior to simply holding Bitcoin over a three-year period. The bot, TradingAI, consisted of around 4,000 lines of Python code and employed a simple Donchian channel breakout strategy, buying 20-day highs and exiting on a trailing stop. Despite extensive testing, the bot only achieved a modest +4.33% return, whereas holding Bitcoin netted +127.77%.
The author built the bot to avoid the deceptive practices often seen in trading bots, which led to four major flaws: look-ahead bias, zero fees, overfitting, and diversification issues. By implementing a proper backtesting method, accounting for fees, avoiding overfitting, and diversifying across multiple coins, the author found that TradingAI's performance was not significantly better than a single coin investment.
However, the bot excelled at preserving capital during market downturns, spending most of its time out of the market and only trading during confirmed trends. Ultimately, the author realized that the bot's fee structure made it vulnerable to losses, and that the small edge it had over a simple buy-and-hold strategy was not enough to justify its complexity.
Written by urgent.news from Dev.to's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
