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The AI mechanics
The AI algorithm in the TraderAI project will work by analyzing historical trading data and identifying patterns and trends that are indicative of successful strategies. This can be done using a combination of supervised learning and reinforcement learning techniques.
Supervised learning is a type of machine learning where the algorithm is trained on a dataset of labeled examples, in this case, historical trading data, and is then able to make predictions based on the patterns it has learned. This can be used to identify patterns in the data that are indicative of successful strategies, such as entry and exit points, risk management, and so on.
Reinforcement learning, on the other hand, is a type of machine learning where the algorithm learns by taking actions in an environment and receiving feedback in the form of rewards or penalties. This can be used to train the algorithm to make trades based on the strategies it has learned, and to adjust its behavior over time based on the performance of the trades.
Once the AI algorithm has been trained, it can then be used to make trades on behalf of the DAPP users, following the same strategies as the professional traders. The algorithm can also be continuously updated, taking into account new market data and changing market conditions, in order to adapt its strategies accordingly.
It's important to note that the AI algorithm performance will also depend on the quality and relevance of the data used to train it, as well as the quality of the algorithm implementation and the parameters chosen. Additionally, the AI algorithm will be continuously monitored and backtested, to ensure that it is still performing well and to identify any possible issues or improvements.