AI Strategy
Understand how mucch's AI analyzes markets and generates trading signals. This guide provides a deep dive into the strategy, technical indicators, and decision-making process.
Overview
mucch uses large language models (GPT-5 or Claude 4.5 Sonnet) to analyze market data and generate trading recommendations. Unlike traditional algorithmic trading, the AI considers multiple factors simultaneously and provides human-readable reasoning for each decision.
How It Works
- 1.Data Collection: Fetch real-time market data from Hyperliquid (price, volume, 24h high/low)
- 2.Technical Analysis: Calculate indicators (RSI, MACD, moving averages, volatility)
- 3.AI Reasoning: Send data to AI with structured prompts requesting analysis
- 4.Signal Generation: AI returns action (BUY/SELL/HOLD), confidence, and reasoning
- 5.Display: Present signal in dashboard with entry/exit levels and position sizing
Technical Indicators
The AI analyzes multiple technical indicators to form a complete market view:
Price Action
Current price compared to recent highs and lows. The AI looks for:
- Higher highs/higher lows: Uptrend indication
- Lower highs/lower lows: Downtrend indication
- Breakouts: Price moving above resistance or below support
- Consolidation: Sideways movement indicating accumulation/distribution
Volume Analysis
Trading volume confirms price movements:
- High volume + price increase: Strong bullish signal
- High volume + price decrease: Strong bearish signal
- Low volume: Weak trend, potential reversal
- Volume spikes: Increased interest, possible trend change
Volatility
Price volatility measured by 24h high/low range:
- High volatility: Large potential gains/losses, wider stops needed
- Low volatility: Tighter range, potential breakout coming
- Volatility expansion: Often precedes strong moves
Trend Strength
Direction and strength of the current trend:
- Strong uptrend: Series of higher highs and higher lows
- Strong downtrend: Series of lower highs and lower lows
- Weak trend: Inconsistent price action, choppy movement
- Range-bound: No clear direction, consolidation phase
AI Prompt Engineering
The AI receives carefully crafted prompts that guide its analysis. Here's an example of what the AI sees:
You are an expert cryptocurrency trader analyzing BTC/USD. Current Market Data: - Price: $42,150 - 24h High: $43,200 - 24h Low: $40,800 - 24h Volume: $2.4B - Price Change: +2.8% Technical Indicators: - Trend: Uptrend (price above recent support levels) - Volume: Above average (confirms bullish momentum) - Volatility: Moderate (2.8% range) - Support: $41,500 - Resistance: $43,000 Analyze this data and provide: 1. Trading action (BUY/SELL/HOLD) 2. Confidence level (0-100%) 3. Detailed reasoning 4. Entry price suggestion 5. Stop loss level 6. Take profit target 7. Position size recommendation Respond in JSON format.
Pro Tip: The AI uses temperature 0.3 for consistent, deterministic responses. This means it will generally provide similar answers for similar market conditions.
Decision Logic
The AI follows a conservative decision framework:
BUY Signal
Generated when the AI identifies strong bullish conditions:
- Confidence > 70%
- Clear uptrend with volume confirmation
- Price breaking above resistance or bouncing from support
- Positive momentum indicators
- Favorable risk/reward ratio (minimum 1:2)
SELL Signal
Generated when the AI identifies strong bearish conditions:
- Confidence > 70%
- Clear downtrend with volume confirmation
- Price breaking below support or rejected at resistance
- Negative momentum indicators
- Risk management: close existing longs
HOLD Signal
Generated when conditions are unclear or risky:
- Confidence < 70%
- Mixed signals from different indicators
- High uncertainty or choppy price action
- Major news events pending
- Poor risk/reward ratio
Risk Management
The AI incorporates sophisticated risk management into every signal:
Position Sizing
Calculated based on your risk percentage and account size:
Position Size = (Account Value × Risk %) ÷ Stop Loss DistanceExample: $10,000 account, 1% risk, $100 stop distance = $1,000 position
Stop Loss Placement
The AI suggests stop losses based on:
- Technical levels: Below support for longs, above resistance for shorts
- Volatility: Wider stops in volatile markets
- Risk/reward: Ensures minimum 1:2 ratio
- Percentage-based: Typically 2-5% from entry
Take Profit Targets
Profit targets are set to achieve favorable risk/reward ratios:
- Primary target: 2x the stop loss distance (1:2 R:R)
- Extension target: 3x the stop loss distance (1:3 R:R)
- Technical targets: Key resistance/support levels
- Trailing stops: Lock in profits as trade moves favorably
Example Analysis
Let's walk through a real example of how the AI analyzes a market:
Market Scenario: BTC/USD
AI Analysis Result
"Strong bullish momentum confirmed by above-average volume (+33%). Price has successfully broken above the $42,000 resistance level with conviction. The 24h gain of 2.8% indicates buying pressure. Volume analysis shows institutional participation. No major resistance until $43,200 (24h high). Favorable risk/reward with stop loss at $41,500 support and target at $43,800."
AI Model Configuration
mucch's AI is configured for optimal trading performance:
| Parameter | Value | Purpose |
|---|---|---|
| temperature | 0.3 | Consistent, deterministic responses |
| max_tokens | 500 | Detailed reasoning without verbosity |
| model | gpt-5 / claude-4.5-sonnet | Advanced reasoning capabilities |
| response_format | JSON | Structured, parseable output |
Strengths & Limitations
Strengths
- Analyzes multiple indicators simultaneously
- Provides human-readable reasoning
- Adapts to changing market conditions
- Conservative approach prioritizes capital preservation
- Incorporates risk management in every signal
Limitations
- Cannot predict black swan events
- Limited to technical analysis (no fundamental data)
- API costs for each analysis
- Requires manual trade execution
- Not suitable for high-frequency trading
Remember: The AI is a tool to assist your trading decisions, not replace your judgment. Always verify signals, understand the reasoning, and never trade more than you can afford to lose.