AIIntermediate#Reasoning#Prompting
Chain of Thought (CoT)
C
Definition
A prompting technique where the AI agent is encouraged to 'think step-by-step', improving logical reasoning in complex trading scenarios.
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Concept Diagram
Key Takeaways
1
CoT is a reasoning technique where AI breaks complex problems into sequential logical steps
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Each step builds on the previous one creating an auditable chain of reasoning
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Dramatically improves accuracy for multi-step financial and trading analysis
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Enables AI agents to explain their trading decisions step by step for human oversight
Practical Example
A trading agent uses CoT: 'BTC dropped 5%. Step 1: Check funding rates — extremely negative. Step 2: Check liquidation heatmap — $60K support swept. Step 3: Check DXY — flat. Conclusion: Likely a liquidation cascade, not a trend reversal. Action: Buy the dip at $59,500.'
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Related Terms
AI
LLM ReasoningThe process by which an AI agent uses large language models (like DeepSeek or Claude) to parse news and market data into trading decisions.
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Fine-TuningThe process of further training a pre-existing AI model on a specific crypto dataset to improve its domain-specific accuracy.
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Context WindowThe maximum amount of information (tokens) an AI model can 'remember' and process at any single moment during reasoning.
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Prompt EngineeringThe art of crafting specific text inputs to get more accurate or specialized behavior from an AI agent.
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