I have not bought many things since i started trading but i would say Lance Beggs has had a profound impact on my understanding of PA and the nature of supply/demand. Lance has been around since a long time and you can see by the large number of articles he wrote and share freely he knows his stuff. His eBooks go much deeper than simple setups. For me they are worth the $$$$ as you wrote and even more.
I did not try other instruments. I did not really try the 70 tick chart, because:
1. Since this is forex, every broker will have a different tick count (there is no central exchange with volume). So, if you really want to test 70 tick, you'd probably want to use the same data provider as Volman did in his book. I'm not even sure you could get the raw data to put in a backtest platform.
2. If you use another source for data (for example, I use Tradestation), you might be limited in the amount of data you can see. With Tradestation, I can only see the past 6 months. That is not enough for me to run what I think is a long enough test.
The following 2 users say Thank You to kevinkdog for this post:
I found out these observations from a student of Bob Volman PA quite interesting. The guy failed in his attempt to make it work for himself but i think overall he has the right attitude and perspective in his conclusion. It just proves once again how difficult it can be to learn from a book or by oneself.
The issue is in realizing that you must strive for a much better than breakeven method. Volmans' book is good in that it gives a correct general philosophy and a foundation of good price behavior concepts, but if you take any of his setups verbatim, you have only a breakeven system. When reading the first 80 pages, I saw a well written approach to price behavior, but I did not see a viable system for exploiting it.
In fact it is easy to develop a breakeven system by yourself - you don't need Volman or anybody else - there are a hundred different ways to do it, including the "throwing darts" approach. Obviously one must go beyond this.
One must identify setups or patterns that provide a much better edge, and then create a system that capitalizes on the edge. A book like Volman's can be a good start to give you ideas, but remember that "tight" stops only means you get stopped out more.
Once you identify the probabilities and rules for when to enter and exit, you must think about all the ways that a trade or trading strategy can become a loser. The definition of "loser" is "unrecoverable max drawdown." You may predefine your stop loss distance but this tells you nothing about your expected drawdown. It does not tell you how many losing trades in a row will happen. You need to be able to reasonably define that type of thing and then proceed to modify your method in a way to manage or limit the total drawdown.
The way I approached the development of my system was to:
(a) identify the target market - trending or ranging. this is the market my base strategy works best
(b) put the base strategy into the market it was not designed for - this represents the "worst case" scenario
(c) devise methods of limiting and recovering from the large drawdowns of the worst case scenario
In my opinion, trading naked futures always exposes you to the risk of too large losses that are either incurred in one trade during a limit move, or over many trades during the drawdown periods. It's necessary to use options to control this exposure. Options are insurance and you pay for it by buying premium. The fact that the premium does not move 1-1 with the futures price can be utilized to prevent a futures-options strategy from being a breakeven strategy, otherwise it will simply be another twist on the dreaded "breakeven."
I don't sell premium to make money because this is as risky as trading futures. By selling premium I'm talking about such things as initiating a credit spread like a bear put spread. There is no point in doing this. You gain nothing you don't already have with the underlying instrument.
My advice for people trying to break out of a "breakeven" rut is to take an approach similar to what I did. Start with an obvious winning strategy in a specific type of market (it is not difficult to create a winning strategy in a specific context). Use that as the core trading strategy. Then put it in an adverse market and modify the strategy so as to limit drawdown. Put the modified strategy back into the primary market and tweak it so that it remains profitable.
Remember that "profitable" means "net" and there's no point in trading unless you can make returns that are noticeably higher than interest rates offered by the banks.
Hopefully this helps some people.
Last edited by mwtzzz; February 16th, 2013 at 10:59 AM.
The following 8 users say Thank You to mwtzzz for this post: