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@Happyface - 7:1 is a horrible r/r. Literally never think about that again. ever. You have to be accurate 70% of the time to break even. The best traders in the world are lucky to be ~50% w/l and you better believe they shoot for 1:3 r/r. And be very careful trading those treasuries, yea the 31.25 per tic on the ZB is attractive, but if you don't know how to kill losers quicker than 7 ticks, you'll be wiped in a week. Trust me on this. Also, make sure your account has at least $10K per contract traded. Anything less and you're not giving yourself a fair chance.
This thread is a couple years old, how many accounts have you blown through? And I'm not making fun! I've made the exact mistakes during this augurous learning curve and process of becoming a professional trader. It's taken me ~8-10 years to become consistently profitable. And I'm not an idiot, by any stretch. Just persistent. And I've never traded anything other than a live brokerage account, from day one, so that 8-10years it took to get in the black was a result of HEAVY losses in my first few years. I'm just stating that if you're not careful, you could make the same mistakes I did...
Here are some things i've learned about backtesting (if that even the topic? - sorry if not, but this will help, I hope)
1. program up your strategy (if it's rules based and not gut trading),
2. put in a 2 tick profit target & NO stop loss but flatten on session close.
3. use market orders with 5 ticks of slippage (sounds like a lot, but every strategy i run live (non sim live) that uses market orders for entries performs pretty close to an NT backtest with 5 ticks slippage - they're usually 60% as profitable as a 5 tick backtest. If you want to test with limits, put two tic slippage just for good measure and be sure your code kills the entry after the bar closes if it doesn't fill (if it's an onbarclose=true strat)
4. Run that on the past 3 months till today, If you have an account that's not in the red that means almost or every 2 tic target was filled and you have a decent strategy.
5. Won't get into how, but then do a solid Monty Carlo analyses (this randomizes almost everything (paramaters, entry bars, ect...) to test for robustness. well, usually within 30% of assigned value is standard) and make sure it passes with flying colors.
6. Then do out of sample walk forward testing. (a must pass)
The closest you'll ever get to a backtest results = live market results is if you run it on market replay with w few tick slippage. That sorta models the sim dynamics of the markets.
Everyone has their own thoughts on backtesting, this just happens to be what works for me.
However, for 1 tic scalping, throw away your charts and backtests. Actually never say 1 tick scalping unless you're a floor trader and can instantly place both with a broker after you've quickly glanced at a known major players' hands in the pit before they throw them up to order in your direction. otherwise in electronic "scalping" - shoot for 4-6 ticks on the ZB if that's what you're trading. The same can be for the ES.
Now, disregard everything I just said, and learn to read the tape. If you're not REALLY good at reading tape (order flow) there is absolutely no way you can survive a small tic scalping strategy. Tape reading will allow you to be dynamic on your exits too - you'll actually never trade an (n)tic strategy ever again as you'll learn over time that the markets will tell you how much profit you can make each trade and how much you can lose. Every trade is different and should be treated as such. Move away from lagging anything - and the only thing that's linear and non lagging is the actual order flow. Tape reading is how i finally learned to make money. There is a vendor on here that sells some good tools. I'm not going to mention them so this doesn't read like a advert. But Peter's software is brilliant.
Wow, a trip down memory lane to review this thread I started in 2012.
By way of update; yes I tested futures scalping live last summer with my best month 117 trades of which only two were losers. I actually had 90 straight winning trades in a row. All of this within just day trading hours with a hard close at 5PM (my 2 losing trades were hard close at 5PM trades). My scalping strategy utilized limit orders and zero slippage. Conclusion: day trading futures with a hard stop at 5PM is a fool’s game, futures can only be traded with at most a week end hard stop on orders. Since the overnight margins (especially in Oil and some currencies) was too high I decided to stop trading futures altogether, but still write code and test for friends in Chicago. Alternatively I have taken my futures strategy (but changed from scalping to swing trading) and migrated over to currency with good success with currently a 46% return so far this year in live trading. Currency has been much better to me than futures.....
Enjoyed reading your thoughts, and continued good luck in live strategy development!
If you have colocated server on CME premises with a Rithmic diamond API execution then i think you can get a much better fill rate. Experts here do you agree ? Maybe you cant get filled on every tic but if you place your trade 2 ticks up you will have good results.
I just read one of your posts from 2016 stating that reading tape is the best strategy for day trading (scalping) Futures. I currently trade CL and would love your thoughts on trading Tape in CL using NT 8. And are there any resources that can teach me to read tape trading CL with NT 8.
Oh, and in your post you stated that Peters software is amazing. Is that Tape Reading software? I would love to learn.
Jigsaw, auctiondashboard, Bookmap all are in a way related to the tape. Mentioned a few here without getting into any specific vendor. I use them all. However i also use somethings which I have created by myself after wanting to go after specifics. Attached chart of CL last year on a front month which told me move is comiiin.
I use a lot of T&S to read actual tape and also the use of Limit vs Market Order analysis....but at critical junctions. I am really not interested in scalping the tape. But there are various people who also have great success in scalping. So one needs to find their sweet spot to utilize tape i guess
Jigsaw has some great tape reading skills/drills. You can also find a variety of stuff on youtube from Jigsaw and many others if you do a little search. Imho the basics of Market Structure probably helps to understand in reading the tape and in what context is the market at the time of reading tape.
Also this forum has a thread on tape if that is any help to you.
Hello from Russia. Say thank you Google translator for meaning. I myself with the English at the dog. Woof woof.
In any case, glad to share experience with overseas counterparts. If you like the post, do not bother, write a response.
Your Alex.
