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Hey yall - just was hoping for maybe a little brainstorming re: some of the progress I've been making.
i have been trading Mack's PAT system for about 3 months now with mixed results. I modified his system, in that I am looking for a 10 tick target, rather than his recommended 4 tick profit.
In September I was moderately profitable, not accounting for commissions (as this is me paper trading) and managed $20 returns on one MES contract.
I figured all right there is something here - so I scaled up to 2 contracts and decided to use one contract as a runner. My gross losses were $142.10 on the month, not accounting for commissions.
You can see my win rate Month over Month remained about the same but i took more losses and those losses were magnified because of the increased size.
Again to recap i have been going for 10 tick profit targets and allowing the second contract to run.
I am trading purely price action, and only one setup which is a Second Entry - also called a Two Legged Pullback. I trade only the one setup and nothing else and i have seen several other futures scalpers also trading this style.
This just goes out as a general question as i am certainly a beginner - how does one continue to iterate on a strategy that may or may not be working at the time? Are there any Price Action scalped out there who care to share any wisdom? Is 10 tick profit target unreasonable for scalping?
Thanks in advance for any feedback here. Appreciate any and all words of wisdom. Thank you!
For all intents and purposes, I'm at 50/50 so no real edge defined, with my current R;R setup. I am thinking, if I take more 2R trades and look less for scalps then the win rate I currently have is enough to make some money on. But i understand this is a fallacy because this back test is solely looking at scalps.
The crossroads I'm at now is improving the pattern recognition of the Two-Legged pullback and figuring out an ideal R:R for me. Scalping is nice because there are plenty setups I take that wouldn't work for a 1R trade but work just well enough for a 10 tick scalp.
Conversely, there are several trades that setup for 2R trades, that I scalp out of prematurely and missing the larger move. I also think 120 days is not significant enough of a back test to decide whether this system is working or not. I could be wrong.
And my stop for these scalps is always 1 tick above the extreme of the signal bar. I try my best to not trade anything greater than a 5-point bar because the R:R just becomes so unwieldy. And these entries and exits are always limit orders, I'm using a 950 tick chart as it most closely mimics the 2000 tick chart on the ES.
Do you have a profit target ? Have you tried to reduce the 10 ticks to 6-8 ticks ?
Looking at the win rate (50%) and the MFE/MAE, this is a breakeven system at best.
The stats indicate your entry logic needs to be improved...there is no advantage to the current entry logic.
Thank again for the reply! Here's the distillation of Mack's PAT (Price Action Trading System) as I understand it.
Per Mack and Al Brooks, markets like to move in pairs. Using that market move pair assumption, Mack and Al in their own respective ways describe high probability setups as entering pullbacks in strong trending environments using 21 EMA as an indicator for entry and trend strength.
Two legged pullbacks have a multitude of names from my understanding, another common one is the ABCD pattern, Second Legged Entry, etc. See image attached for visual reference.
If necessary, I'm happy to go in more details of the strategy if my elevator pitch does not suffice.
Do you have a profit target ? Have you tried to reduce the 10 ticks to 6-8 ticks ?
Yes. I always have a profit target of 10 ticks per entry. The stop loss on the trade is the opposite end of the signal bar. The signal bar is the bar that turns back in the direction of the trend at the conclusion of the two-legged pullback. The stop loss varies, but i try to not take trades that require a stop loss of greater than 5 points.
Do you have a profit target ? Have you tried to reduce the 10 ticks to 6-8 ticks ?
No - I have not tried to reduce the ticks from 10 to 6 or 8. The original strategy suggests 4 tick target, but that never made sense to me. I think an 8 tick profit is a sweet spot as I've had a handful of trades in the last week that were 1 or 2 ticks shy from a 10 tick profit but well into an 8 tick profit target. The stop loss order is a limit order.
Looking at the win rate (50%) and the MFE/MAE, this is a breakeven system at best.
The stats indicate your entry logic needs to be improved...there is no advantage to the current entry logic
And I think you're exactly correct regarding an improvement on my entry logic. This is a discretionary trading system requiring a high level of subjective decision making based on one's current reading of the available price action. Other traders i follow trading the system have many years of experience reading Price Action - so amongst other things my lack of screentime, is surely affecting this discretionary edge.
I think I'm left with a couple choices here. I have seen the strategy work for other traders in a scalable and probabilistically favorable fashion. I have to either adjust my tick target from 10 to somewhere between 6-8 or change from scalps and go for longer term intraday swing trades and got for a fixed R:R. I understand this is a personal preference, but should you have any insight that may help my decision making between these two choices, all information is good.
The problem with pullbacks is:
How deep do they go ?
How do you know when the PB is actually a trend reversal ?
I must admit....PB's have always stimied me.
They often take my trend following system out of a big winner because they cause my trailing stop to be triggered long before the move is over.
The problem with pullbacks is:
How deep do they go?
- 50%+ DISCOUNT of floor OR ceiling @ SR Pivot, Distribution POC, Strike and theres more levels to consider. these are main ones though.
How do you know when the PB is actually a trend reversal?
- correct time, PB showing accumulation / exhaustion via pins/psrs, dv, AND if there is a weak liquidity target ahead BUT in saying that you DONT know and never will. I wish someone had told me this 10 years ago - Trading is not about being right or wrong. Its about getting discounts and squeezing liquidity into profits. If youre always taking discounts you can be wrong 70% and be ok. obviously you want to be right 70-80% then you are multi millionaire by sinply taking discounts.
They often take my trend following system out of a big winner because they cause my trailing stop to be triggered long before the move is over
- keep your risk as a strong holder DO NOT place within the auction/distribution/levels - accumulation zones. Stay behind full auctions.
Its a great question and a difficult one to be able to accurately assess. ie: the discretionary nature of Price Action trading and moreover the discretionary nature of my price action trading system.
From my understanding and from the learning through Mack and Al Brooks it's a combination of things to try to distinguish between a pull back and a trend reversal. See below:
The assumption should be that trends continue, and most breakouts fail
The velocity with which the trend continues in a particular direction (example being a parabolic move or a slow and steady move close to the moving average)
The momentum with which it pulls away from the moving average. example being a parabolic move that pulls away sharply from the moving average
Using a combination of proximity to the moving average, price covered (vertical distance) and time that a directional bias has been in play are all relevant information when trying to understand whether a pullback is a pullback or a trend change.
Basic market structure also tells us that market don't like to reverse on a dime but usually enter a trading range before either continuing in the same direction from which they came or reversing in the opposite direction.
Thanks again for getting this conversation started! Apologies for the late response.
