diverdan 

Hi Adamus I will be really interested in your discoveries. I too am struggling to be profitable and would like to have a mechanical (as opposed to descretionary) trading strategy on a longer period chart. So I am reading with interest - thanks Daniel

Hi Daniel,

I'm still sitting on the fence regarding the best approach to mechanical trading. I think your focus on long term systems is good. Ideally you would find 3 or more systems that are as uncorrelated as possible, and trade them on as many different markets as possible with low bet sizes, which for me would rule out futures and restrict me to forex and maybe some of the indices and some cash instruments on oil, metals, etc.

That strategy would be slow to profit in the short term but once you achieve a certain level, if your systems are good enough and you don't take money out, you get to the point where you can start compounding your profits and that is something worth aiming for.

That's one of the other reasons why I want to trade manually - so that I can earn my living from it, and leave the profits from the systems alone.

The YTC PAT material from Lance Beggs contains a fairly comprehensive description of how a trader should self-train from start to finish, so I'm following that approach. I'm glad of the structure, basically, since focus was always one of my weak points - or better said, developing focus in a new area for me has always taken frustratingly long, so I'm happy to adopt a programme when it's put on a plate for me.

The learning and testing methodology is not quite the same as what I was doing earlier. Instead of going over a year's worth of past data marking up the trades I would have taken, the first stage in this approach is to go over the past data just marking up the S/R and the setup areas where the trading takes place, trying to identify the market strength and weakness, and concentrating on what other traders would be doing in those areas.

There are five setups that are known by their abbreviations:

1. TST - the TEST of a support or resistance by a weak market, expected to reverse
2. BOF - Break-out failure through S/R and back again
3. BPB - Break-out Pull-back through S/R and weak pull-back and then away
4. PB - Pull-back in a trend
5. CPB - Complex pull-back in a weaker trend, 1,2,3 legs reverse, back and reverse before continuing

I'm going to start posting my screen shots with the mark-up for the last trading day. So at the moment there are no trades on here, and I suspect since I'm new to this, quite a few of the setup areas would not have lead to trades because the market moved too quick in reality (as opposed to hindsight).

I got in touch with a few other YTC PAT readers, so if you're reading this, don't hesitate to comment. In fact that applies to anyone.

I stepped down from the 5 min chart to the 3 min chart this week. Maybe I'm listening to one of my little psycho-weaknesses here, because I love to have more trades, but my excuse is that I don't think I had a great reason to be on the 5 min charts when Lance is writing the whole time about 3 min charts. The 5 min chart is a definite habit for me from reading so much Al Brooks.

My work-rate at the moment is pretty slow. I'm having trouble getting through a week of past data per day, but hopefully that will speed up a little. So I'm trying to get through 5 days of past data, plus today too. At this rate it's going to take me 52 days to get up-to-date, which takes me to the 2nd week of October. That's not including the breaks I know I'll take. Let's hope things speed up.

Still haven't settled on a session to trade yet. I'm testing from 06:00 London time through 16:00 - that's a 10 hour shift which is obviously not possible in real life.

Great post Adamus!

I looked up the same chart and posted it here under how I view it / which possible setups I saw.
PS I know it is hard to sit on your hands and just study 100 old pricecharts, but it is worth it.

Nice, thanks.

How do you see trapped traders in there at 08:00? This is one of the parts I find difficult.

Basically it is just a tip of price under/above a SR-line, swing high/low, ledge of trading range. You could also see it as a BOF. It is also a place where a lot of people put their stoplosses.
The first chart is 3min chart, second the 1 min. Blue line represents a resistance line ( not exact all times but it does represents a resistance zone imo)

I'm restricting myself to an hour per day from now on to ensure that I get my six days covered in the time available. Here's is what I saw in yesterday's action.

I'm still a bit in the dark trying to identify what other market participants are doing, but I figured I need to watch for three things:

1. what are the traders who are in drawdown hoping for?
2. what are the traders in profit targetting?
3. the traders who are regretting missing the last good entry - where will they try again?

Yesterday's chart which I just marked up.

It doesn't feel good. I don't think I can blame the feeling on the narrow trading range that continued until late afternoon. Without sim trading it's just an estimate but I think most of the setups would have led to losses yesterday.

Emotionally, it's difficult to work out what the issue is. Maybe I just need some caffeine.

Hey Adamus,

I marked up you chart with some comments.

Btw 1, do you like this or should I not do it again?
Btw 2, don't take my comments too seriously. Although I studied and practised Beggs a lot, I'm (unfortunately) not a million dollar trader

Cheers

Zwaen 

Hey Adamus, I marked up you chart with some comments. Btw 1, do you like this or should I not do it again? Btw 2, don't take my comments too seriously. Although I studied and practised Beggs a lot, I'm (unfortunately) not a million dollar trader Cheers

Sure I like it, it's just the kind of collaboration I'm looking for. You're welcome. It's definitely an insight to find out what other traders are thinking when we're trying to do the same thing.

I'd argue with you about the S/R losing their validity.

As far as my experience goes, support and resistance don't lose their validity through just one market action - I'd say it would take a whole day of the market just ignoring the S/R level for me to delete it from the chart.

The way I see it, if the market starts interacting with the S or R level, then it's valid. On any given day with a given S or R level, the market could do one of several things:

1. ignore it and push straight through without even a minor PB
2. break-out, show a weak PB - great!
3. break-out weakly and fail - also great!
4. not break-out, just TST it - this I find tricky - what if it then breaks out?
5. doesn't get close enough for a setup before reversing

So I'm just learning them. I haven't got to the point where I wished I knew how strong the S/R level is. I mean, I don't even have any decision making process to judge how the strength or weakness of an S/R level will affect an entry.

I guess I sound a bit stupid here, but what difference does it make? (apart from a simple correlation: strong S/R = less of (1) above, more of (5) and vice versa).

Adamus 

Sure I like it, it's just the kind of collaboration I'm looking for. You're welcome. It's definitely an insight to find out what other traders are thinking when we're trying to do the same thing. I'd argue with you about the S/R losing their validity. As far as my experience goes, support and resistance don't lose their validity through just one market action - I'd say it would take a whole day of the market just ignoring the S/R level for me to delete it from the chart. The way I see it, if the market starts interacting with the S or R level, then it's valid. On any given day with a given S or R level, the market could do one of several things: ignore it and push straight through without even a minor PB break-out, show a weak PB - great! break-out weakly and fail - also great! not break-out, just TST it - this I find tricky - what if it then breaks out? doesn't get close enough for a setup before reversing So I'm just learning them. I haven't got to the point where I wished I knew how strong the S/R level is. I mean, I don't even have any decision making process to judge how the strength or weakness of an S/R level will affect an entry. I guess I sound a bit stupid here, but what difference does it make? (apart from a simple correlation: strong S/R = less of (1) above, more of (5) and vice versa).

And it also makes me thing, how are you going to measure the strength or weakness? Just give it a crude "strong" or "weak"?

I could go with that.

However in all the material from Lance that I've read, unless I've forgotten it or I missed it, he doesn't actually worry about the strength or weakness of the S/R level. That would fit in with his keep-it-simple approach.