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I am interested in what are you saying here. Please correct me, if I am wrong. Let assume I have learned mechanics behind price auction and gained the cognitive edge over the opposition in particular trade. I still need a set of rules (trading system) to follow to ensure that entering the trade is not based on my biased perception of the market. Otherwise, there is no way to stay disciplined and consistent for a long period of time. My question is, should I develop these rules during my active observation of the market or rather use someone's else rules as my starting point? As I always believed, that if one wants to be great at something they need to choose teacher/mentor as their starting point to develop their own thinking and understanding.
Regarding the observation, should I start my learning journey with historical data or rather watch the real-time market on daily basis? What matrix, tool or set up specifically should I implement into my Ninja trader platform to look at the right set of information for the start.
Can you help answer these questions from other members on NexusFi?
The ideas of bias is why I like the concept of invariants. I created a matrix, for example, where I broke all diets down to variants and invariants. You can see that the dieting philosophies differ in what they control and what they allow to vary. There is another concept which is related to "search space" and "solution space". If you want to potential to be as profitable as possible, just get rid of all the rules. Any rule you create will reduce the probability of finding the best solution because your rule will be arbitrary. But, as you say, that's too much freedom for many of us. So, by imposing invariants on our trading then if we are successful then it makes it more likely we found something we can repeat: so that is another valid approach you can try. It just makes it harder but the confidence will be higher, if you can find something that works.
Always develop/test your own rules. You can use another someone else's ideas or even rules as a starting point. What I like to do is learn just a little about how another trader trades so I don't really know what they are doing but that makes it less likely that I incorporate false beliefs into my trading.
You can do both. You have to develop your own unique edge which means going outside the box of standard thinking. It also depends on what your strengths are and how good you want to get. You are more likely to have initial success if you can develop trade systems. You can develop those in Tradestation or Ninjatrader. However, the problem you will face is you haven't developed strong market cognition. Any path is likely to be difficult. So, I would recommend doing an assessment of your strengths. The term "trading" is used to refer to all sorts of trading even though they can be quite different. It is similar to how the word thinking might apply to thinking about music, art, math, etc but those forms of thinking can be quite different.
If you are trading with discretion, real-time trading is going to give you an advantage over historical simulation for several reasons (at least in terms of tape reading). Some of the reasons are, (1) you can incorporate news, sentiment, and other information easier, and (2) real-time paper trading is more accurate. But, if you lean toward rule-based trading then again backtesting will help. In any event, a good mix of both will be more useful then either in isolation and again thinking outside-the-box and learning to develop unique ways to train could be a viable edge.
As for tape reading/order flow, you should start with some of the enhanced order flow tools and profiling tools. I like our tool but we haven't upgraded it to Ninja 8 yet (might be a concern for you). Most of the new generation tools are going to be better then trying to use the defaults.
In any endeavor it is important to understand the "core" of what produces success. Unfortunately (for me), based on my experience thus far, I am not convinced that talent and skill is the best predictor of trading success nor is it just about trading capital.
Becoming a very successful trader is more about having everything: you need skill (strong tape reading or programming or market ideas), personal attributes (ability to seek risk aggressively but with discipline, ability to work over a long period of time towards a goal), and capital (crucial). Think of it as a triangle. It doesn't matter how strong you make any leg or any two legs of the triangle. If one leg is too weak, success is unlikely. How much do you need to make trading? 165k per year. Why? Because most careers top out around 165k with a few going upwards to 200k. So, you need to make at least 165k to be assured you can afford to trade. Most traders don't have the supporting triangle to make that possible. Growth is very important aspect too. When evaluating any idea, I like to take a 5 year view. If I don't like the idea that I'm working on it 5 years in the future then I toss it out.
Another thought, intelligence can only be evaluated within a given environment. If you look at the computer field, the advancements are very rapid compared to understanding the brain and medicine in general. Why? Because, the scientist working on understanding the brain haven't yet created the right environment to express their intelligence at the same rate. So, absolutely if you can create a better environment you can express a greater potential. With something like trading, there are probably "clusters" of success where things can combine together. This can explain the paradox of conflicting information because the wisdom/information is not meaningful without a total understanding of the "cluster".
Here is a example of market structure using volume profiling on a 60 min chart. Price has come down in a five wave sequence, to a zone just below a high volume node at 6217, from a high volume node at 6288 which is the current VPOC. Price then trends back up to the value area high (VAH) just above the VPOC .
The structure is complemented by the Fibonacci retracement sequence as the last two pivots came to the 23.60% of the high and the last rotation price comes down to the 61.80% fib.
you asked a question on Market Profile vs Order Flow. However the question really did not clarify what you seek from either and hence just going to give my 2cs.
Both can deal and have Volume plays. Volume is probably the most important thing in the market. Most cannot describe what is volume...& profile explains it to them. Similarly Volume when dealing with OF you will rarely hear many talk about the subject. Volume is imho and i dont know much so for what its worth....is the Single Most Imp factor driving the markets. When one know what Volume did...what volume is doing...they will also know in course of volume studies what volume will do. Bold statements but thats it. However in knowing these one has to understand what is the market...how it moves....when it moves...what is the expected move. If one is really adept at volume they maybe able to say how many limits or markets orders or aggressive limits are in the market at any given point of time again all a volume play.
So not sure...r u really looking to delve more into Vol Prof or OF. But if it is just trying to understand the market....one can do so by a simple search Mastering the Markets pulls up a free book. On knowing what volume does....comes into play a series of self studies with observation of markets which then firms up belief. think about it....if any book/person/education can give that ...... they would be king....rather if the info was so great would they give it. I dont know....but i dont think so . what one gets from the market comes with extreme perseverance, passion and intricate knowledge of the market by concentrating on probably 1 instrument. also after knowing this is not the journeys ens as nothing is a certainity in the market but just a probability where risk management is more critical than anything. when 1 instrument is known and one can trade it with a good risk mgt strategy...u can trade anything after that. so if u wish to know market....probably a free book may cut it.....then on the interest comes a big play of how one persevere's it.
. what one gets from the market comes with extreme perseverance, passion and intricate knowledge of the market by concentrating on probably 1 instrument. also after knowing this is not the journeys ens as nothing is a certainity in the market but just a probability where risk management is more critical than anything. when 1 instrument is known and one can trade it with a good risk mgt strategy...u can trade anything after that. so if u wish to know market....probably a free book may cut it.....then on the interest comes a big play of how one persevere's it.