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It's a good article. For an in-depth look you can read Evidence Based Technical Analysis, the author explains over multiple chapters how and why backtesting and data mining are both a blessing and a curse.
It's important to understand that data mining is useful, and backtesting is pretty much required. But it's also important to understand the critical importance of out of sample testing and selecting results that have the highest probability of performing well in the future, not in the past.
Most people backtest and select the resulting set of rules that yielded the highest net profit in the past. It's pretty worthless for forward trading, or out of sample. People don't really seem to understand that until you start to see it in action, but the book I mentioned above does a good job of explaining the "why" not just telling you an opinion of why it doesn't work.
I have a May RUT iron condor and the advisor suggested our closing the call spread this morning with an estimated loss of $95/contract ($1.5 to close the spread for an initial premium of $0.55). Now that I know a little about Market Profile, I went through the value areas of the past week or so on TF. It's definitely on an uptrend. I could have closed the call spread earlier say @$1 to minimize the damage oooooo.
Well, this morning TF opened within the value area before going down. When it started to trade back within the value area on the 2nd 30-minute bracket, I expected it might go further up to touch the previous day's VAH (value area high). I grasped the chance to close my RUT call spread @1.25 which's a little better than $1.50 ($25 saving).
If I understand the 80% rule strategy correctly (Scenario 5 + Trading with responsive mind frame today for TF), there was a long opportunity which was also confirmed with the 4R set-up per enclosed. It's good for 10 ticks ($100 for 1 contract). Notice the subsequent short was not confirmed by the ADX indicator (Panel 3 on 4R).
To follow a smaller timeframe set-up for entry maybe a very conservative approach as one may just use an osc indicator for that purpose. I need to explore this further.
Will cover ES and my next move in another post. Thanks.
For ES, it opened below the previous day's value area and was able to hold low on the subsequent 2 30-minute brackets. It's Scenario 4 (same as Scenario 1 but opposite direction) and Short trades only.
You will notice from the 4R chart (ellipses) that one may not go short as ADX on Panel 3 was green, the only indicator not aligned with 2 short opportunities.
I will probably get the answers (what to use for entry after 2 30-minute brackets were completed) from this Sun webinar.
2. SuperTrend
No trade this morning.
3. Atlas Line
Almost forgot to mention I have removed it from my monitoring list. It may still be a good indicator. Its uncertainty has prompted my decision.
My Next Move:
1. Continue watching the remaining hour of the MP video (did finish 2/3 last night). May watch it a second time as it's quite educational.
2. Do a weekly recap on the 2 YM strategies.
3. Market replay a Confluence Zones indicator and decide if it may add value to my set-up.
4. Look forward to a fruitful Sun afternoon as Ben/Big Mike will be facilitating a MP webinar.
Thanks for your question mea109. I waited until completion of the first 2 30-minute brackets to determine which 80% rule scenario/strategy to use, ie Scenario 5 and Responsive mind frame for TF. The first trade opportunity was a long around 10:30 am and not before.
If one only uses Perry's set-up, he/she may follow the early signals.
I have a 2nd thought on the first TF trade. According to the enclosed 2 Bracket Rule, if the 2nd 30-min bar opens inside the value area, the 80% rule is satisfied and NO NEED to wait for the completion of the 2nd bracket.
Regarding your 2 TF trades before mine, I estimate the 2nd one (not the first one as it's before 10:00 am) may fit the 80% rule IF it was triggered after the 2nd 30-minute bar opened..
Thanks again for your raised question as it definitely reminded me of the subject!
I did 1 sim trade (discretionary method) this morning based on MP NTR (Natural Trading Range) with Perry's set-up (I continued using the first version with SMA 40 for trend direction).
Goals Accomplished:
1. Trade Management: Did let the 2nd contract run a little before closing it with 6 ticks profit. I struggled a little if I should let it run longer regardless of warning signals since the first contract was an 8-tick winner. Bearing the Preserve Precious Capital goal in mind, I chose to close it even it did get up another 9 ticks from my exit. Bottomline: I'm happy with $165 net after commission on 1 2-contract trade. Will be very nice if it's real $$ .. haha ..
Note:
1) I have the previous day's VAH 1197 as the PT for the 2nd contract while the first hour Initial Balance was still plotting.
2) It's Scenario 5 this morning as Price opened within the value area.
After reviewing my YM strategies (combo of The Wizard, d9 and futures.io (formerly BMT)) over the weekend, have decided to stop sim-trading them. Instead, I used the enclosed to sim-trade YM this morning (only for a 45-minute time span). It's a profitable morning with 3 trades (2 winners and 1 loser). Will run it for a while and see .. haha ..
Hope you won't mind my walking through what's in my petite head on what could be a MP trade (complement with Perry's set-up for entry) for YM. It's a late one (in my mind) as it's after 12:00 noon before we got a Long signal.
Based on the 80% Rule Strategy:
1. Scenario 5: YM opened within the value area and it's showing signs of a balanced market.
2. Trading from a responsive mind frame, ie price has to break up or down the Value Area (between 11030 and 10932 based on previous day's session) and gets rejected. Then we enter after the break and rejection. I learned from Sun webinar that it's "fading the extremes of the balance areas".
I'm done with my MP/Perry's practice. Will watch a MP video a second time. Also plan to start reading the Mind Over Markets book this week.
Platform: market delta, multicharts, no matter how hard i try not too, i still use ninjatrader
Broker: amp/zen
Trading: cl,6e,nq,tf
Posts: 128 since Oct 2009
Thanks Given: 268
Thanks Received: 27
Hey Beth, Keep up the good work... Hey would happen to have the zip for that TS supertrend V2 - Thought I had it, but cant find it - I think mine is the old version... thanks
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