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This is my 1st post so please bear with me if someone has posted similar questions. I have been trading ES mini Futures on a demo account with AMP for the last 1 month. I am using Multicharts.net. I am chart pattern trader and have traded stocks and FX in the past. Can someone please let me know if the DOM and volume profile in multicharts.net are good tools to use in order to succeed in this business. From this forum I know some people are using Jigsaw. I would like to know what external tools provide the "edge" other than trading based on candle sticks and chart patterns. What is the formula to succeed in this business besides hard work and lots of time in front of the computer analyzing the market ?
1. Get some raw data for your instrument. Get this as granular as you can. 1 tick bid - ask price levels preferably.
2. Analyze the data to find various ways you can enter and exit based on different rules. Consider these different types of bets. Sometimes you can leverage a larger stop loss with a smaller profit target, sometimes you can use a larger profit target with a smaller stop loss. Test different order types, analyze what not crossing the spread can do for you, and play with crossing the spread as well. Determine at least 5 different bets to start with such as: When x occurs, do y, if y occurs do z, etc. Test this like a scientific hypothesis and see if you can find any bet that wins on a consistent basis. I find it much easier to test ten, twenty, hundreds of different if / then types of scenarios in excel vs. running simulators using trading software. This will at least get you thinking about what edges are really out there in the data.
3. Figure out mechanically how you could apply some of these tests to a real trading environment. (I.E reverse engineer your betting logic into a real trading system.)
4. Define your winning / betting formula for trading. It will look something like this:
When x occurs do Y, When Y occurs, do Z, etc. This will produce the follow expectancy tree.
A: % Chance of Winning
B: % Chance of Losing
C: Ticks gained from Winning
D: Ticks lost from Losing
E: Commissions and Fees
F: Slippage / Toxic fills
As long as the net total expectancy at the end of your decision tree is positive and exceeds your commission cost per trade, you have a winning strategy. This would be the proverbial formula you are looking for.
I don't believe that any tools out there that analyze the market, be it DOM tools, chart tools, indicators, or anything will help you built your own decision tree model, and this is precisely what you need. This will take you a lot of work, and you will need to run lots of simulations to find edges, but they are there. Once you have a found a trading decision tree with a positive expectancy, you can use "tools" such as DOMs, charts, indicators, etc to try to help you achieve the mechanical entries and exits that your strategy needs. But these tools alone will do very little to help you uncover a system with an edge in the first place. For this you need a process that involves very hard core analysis and there are no shortcuts, no free lunches, and there is nothing that can shortcut this process.
But for those that follow this type of process, there are serious edges that are out there than can be used consistently for profits.
Best of luck!
Ian
In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
Thank you iantg for your reply. Your comments are greatly appreciated.
I have started trading ES for the last 1 month on a demo using multicharts.net using AMP. How can I get the raw data for ES. Do you have any links or web sites that can guide me on the 4 step process you mentioned.
I use Ninjatrader myself, but the coding syntax to extract raw data from the ES should be similar on any platform.
Here is how to do it in C# / Ninjatrader. I Believe MultiCharts.Net uses C# as well, though some of their core libraries will likely have different naming conventions for some of these.
In NT: We just run this code on the OnBarUpdate Event, and set the tick size to 1. On any other platforms there should be some event handler that runs everytime a bar is printed, just set the bar type to tick and the size to 1 tick... Or as granular as possible.
All the code is doing really, is just collecting the bid / ask prices from the current bar and holding these values in a couple of variables (LastAsk and LastBid) Once the current bid / ask price level changes, the variables holding the previous values will not be =, this queues up the code to run a print statement, extracting each unique price level as they change over time. This logic is very simply and it prevents duplicate price levels from being printed. If you run it on a 1 tick data series, then you can capture every single price level change. This is what you want, because with this, you can see all the granularity that is often lost in charting tools.
So to get this up and running on another platform, you just have to find the native equivillant to:
GetCurrentBid / GetCurrentAsk
Everything else should be the same.... I am not sure how other platforms handle printing output, but NT, allows you to print output directly from your code to an output window.
This should get you started.
Best of luck!
Ian
In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
