I appreciate your feedback. Your comments actually make a lot of sense, as the highest point of anxiety in my trading experience usually comes at the time when I get conflicting signals from the 'model' and the price action. And the anxiety in turn leads to poor trading. I have been thinking about abandoning the model for some time, but have not been able (emotionally) to pull the plug.
Perhaps this perspective may help you pull the plug. By defintion, Price Action already includes input from all active models, strategies, and the expression of beliefs (or disbeliefs) from all discretionary traders, investors and hedgers. From both their actions of buying, selling, etc. and also sitting on their hands waiting. If you think about it, integrating your "model" in on top of all of this after the fact, actually gives the model too much weight. Because the model is in effect just recycling some of the same data that is already included in PA, right?
Correct. However, the initial idea behind the model was to get a probabilistic view into something that is not visible from the price action itself. For example, the model was designed to answer the question - when X, Y and Z events happen, what is the most probable direction of the market in the next 1 - 10 days. In this example X may be based on the price action, Y on implied volatility and Z based on price reaction to the recent news. The idea was to quantify the events that may brain may not be able to capture and miss, if was was looking at price / volume / breadth alone. Don't get me wrong, I am not arguing, but just trying to explain the logic behind the multi-level approach to market analysis. Switching to trading on PA alone, will required a major attitude change. I, unfortunately, came into trading with a lot of baggage from my education and regular job, which I am still working to undo. The major one is that there is "because" behind every price move and figuring out that mysterious "because" is the road to riches. Again, I appreciate your comments.
I can't think of one single thing in my own trading past that cost me more money than this. The problem with "because" is that in all other areas of life, it logically leads to "should" or "shouldn't". But not so with markets. It is pure folly to suppose that we can see into the minds and beliefs of millions of market participants.
As I mentioned in the previous posts, I am trying to automate my methods using my friend's help, and so far we did not make much progress, as we are really struggling with putting my trading methods in a computer code. We will give it couple of more weeks, and then probably abandon the project if we don't have a breakthrough. This week I was trading my discretionary methdology, but made some adjustments, partially based on the advice I got here (thank you, Slapshot): The adjustments were as follows: All trading decisions were made purely off charts I put the 'model' on hold (my wife was updating it to keep it going, but she was not telling me the outputs) I did not read a single piece of news during the week, not Wall Street Journal, not Bloomberg, ... nothing (I am planning to catch up during this weekend) I stopped reading all my favorite financial blogs I did not visit ET or other forums for the whole week until now It is early to tell if the performance improvement was a result of the changes mentioned above or just random luck, but I am willing to continue the experiment for at least one more week. I had a positive week - account is up ~ $8,500 or 11%. The week started with a loss of approximately $4K; I went short before the close on Friday of last week, and covered on Monday morning. In retrospect, taking a short position at the end of last week was a good bet based on my methodology; however, the exit was a disaster. I got distracted (I have a full time job) and the price passed my mental stop loss level by approximately 6 points. Because it was "stop and reverse" setup, my total opportunity loss was 12 points on 10 NQ contracts or $2,400. Other than that, I did not have any more losing trades during the week.