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You try to be scientific where no such thing can be easily applied. To start with, do you know that minimum number of trades that is required to be confident with an error x% that some backtest result is statistically significant and what assumptions must be made? Backtesting is a hideaway for those who cannot trade the tape.
LOL......you must be very, very old. I think paper tape was replaced by electronic data transmissions perhaps 30 to 50 years ago. Trading the "tape" is for the folks who lack the analytic skills to model the market. But one method that might work is to lay the tape on the ground and then eviscerate the duck over it. Symbols that get duck entrails on them are long term buys, a little blood is a short sell.
I think - but I am not sure - trading the "tape" in modern times mean trading with one of these two : the DOM and the T&S. Very few skilled traders can be profitable trading the "tape".
Wow, this thread is getting a little chippy. Obviously, there are different trading styles for different people. But still, to outright dismiss backtesting and a scientific approach to trading as a whole seems a little short sighted. Insert Renaissance Technologies as Exhibit No. 1 in this argument.
The dismissal of science and statistics is common in many areas and is usually done to insulate current patterns, possessions, skills from the need to change. For example there are folks that will tell you that Climate Change Mitigation is a Communist plot.....err perhaps a Muslim plot while they worry about the cost of a new sea wall and beach sand replacement in front of their summer home in the Outer Banks of North Carolina.....which will likely wash away in a decade or two of sea level rise. The "Tape Reader" is likely someone who has survived so far in the world of trading and fears that humans are being replaced by models, algos and deep learning machines. So deny the reality you don't like. Note: duck entrails do have a p value grater than 0.02, so there is hope.
Please, learn first what "tape reading" means. It is the most advanced style of trading. Courses go for $20K+ and you may not be accepted depending on answers to a questionnaire. backtesting is the poor man's way to doom. backtesting is not scientific because experiments cannot be reproduced. It is hypothesis making. Do not frame hypotheses because sooner or latter you will pay for that in the markets. Just a friendly advice.
I love those courses where some guy will charge you $20,000 or $30,000 for the secret to making a fortune in the market. There was a guy named W.D. Gann who used to do them...became a kind of financial cult leader, with astrology and magic numbers based on the law of vibrations. Of course when you apply a bit of math and deductive reasoning you end up concluding with 94.3% probability that the only reason these seminars exist is because the $200,000 the guy makes for running it twice a year is a lot more money then he can make actually trading the market. I have over 50 lbs of printed material and handouts from such courses, including W.D. Gann's, where the secret is revealed and success guaranteed. You pay the UPS change and the box is yours. Save yourself $20,000. For those who don't have time for reading 50,000 pages, I will be offering a seminar on March 15, 2015 at the Holiday Inn, in Fargo, ND. The seminar runs between 10 AM and 11:30 AM and will reveal the greatest long secret trading method of all time: DTET. In DTET (or Duck Tape Entrail Trading) market selections are made by eviscerating a duck over the Wall Street Journal or Financial Times. The position of the intestines indicate future market winners. The cost is only $19.99 if you sign up before midnight. Note: you must bring your own duck.