But, overall, this is a good read. I think many of my old timer colleagues can appreciate your questions, as well as how straight forward and honest you are.
What instrument are you trading? Is there a micro contract for it? I see in another post you wrote you are a discretionary chart trader, so for forward testing trade the micro if it exists.. A little skin in the game with micros will make the testing much more realistic and enjoyable vs. purely simulation.
You need to test. I think that this strategy will most likely not work in its pure form. You will need to correct it.
Not all systems will work on different time frames if they are NOT chart based. Like I have a tick system but it will not work on any other timeframe and I have system that works on monthly data which does horribly on daily timeframe. My systems though that are chart based can be conformed to other timeframe, support and resistance doesn't change much with exception of time requirements. Whatever you are using on larger timeframe, perhaps your parameters are too tight and not giving enough opportunities. Instead of going much lower timeframe, I would try half existing timeframe to generate more opportunities. Do if using dailies, try cutting day in half or thirds. Commissions can really eat into profits hugely. I average down on all my models cause I designed them this way, but also done extensive back testing. And longer term time-frames are hedged.
Price Action: 1) PA is static as in charts that have already been drawn. And it is dynamic, i.e. charts yet to be drawn and how they are become drawn. In the latter what is important is the “how” they were drawn. The former serves to glean visual ideas for possible strategies and tactics and is the extent of possible backtesting on PA. 2) It is nigh impossible to code PA. 3) It is nigh impossible to backtest PA other than the visual backtest as mentioned above. See ….the “dynamic” throws the monkey wrench into the test. Every time. 4) PA consist of principles to be learned about price movement. Concepts about price movement. 5) Setups are a sort of tactical mechanisms for entry and exits including SL’s to be deployed within PA principles. But they are uncertain, and needs be, by nature. Because they are employed in uncertain PA. Everybody is looking for the elusive certainty tgat simp,y cannot be found. The gurus harp and harp..”sure fire system…backtest 5 years…easy $$$…buy now..but wait…if you buy within the next 10 minutes…bonus # 1 bonus #2 are yours, absolutely free! Don’t miss this once in a lifetime offer! Hurry! Call that number on your screen! Now! As much as traders long for certainty (if I do this then this will happen) and guiding rules carved in stone, it is a fleeting goal NEVER to be fully obtained. That is right I said NEVER. 6) PA is a fog we “learn” to navigate in. We do not know whence the fog came nor how long it will last, nor how thick it will be. We can only watch the “dynamic” as it unfolds and adjust our navigation upon what is happening. 7) Why is PA a fog? Why can it not be backtested? Why can’t it not be boiled down to concrete rules for entry..exits..and SL’s? Because of the innumerable variables inherent therein. 8) PA ALWAYS draws breakouts, ranges, channels, trends, pullbacks, wedges, triangles, flags…etc. and other patterns. 9) Every chart will have any number patterns or combination of patterns of number (8) above. 10) BUT NOT ALL ….BO’s are the same, dynamically, as they are happening. Not all ranges are the same. Not all PB’s are the same. Not all wedges..triangles..flags…etc are dynamically the same. Not all SL’s can be the same nor work the same because of the dynamics of “how” PA by it’s nature, tends to be. Coding PA is nigh impossible. Certainty in PA is virtually impossible. Trying to backtest PA is unachievable…and a waste of precious time and energies. IMO a cursory visual glance of a static chart can serve as a guideline to the extent of possible backtesting that can be done on PA. That is a sort of visual backtesting. For the purpose of gleaning “possible”, workable setups. But there are just too many variables. There is entirely much fog for backtesting of PA to be a feasible activity? Too much uncertainty. Too many players. Therefore: 11) The best we can do is glean and learn how to respond in the dynamic as things are happening. 12) As concerns watching a single market or several: much of that concept depends on what kind of trader one is. For instance, as a scalper of 1 to 8 points in the ES I see plenty of trades to be taken; everyday. Nary a day goes by that one has to set on their haunches waiting. Not if one has a toolbox of tactical setups to deploy as the dynamic is unfolding. Do I use a screwdriver right now in this market? Do I use the vice grips? Do I use an open end wrench? Do I use a skill saw? A chain saw? A saws all? Do I average down? Is the dynamic indicating scaling in on a losing position is a probable good tactic, given the context of static PA even as the dynamic is unfolding. Does the dynamic imply that scaling into a winning position to be a decent scenario (as employing such a tactic can fail as often as it can succeed) as doing so can even work against a trader? Looking at the static (the chart already drawn for the session) and the dynamic (how it is being drawn) where do I place my SL? Do I move my SL’s or leave it? I know…I know..the gurus say never move it. Never average down…always scale into winning positions. Press the trade! (whatever that means…LOL) ….incessant echo’s thru the trading universe, never to be quieted. 13) IMO IT IS MUCH MORE BENEFICIAL to spend one’s energy and time developing tools to employ as the markets unfolds dynamically. I will often change my mind and on a dime, exit and turn, doubling up in the opposite direction, because of the dynamics taking place at the moment. Yes, I will employ tactics and strategies based in a large part upon static charts, using those as mechanisms to spot possible setups, entries, exits and SL’s but the dynamic…the “how” that price is being made and the “how” the chart is being drawn is of upmost importance to me. As to whether I will “stay the course” or change my mind even doing the opposite, or perhaps moving PT’s…SL’s…or just plain getting flat and waiting for more info. I DO NOT BELIEVE IN NOISE IN THE MARKETS NOR DO I BELIEVE I CAN BOX THE MARKET IN WITH A SET OF RULES, OR PLANS. I believe there is a reason for every movement whether it be 1 tick or 100 ticks. That doesn’t mean I can always know the reason but by correlating the static with the dynamic I have a better chance at deciphering what is happening, the why, and the probabilities of the direction for the next scalpable move. I believe I must have several tools at my disposal and the skills to use them. I believe I must be flexible to change on a dime and employ a different tool, and lay one aside, even if only for the moment. Such is the modus operandi of a scalper. PS …most don’t define scalping as 1 to 8 points like I do on normal days and 1 to 12 points on more volatile days but that too is a matter of opinion!
Just be aware that most find it very difficult to trade along both a longer & intra-day time frame. It can be done & can create a good synergy but sure does not come easy. Just don't forget to always keep the main thing the main thing. Day trading is like trying not to get pulled over by a cop tailing you at 2am after smoking crack & heroin - your often in flight/fight mode which triggers the monkey side of the brain to take the wheel & compound dumb mistakes beyond belief. I do both swing & day.. depending on the market conditions & my mojo.
Hello volpri, I absolutely love your post on price action, and I trade price action as well. It is for sure a daily grind and alot to think of a game of probabilities. Your words are wise. Thank you. I wanted to comment on your post about the challenges of being a discretionary price action trader. Or just discuss a few things or my challenges. 1. The future uncertainty: The challenging part of price action is that it is very subjective. For example, how does a PA trader know if they are doing the right type of trading that will reward him/her with profits at the end of the year. I psych myself out from this unknown foreseeable question by saying to myself repeatedly before clicking buy or sell, what is the probability of a win vs a loss. Then I pull the trigger. This helps.