If you go back and read what i posted originally I said if the 10 min confirms the trade then so much the better, it was never hard and fast but certainly helps, this is a method, not a system set in stone, all I really tried to do with this thread was show how to use the MACD properly as so many traders ignore the zero line. I think it is the most powerful method out there and most of that power stems from it's simplicity, so when you start tearing it to pieces it loses it's effectiveness
If I may suggest something here. IMO if one wanted to position for a move and not simply react to it, he would be better of entering into a trade when 2 min MACD crosses its signal line en route to the 0 line. From personal observations 0 line cross entry, a lot of the time, is already too late. Opinions?
Thats exactly why I have proprietary indicators for anticipation, the hardest part of this thread has been trying to replicate those indicators, the 8 period SMA +2 is damn close and the 3SMA+2 which is amazing for re-entry in an established trend is spot on to the proprietary one I use
There is another matter of 10 min MACD @ market upon open. 10 min will fall behind 2 min on many occasions, so opportunities will be missed if one is to wait for 10 min MACD & signal to start registering either above or below 0 line. So ignoring 10 min MACD/signal perhaps the first 90 min of morning session could be an alternative, than again on other occasions futures start shifting before cash markets open, not easy to automate if considering the above.
Back test #3, with the entry/exit rules as defined by romik a few posts above. Results: 448 trades for a $4206 loss. Sample day:
What I like about this, is that you have a lot less trading going on. On another hand, as mentioned prior by T28 and myself regarding automation consider the following. Look at market open 2 min MACD & 2.50pm 2 min MACD. An ATS would disregard those 2 set-ups when a human might consider them as good opportunities for entering into a trade. I think this where an ATS will struggle, it's because it is so damn hard to program all possible scenarios, which can be considered and not disregarded.
OK, so in its simplest form, the method is: Buy when two following conditions are met: 1. MACD2(12,26,9) > 0 2. MACD2(12,26,9) > its signal line Sell short when two conditions are met: 1. MACD2(12,26,9) < 0 2. MACD2(12,26,9) < its signal line where MACD2(12,26,9) stands for MACD indicator calculated as follows: Fast EMA: 12 2-minute bars Slow EMA: 26 2-minute bars MACD = Fast EMA - Slow EMA Signal line: 9 2-minute bars EMA of MACD Is that right? If so, then I already backtested it in my first attempt (and yes, I know you don't believe in back testing).
If I wasn't anticipating the zero cross and using my discretion I would hate to see my account balance, how can you program things like watching order flow and price action? or discipline and psychology? impossible! so I don't really think you can say you've backtested the method, it will be different for everyone anyway, and the reason I don't believe in backtesting as a rule is because it is akin to flight hours in a simulator... they don't count!!!
Order flow is just a stream of numbers, so why is it impossible to program for it? Not sure what you mean by "price action", so I can't comment. "Discipline" comes free with the use of a fully automated system that places orders for you and does not require your presence - I have one running unattended. Don't know what you mean by "psychology", either, but there are sentiment indicators. Let me pose this to you. You are basing your trading on SPM and a combination of other factors, and you are profitable. However, SPM used by itself appears to be a consistent loser, no matter how it's spun around. I think there is a good chance that if you replace SPM with a throw of dice and keep your other (yet to be defined) rules intact, you'd end up more profitable.