I have done a lot of back testing which is
of limited value
I don't have the Autofib, or Market Profile
so what looks like half way up the screen
in real time might have been at the extreme
top of the Autofib, and what looks like
right at the top might have been halfway down.
We see what we see, and to quote the song
'and disregard the rest'
We can't afford to disregard anything in
Actually I've learnt a lot about back testing, I
would say its worth doing to get a broad overview
of whether a strategy is likely to be profitable
but it doesn't in any way compare to forward
real time testing and it can very easily lead
you into a false sense of security.
I have already uncovered a major flaw in my
current approach, which is OK, this is all I am
really doing, testing everything out, optimizing
as best I can - but only time will tell.
The original system is Divergence and enter after
break of trendline. By that time you may have missed
much of the move although usually it will move again
in your favour.
But I have found, and especially utilizing Market Profile
is that if you enter immediately Divergence appears
you are almost guaranteed 50 pips or more, but where
the Holy Grail falls into sin is sometimes a pair will just
keep on and on bucking every subsequent Divergence
that is printed!
This is where accounts are blown!
That's why you have the trendline rule.
Frankly, I'm a bit stuck on this one.
Getting in aggressively usually works but if it fails
two, three or four times you are in big trouble.
There is one option -
It seems I'm merging two systems in a way and
there is a conflict, or at least there seems to be.
Perhaps I should be trialing the two systems
separately and see how they compare over time.
I have already found TDI, whilst a great indicator,
keeps you out of too many winning trades.
Tick volume however does appear to be reliable,
at least in hindsight, but I wouldn't say its
indispensable or conclusive of anything, but I
will certainly keep it for the time being.
At the moment what is really resonating with
me more than anything is Market Profile.
But I can't believe it is as good as it seems
or surely everyone would be trading it.
Price does always seem to revert to mean,
to be drawn back into the 'Value Area'
and that makes total sense, to me at least,
as in tomato analogy - its all about auction
The danger of indicators is they indicate this
or that but not all of us have any clue what
it is they are really indicating
but I do at least get the concept of Market Profile,
when price strays from value it should return
to that zone.
Perhaps it is really a question of what is the system
based on. So far it has been an established
but I appear to be morphing it into a Market Profile
strategy with Divergence as confirmation.
It sort of reads this way - If price hits the extreme
of Autofib with Divergence that would be a very high
probability trade - but check with Market Profile and if
price is well out of value area it will almost certainly
return to that zone, usually to the Median line.
Actually I have a great deal of confidence in the strategy.
My real Nemesis is really money management. specifically
the x 10 Rescue trade
It seems to work OK on the original Divergence strategy
but its untested on the Market Profile version.
Here's the problem - I believe the Market Profile version
is far more reliable, but entry is far sharper, ie not waiting
for trendline break
Both MP price being out of value, and a trendline break
give added assurance - but you can't have both
Its a bit frustrating.
However, if you go the Market Profile route you may not
need the buffer of the 300 pip SL, which means you wouldn't
need the Rescue trade, and if you don't need the Rescue
trade at x 10 Lot size, then you can just trade the standard
1% per trade at maybe 1:1 RR
I would hope win rate would be better than 70% and when you
lose you just lose - next!
This is the whole point of keeping a journal, to keep testing,
adjusting tweaking and refining.
We don't know what we don't know.
This system will evolve. Currently I don't need it to be
more profitable, I need it to avoid sudden death
somewhere down the road.
If there is no danger of sudden death then I have found
the Holy Grail!
If I had a dollar for every time I thought I'd found the
Holy Grail I wouldn't even need to trade for profit!