Saturday, September 22, 2012

The road ahead

My frequency of posting has reduced in the past few months but rest assured, with the generous help from my small research team, I'm actively working on bringing several important facets of trading to light.

A small selection of currently active research areas are listed below:

Trading Channels:
One of the most important problems in price action trading is to trade channels using a small fixed stop without resorting to scaling-in or other poor habits. Since channels are common, this is a top research priority.

Predict tight days that aren't worth trading: Some days are extremely tight and on a day with a four point range with choppy overlapped price action, trading is dangerous. Predicting such a day early enables us to stay out and skip trading.

Predict choppy opens that are likely to result in stopped out trades:
Opens that otherwise look like potential setups may never generate a profit and may stop you out or enter a chop zone. Correctly detecting this enables you to skip trading until price action becomes more amenable to trading. This chart is the AM of the FOMC day that eventually led to a huge rally.

Predicting Breakouts:
One of the hardest problems in price action is predicting which bar would lead to a successful break-out. For example in this chart, b57 short led to a breakout while every other signal prior to it failed. A high probability prediction of a breakout enables us to judiciously enter a profitable swing trade.

And more: I'm also working on exiting losing trades for breakeven or a few ticks loss by detecting trade failure early. The setups 1Rev and 1PB have been further broken down into a small set of distinct setups that enable the trader to anticipate and trade them bar-by-bar. As soon as these setups complete the requirements of rigorous testing, they will be published here in a series of blog posts.


  1. Sounds great!
    Many thanks for sharing so much information with us!

    Obviously the testing is focused on the ES.
    Do you feel that the results will convert easily to setups for other futures/stocks?


    1. They should easily convert to stocks and other futures contracts. Note that each trading instrument has its own peculiarities with respect to stops required, profit targets, volatility, etc. These parameters need to be determined individually.

      Also, lower the volume, the lesser the signal bar reliability.