Microstructural phenomenons: pre-testOn the chart, Oct '94 is a pre-test of 92.26
I'm not sure it's a good example here, but it'll suffice to explain this easy concept.
Again, it's not the system's behavior principle, the reason of this microstructural phenomenon is all of us.
Forgot to mention before...
There's no such thing as, "A new wave started after "almost" hitting a level". NO. In 100% cases, a level should always be touched. because cheap/expansive is always 1 tick past the level, the main responsive activity will be concentrated after the level, never before.
However, some of us sometimes gets a lil heavy handed in scaling in/scaling out of the previously acquired position. That's why prices start to react (sometimes quite strong) in front of the level.
The main things to learn from here:
1) Pre-tests are not the systemic events, if you're responding at a level / a lil deeper past the level, nothing had changed for you at this points;
2) If you started to scale in before the level and got caught in a pre-test, just simply close your position with whatever revenue this pre-test offers a lil bit later and start scaling in again like nothing happened;
Caution: pre-tests are also a part of the recorded market activity as everything else, during which the things may change or may not change. Pre-tests should be taken out of the context and be processed as independent entities.
Test
How to Backtest a Trading StrategyBacktesting is a manual or systematic method of determining whether a trading strategy or trading setup has been profitable in the past.
A trader should backtest a strategy to help determine if a trading strategy is likely a waste of time and money, or if it shows promise and profitability in a variety of markets.
While you can get software that does systematic backtesting… we prefer manual backtesting as it can be carried out by any type of trader,
It is a key component in developing an effective trading strategy. There are infinite possibilities for strategies, and any slight alteration will change the results. This is why backtesting is important, as it shows whether certain parameters will work better than others.
What Do I Backtest?
The first thing to note is that you don’t need a full trading strategy in order to start backtesting.
For example I personally am always looking at new trading setups and candlestick formation and then backtesting them to see how effective they are.
You can test small parts of a trading strategy before putting them all together.
And of course you can and SHOULD backtest your whole trading strategy in a number of different trading situations.
How to Backtest
1) You need data to use in testing… if you are testing short term strategies on small timeframes then use at least a few weeks of trading data.
If you are using higher timeframes then you should be using years of trading data.
2. Define the strategy parameters. Entry conditions, exit conditions etc. Include as many “If X happens then I will do Y” scenarios as possible so that your strategy is repeatable.
Its essential to include risk management in these parameters too. So decide on if you are risking a percentage of your account equally on each trade, what is that percentage. If you are managing your risk in another method, clearly define it as something you are able to measure.
ALL OF THESE PARAMETERS ARE WHAT YOU ARE MEASURING AND TESTING. THESE ARE THE ELEMENTS THAT YOU CAN CHANGE TO SEE WHICH ARE MORE OR LESS PROFITABLE.
3. Use the TradingView rewind tool to go back in time and remove the predictive nature of knowing where the chart will be headed.
You could go back in time and look for trades from a year, a month or a week in the past, depending on how far back you wish to look.
4. Analyse price charts for entry and exit signals. This can be done until all trades on the chart up to the current time have been located and marked or written down
(be aware that it can take some time and be prepared that you are unlikely to be able to do all of this backtesting in one session… it could take you a few sessions of backtesting and recording the trade outcomes to fully test a strategy.)
5. Once you have competed this process, then you can start to total all of the trade results up to see how profitable or unprofitable your trading strategy / setup has been over time.
What Goes Wrong in Backtesting
Typically the pitfalls and the ways that people fail at backtesting are based around not being through enough.
That could mean that people haven’t included enough data in the backtest.
It could mean that they left too many unknowns in the strategy so when using it in a live trading situation the strategy isn’t usable or realistic.
Also it could be that people don’t back test for long enough to see if the strategy is profitable or not. If you only have a small sample size of trade then even a short losing or winning streak of trades would dramatically affect the results. You need enough trades to show winning streaks, losing streaks and all between so that you can be confident that your strategy will be able to withstand those situations in live trading.
Imagine for example in your backtesting your strategy didn’t lose more than 2 trades in a row but when you start using it in live trading you get 5 losses in a row. This is a situation that hasn’t been tested so could show a different result.
The goal is to backtest for long enough and through enough so that nothing in live trading hasn’t been tested previously. While it may not be possible to fully achieve this… it should be the goal and you should feel confident enough that you have done everything possible to ensure this is the case.
Indicator TutorialSymbol: NASDAQ:NVAX
Indicators
Upper: Delta Volume
On Chart: ALMA x2
Lower: Laguerre RSI
Comments
1. Look at the Large Volume Imbalance and how the price trended after.
2. The widening separation of our Moving Averages.
3. Bottom Indicator Showed Bearish Trend Continuation...
Option Choices
1. Sell Covered Call (Collect Credit)
2. Buy Put (Pay Debit)
3. Sell Call Credit Spread.
4. Buy Put Debit Spread.
Your Ultimate Trader Personality Test! Would You Pass It?Here is a test that you can start with to know if you are psychologically ready to become a forex trader.
1- Do you get angry when you lose a game? Do you seek revenge?
If yes, then chances are you will get even more emotional when you lose a trade especially that your money is at stake. Moreover, you will blame the news, president trump, your strategy, or even your friend who called you while you are monitoring the trade that lost.
If you’re going to be a successful trader, you will have to learn to love taking a loss. Of course, you are not going to be happy to have a losing trade, but you will understand that losses are part of the process and you should be happy to be out of the market when the trade no longer represents a profitable opportunity.
Revenge trading comes from one thing and one thing only, blaming the market for your loss. But let’s think about this realistically. Who is responsible when you have a loss? Of course, the correct answer is you.
The market didn’t cause you to have a loss. Then when you seek revenge for the loss you received, you are actually trying to get revenge against yourself.
The best fighter is never angry. ~ Lao Tzu
2- Do you think you are always right?
Ego always wants to be right. In the markets, we as traders are not seeking to be right or wrong; we are seeking to make money.
Your ego is your biggest enemy when it comes to trading. Because when you get too confident in your trading, you will not follow the rules as per your trading plan when believing that you are too good and that most of your trades will end up winning no matter what.
If you let ego control your decisions in the markets, you will end up in a pool of losses with nothing learned but psychological and emotional pain.
If you know a trader with an ego through the roof, he is not a trader, you may call him analyst, or instructor, or even a scammer, but not a trader.
Know what you know and know what you don’t. And no matter how good you think you are, remember to stay humble, for if you don’t, the market will do it for you.
3- Do you fasten your seatbelt every time you drive?
If you don’t fasten your seatbelt, means that you think that you are too good to make an accident.
Hopefully, you will not make any accidents, but we both know that one accident can ruin your life especially if you weren’t wearing a seatbelt.
We would rather call ourselves Risk-Managers not only Traders. As the only thing we have control on is our risk. The market can go anywhere.
Professional traders think Risk, not Reward. No matter how good is your trading strategy, if you don’t manage your risk well and find ways to put the odds in your favor, you will not make it in trading.
Trading without a stop loss is like driving without your wearing a seatbelt. One trade can blow your account.
4- Are you a follower?
As a trader, you should never copy or follow blindly other trader’s analysis on social media or trading networks.
You chose forex to be your own boss, why do you insist on being a follower?
Moreover, do not doubt your strategy, entry, just because your fellow traders offline/online disagree with your position direction.
The odds of being right aren’t with the crowd.
The only way to make money, in forex or trading in general, is to trade by yourself and to be in full control of your account by following a well-defined trading plan that you implement objectively like a robot.
You’re the one in charge of your trading. You alone are responsible for your success or failure as a trader. It is not the market… nor another trader… nor the trading system… nor the government or its news releases that are responsible.
Develop your own trading style that suits your personality, time, and expectations and follow it with full focus.
“If you don’t design your own life plan, chances are you’ll fall into someone else’s plan. And guess what they have planned for you? Not much.” ~ Jim Rohn
5- Can you wait for the green traffic light?
To achieve success in forex trading, the first step would be to develop a good trading strategy with well-defined set of rules and to follow it objectively.
Having the discipline to follow up your trading plan/rules is the surest way to build your trading career and make consistent profits over the long term.
Self-discipline is NOT a trait that you are born with. Anyone can practice self-discipline, but it isn’t as easy as it sounds.
“Just like Rome wasn’t built in a day”
Nobody becomes successful overnight. It takes time, strategy, discipline, and consistent trading until your efforts pay off.
The market pays you to be disciplined. Be disciplined every day, in every trade, and the marker will reward you.
If you decide to trade without any rules, I promise you will not be successful.
Freedom is good, but you need to have what I call “structured freedom.”
6- Are you usually committed to diet/gym? Are you into long-term relationships?
The successful trader stays focused and sticks to his system/methodology.
Just like you get married. You chose to spend the rest of your life with your partner, knowing that you may find someone better, smarter, more beautiful… but you are done searching. (Unless you want to cheat on your partner)
Stop searching, for new methodologies. If your strategy is profitable. Then focus on it, master it, and repeat. You have got a money machine.
Do not change methodologies week after week.
Have you ever been in a marathon or planning to? Consistency and Determination is the key.
Choosing to learn from your own mistakes rather than giving up is what determines a winning mindset.
Just like trading, you pace yourself to win the long-distance trading race.
Successful trading is supposed to be boring.
7- Do you finish your popcorn before the movie starts?
For example, if you are not usually patient as a human, chances are, you will not be patient while trading.
As a trader, 90% of your time is waiting. That’s why you need to be patient.
First, you have to wait for the setup to form, and once you are in a trade, wait for your trade to hit stop loss or take profit.
“The stock market is a device for transferring money from the impatient to the patient.” ~ Warren Buffett
In brief, everyone can be a forex trader, but not anyone. Successful traders are made not born.
To be a successful trader, you need to work on developing yourself as a trader in many aspects like risk management, problem-solving, flexibility and trading psychology.
To be able to work on your trading psychology, first, you need to start from the core and work on your human psychology.
Thank you for reading the entire article.
You are awesome!
~Rich
💡 TEST 💡
Result. Psychological profile:
🔥80-100🔥
The invoice indicates, that your trading ideas are incompatible with the daily trials of this business. Perhaps you should reconsider your views on intraday trading and your motivation. That can be done by systematically eliminating your negative misconceptions about trading. Return to the questions and try to answer them again, noticing those points where the answers have changed.
🔥60-80🔥
The account indicates that you have an idea of trading as a long-term trader. You should develop a style suitable for deals lasting from 3 to 8 weeks.
🔥40-60🔥
The account indicates, that you have the perfect psychological structure to become a short-term trader, or work as an intraday trader. You seem to have an aggressive nature, that can handle the emotional vibrations of this job.
🔥20-40🔥
The score indicates, that you may be too short-term in your forecasting horizon, which can lead to hesitation in decision making. Perhaps you should develop an effective trading tactic, that you could believe in.
🔥0-20🔥
The account shows, that you are too extreme to trade. To succeed in the field of trading, you should work on analysis and forecasting. This can be done through visualization, goal setting and results planning.
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