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Market Profile: The Secret Sauce To Mechanical Strategies?

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ok, so just curious others thoughts on this particularly those who have written mechanical strategies.

 

if you can write a very simple strategy, and it comes up as 51% of trades profitable and say +$20 per contract per trade (say its for ER2). and say you have only 1 filter in it... ie, don't trade first 30 mins or last 15 minutes of day...

 

So Here is the plan I have been executing;

 

1. Use some simple mechanical triggers with stops (optimized in the strategy) to give a few buy and short signals per day.

 

2. Use some 'trade location' logic via Market Profile as a discretionary filter to help choose direction (ie, go with momentum vs counter-trend trade).

 

3. Use some good pattern recognition as a discretionary filter (reversal times of day, taylor trading, bull flags, coils etc...)

 

4. Target just a few trades a day

 

5. Avoid real low volume days and other narrow range days..

 

6. Add some non-quantiative trading savvy

 

Take this process and make a living.

 

This has been working for me. Is it sustainable over the long-run?

 

It feels like 'trade location' via Market Profile is the secret sauce to making a strategy go from 51% profitable to something significantly higher than that. Moreover, any strategy using 1 simple driver with 1 filter in one time frame that is profitable over thousands of trades is pretty easily improved upon.

 

 

discuss....

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I had once developed a pretty sweet system on the ER2 for trading via value area levels depending on where price opened in relation to the POC. I haven't traded it nor looked at it in a while since ER wasn't my cup of tea, but it did do pretty good.

 

At 20 bucks per car per trade on ER, what are you risking? Thats just 2 ticks. For me, I'm no scalper at all...too much stress for me to deal with...so holding out for maybe 2-3 points on the ER is more like what I'd want to see happen.

 

So I guess Im not quite sure what to discuss...but that's what I've done in the past.

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sorry if wasn't clear. Not targeting 2 ticks. the dumb mechanical strategy with 1 timeframe is on AVERAGE profitable by 2 ticks. Target 2 points on this particular strategy... optimization came out target 2 pts, 1.6 pts risk...

 

the point was more questioning if that is how others think about this... if you can develop simple strategies in a single timeframe that are just breakeven over thousands of trades with no outsize winners skewing the results, you should be able to make that system profitable through filtering out trades that are triggered mechanically that have bad location or some other problem. for example, this particular strategy was 2-5 yesterday while I was 2-0. volume was awful yesterday so you could say that maybe you couldn't do much with the strategy signals and just skip them or you could do only pristine set-ups or you could still take them all and just do them in smaller size. (that said, I should have taken the last signal yesterday, moved stop to breakeven for globex and held overnight for big win...)

 

I started the thread just to see if others think like me on this subject: using Market Profile (trade location filtering) to super-size your mechanical strategies? maybe not many profilers think like that though...

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I had an idea to use trendlines 1 tick above the previous bars value low area and 1 tick below the previous bars value high area to enter trades long and short as an automated system.

I use Tradestation and I have tried several times to plot the trendlines.

So far, no luck. I have to draw them in by hand.

Here is a screen shot of the British Pound showing what happens when I try to draw the trendlines into the Tradestation Market Profile Activity Bar using Easy Language. It looks like a Gann fan.

The second screen shot of the Euro shows the Tradestation color trendline strategy I use to enter using the manually drawn trendlines.

5aa70de0b6e9a_@BPMARKETPROFILE.jpg.9018622c7f3c9e50de03cf455fa38992.jpg

5aa70de0bcc0f_@ECMARKETPROFILE.jpg.1f73f63db6049170bbe3e606b12c3577.jpg

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I should explain that the reason I draw the trendlines is to mark off areas of support and resistance. The long trade will be exited when the price trades up to the yellow trendline and a short will be entered if the 60 minute candle closes above the dark red line.

5aa70de0c159e_@ECMARKETPROFILE2.thumb.jpg.a53b96b1f379ced7a5c876bbd6ebd2a0.jpg

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