Automate Price action, candles and tape reading

[wrbtrader]

..one of my friends who trades NQ future based on 1-minute chart makes 300-500k USD consistently over 10 years. I guess his sharpe ratio is around 4. If his method can be automated, his strategy can be applied to all liquid instruments, over all time-frames, then the profit would be easily more than tens of millions...

If his trade method was automated does not imply it will be profitable in all liquid instruments, over all time frames and result in 10s of millions of dollars.

More importantly, if it was true for your friend, he would be doing exactly that if his method could be automated. Thus, your friend would be using an automated trading system in all liquid markets in the world on all time-frames from second charts to monthly / yearly charts.

Reality, its not automated and it wouldn't be applied to different markets because of the different market context for each of those markets. For example, the dynamics involving the U.S. Emini NQ futures is not like the dynamics of the markets in India (NIFTY futures), does not have the same dynamics as Europe's Eurex Fixed Incone BUND futures nor does it have the same dynamics as stocks on Brazil's BOVESPA exchange...end of story.

In contrast, a profitable automated trading system for the Emini NQ futures would be expected to perform well in the micro MNQ futures and other Emini /micro futures.

wrbtrader

 

[trend2009]

mr trend2009
to your posts last question - . . .automated? i say yes i do think so.

my question for you is - can your friend teach you that very last bit.
that part about - then enter on breakout.
nothing else, just that part.

ask him if he can teach you that last bit.

if you'd like to follow up on that, reply with his yes response.

he is quite open about his trading method, actually, he not only shows his trading records, but also explains why he enters and exits at that point. his entry is mechanical, i.e., 1 cent above breakout, stop loss is 1 cent above breakout on the other side. for every trade, he calculates his profit potential and his loss. when the ratio is above 2, he takes the trade. All in all, his method is classic, head-and-shoulder, double bottom, etc. the core of his method is to use classic patterns to discern trend, that is the only discretionary part in his trading strategy.

Actually I asked him why he did not code his method, he said it could not be done due to the discretionary trend determination. but his trend determination is purely based on chart.

 

[trend2009]

If his trade method was automated does not imply it will be profitable in all liquid instruments, over all time frames and result in 10s of millions of dollars.

More importantly, if it was true for your friend, he would be doing exactly that if his method could be automated. Thus, your friend would be using an automated trading system in all liquid markets in the world on all time-frames from second charts to monthly / yearly charts.

Reality, its not automated and it wouldn't be applied to different markets because of the different market context for each of those markets. For example, the dynamics involving the U.S. Emini NQ futures is not like the dynamics of the markets in India (NIFTY futures), does not have the same dynamics as Europe's Eurex Fixed Incone BUND futures nor does it have the same dynamics as stocks on Brazil's BOVESPA exchange...end of story.

In contrast, a profitable automated trading system for the Emini NQ futures would be expected to perform well in the micro MNQ futures and other Emini /micro futures.

wrbtrader

I believe his method is applicable to other instruments. before he focused on index futures, he traded stocks, CL future, gold future, and forex for a few years, and he was consistently profitable in those instruments too. in the last 5-10 years, he became focusing on index futures, mainly NQ, YM, sometimes CL and ES.

his method is purely candlestick chart based. candle stick chart is fractal. if he can win in 1-min chart, no reason he can not win in 3 min chart. in fact, he was using 10-min chart before 2008 for equity trading.

 

[trend2009]

he is open about his strategy, maybe because he believes no one can automate his method, or he thinks his strategy is just classic, already known to the public, i.e., classic pattern+discretionary trend determination.

 

[easymon1]

do you know anyone has successfully automated a trading strategy based on candlestick chart? one of my friends who trades NQ future based on 1-minute chart makes 300-500k USD consistently over 10 years. I guess his sharpe ratio is around 4. If his method can be automated, his strategy can be applied to all liquid instruments, over all time-frames, then the profit would be easily more than tens of millions. His strategy is to read chart context, first determine trend, then enter on breakout.

so does anyone think such kind of strategy can be automated? sure, the hard part of automation is to code the computer to understand chart context. for price action, everything is dependent on candle context.

mr 2009, you want to get with Friend to work up a written rough draft "Protocol of the process that Friend uses to Read Chart Context? Rough draft. pencil, paper. go. Twenty - thirty minutes is a good start. Relax, have a homebrew. Still like the idea? Organize / rewrite your notes. Wait a day and decide.

 

[danielc1]

Your friend is leaving out something very big to his succes in trading. Something he is not even aware of, I think. His succes does not come from candle pattern, breakouts or other information. His succes comes from 'knowing' when the pattern is in his favor and flawless execution of his trading system so that he win in the long-term. Even replicated in automation, you will need his mindset to get his results.

 

[trend2009]

Your friend is leaving out something very big to his succes in trading. Something he is not even aware of, I think. His succes does not come from candle pattern, breakouts or other information. His succes comes from 'knowing' when the pattern is in his favor and flawless execution of his trading system so that he win in the long-term. Even replicated in automation, you will need his mindset to get his results.

I admire his execution and discipline, that is the key to his success. as to "knowing when the pattern is in his favor", that is part of chart context, he bases everything in his chart. everyday, he spends a few hours reading chart after market close, trying to understand what chart is telling him. he keeps doing this for the last 15-20 years. actually he enjoys reading chart.

 

[wrbtrader]

I admire his execution and discipline, that is the key to his success. as to "knowing when the pattern is in his favor", that is part of chart context, he bases everything in his chart. everyday, he spends a few hours reading chart after market close, trying to understand what chart is telling him. he keeps doing this for the last 15-20 years. actually he enjoys reading chart.

Its very weird that you keep talking about "your friend" in the Automated trading section even though he's not using an automated trading system.

Also, do you realized that you just stated in the quote above a few key variables about your friend that can not be automated ?

Experience, Discipline, Context and then the contradiction after stating these key variables and others in your prior message posts about this friend...

You say he bases everything in his chart as if those other variables no longer are important after you mentioned them to be important.

Simply, you've been describing a friend with those other key variables as someone that knows he's the key to his success in combo with his trade method. That is the real reason why he does not have an automated trading system.

Just remember this key element about trade methods...

If its not automated...its just a discretionary trade method because the trader (your friend) that's using the method is the key variable or just as important as his chart reading skills even if some of the elements in his trade method could be automated.

Discretionary can mean a lot of things to different traders. In fact, a trader using a rule base trade method that's not automated...its still a discretionary trader like your friend. That's the reason why you've mentioned those other key variables involving your friends trading.

This could be a simple situation of a profitable trader that likes his trading the way it is. Therefore, he see no value in putting the time & energy this late stage in his life to automate his trade method.

P.S. If this is a personal friend (someone you hang out with at your home or at his home or just tennis practice buddies, whatever)...you would be mentioning other things about your friend outside of the typical online info about a trader.

wrbtrader

 

[trend2009]

Its very weird that you keep talking about "your friend" in the Automated trading section even though he's not using an automated trading system.

Also, do you realized that you just stated in the quote above a few key variables about your friend that can not be automated ?

Experience, Discipline, Context and then the contradiction after stating these key variables and others in your prior message posts about this friend...

You say he bases everything in his chart as if those other variables no longer are important after you mentioned them to be important.

Simply, you've been describing a friend with those other key variables as someone that knows he's the key to his success in combo with his trade method. That is the real reason why he does not have an automated trading system.

Just remember this key element about trade methods...

If its not automated...its just a discretionary trade method because the trader (your friend) that's using the method is the key variable or just as important as his chart reading skills even if some of the elements in his trade method could be automated.

Discretionary can mean a lot of things to different traders. In fact, a trader using a rule base trade method that's not automated...its still a discretionary trader like your friend. That's the reason why you've mentioned those other key variables involving your friends trading.

This could be a simple situation of a profitable trader that likes his trading the way it is. Therefore, he see no value in putting the time & energy this late stage in his life to automate his trade method.

P.S. If this is a personal friend (someone you hang out with at your home or at his home or just tennis practice buddies, whatever)...you would be mentioning other things about your friend outside of the typical online info about a trader.

wrbtrader

the op of this thread asked if price action can be automated, so I gave an example of my friend's strategy which is based on pure chart, but he can not automate it. what is wrong with that?

I said clearly he based his strategy 100% on chart, and "discretionary" means "chart context", not something like insider information or tv news, or 6thsense gut feeling, or anything outside of chart. so the question goes back to what op has asked if chart can be automated.

 

[wrbtrader]

I'm only pointing out that you have specifically named other key variables about your friend (e.g. discpline, experience, context) that can not be automated. That's the reason why your friend can not automate it because he knows that those key variables in his trading can not be automated.

• You mentioned those other key variables about your friend's trading because he's not 100% chart trader. He depends on those other key variables in combo with his trade method involving chart reading...they all work well together...dependent upon each other in a trading plan.

You do not understand that when you say its 100% chart...you're saying he uses nothing else and you're saying nothing else is important regardless to the fact that you have mention those other key variables as to be important in his trading (e.g. experience, discipline, context).

• I'm going to be a dog on a bone. This is the first time in this thread that you've mentioned 100% chart...you've not use those words before in this thread about your friend's trading. It was not clearly stated before.

I don't know your friend but based upon your own words...trading to your friend is part sicience, part art and part psychology....nothing wrong with that. Simply, its definetly not 100% chart based upon your own words in this thread so far.

Also, I'm guessing that this is not a personal friend...its someone you know online which would explain why you've not mention other things that's important in your friends trading that only a real friend will know.

wrbtrader