I have written over 200 automated strategies using TradeStation's Easy Language. All of them worked in some market at some time in the past. Some have made a fair bit of money. The markets keep changing, so a strategy that worked for the past 6 months, may suddenly stop working. That's life.
Can Price Action Trading Be Automated?
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lovethetrade
Steve, do the strategies stop working (become less profitable) when the conditions become unsuitable for the logic employed or do they stop working forever?
Hello nooby_mcnoob,
There is only one way to see if something works or not, back testing. I now back test any idea I think of it. Noone knows what work until they test it or trade it for years or many trades.
I would test a monkey jumping 2 times in a roll means go long and no jumping go short if I thought it would produce profits in the markets.
That's the beauty of the market, noone knows what will work.
Averages are *tools* which perform a specific task. In that respect they "work" perfectly. Whether the strategies you write "work" depends on your ability to use tools more imaginatively than those who say strategies based upon averages or another specific group of TA tools don't work.
Here's an example of a strategy that works, but isn't profitable in it's current state. Consider it an example of the "work" ethics and creative thinking required to write an unprofitable strategy. It's a relatively simple strategy but IMO it's complexity likely exceeds the amount of study, research and "work" done by most of the competition.
IMO it would be difficult to write profitable strategies without averaging something or without a tool that serves a similar function. Those who hate averages or generally just hate should take note of the fact ...you haven't written enough strategies to know how often averages are used (on various components other than price) and thus how valuable and necessary they are.
I'm not a believer in MA's or to expand that thought, actually I'm not a believer in any indicators by trading directly off them.
I use one indicator RSI, not to trade off the signal, but to measure volatility. But then I don't use volatility either as a signal, I use it as a filter.
But regarding MA's.
From my experience, one could trade using MA's in the following conditions.
* If you were trading long only, the long term trend would need to be upward.
* The system is best run automated.
* MA's get you in late and out late, so profits are small.
* One would need to trade very frequently in order to make meaningful money.
* A filter would be required to ensure when the trend slope speed decreased, no trading as whipsawing will kick in.
* The system would be difficult to trade as there would be much temptation to over-ride with discretional decisions, the temptation would be there constantly to fiddle with the system.
* The system would need to self adapt, as every new trend has for the most part a) a different speed/slope angle, b) a different rate of volatility, c) a different length to its trend run - not that it should affect much. Therefore the MA periods would need to change to suit the trend speed. Easier said than done as trend speed only becomes obvious after the trend becomes established, by then you have lost some possible advantage.
* Automation would be the key, let it run, don't fiddle, the law of averages should see a profit.
None of this is impossible, but it would take some working out.
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