Price Action Strategies All Break Down

Quote from Dhalsim:

No indicators were used.

Yes somewhat i am trading patterns in these strats - nothing like head and shoulder, wedges and so forth like any books states.
The price action i am talking about is recurring themes to the fractal nature of the markets, or patterns which take advantage of the noise intraday.

I agree with you point however i think anything can be computerized, anything a human can see so can a computer.
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I misunderstood your remark about your "other strategies" not being pattern- or indicator-based, implying that some strategies were one or the other or both.

In any case, a genuine price action strategy can't fail because you're following price, assuming that one has a thoroughly-tested consistently-profitable trading plan and isn't going long just because price "looks like" it's going to go up.

But good luck with it. If you can computerize it, you'll be rich.
 
Quote from Dhalsim:

I only have emini data upto 2007 and hence most of my testing is done for last 6 years on futures markets....However, when i then test this on the SPY or QQQ i find that the results perform poorly prior to 2007.

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So does the SPY and QQQ perform as expected from 2007 to present?
 
Quote from horton:

So does the SPY and QQQ perform as expected from 2007 to present?
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Yes, not as well as it does on futures markets because again there are small difference and if your trading noise or patterns then things will be slightly different on both markets.

For example for the one strat i am getting PF of 1.97 on ES from 2007 - 2013 with > 1000 trades. On SPY same strat i am getting PF 1.67 from 2007-2013 with > 1000 trades.
 
Quote from Dhalsim:

Yes, not as well as it does on futures markets because again there are small difference and if your trading noise or patterns then things will be slightly different on both markets.

For example for the one strat i am getting PF of 1.97 on ES from 2007 - 2013 with > 1000 trades. On SPY same strat i am getting PF 1.67 from 2007-2013 with > 1000 trades.
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can you please post equity curve of this strategy (&DD especially) - sounds very interesting...you are getting at least 170 trades per year out of 252 trading days and managing ~ 2 PF....sounds pretty good.

How much leverage do you use to trade this strategy - or is it still at design phase and you don't trade it currently?
 
Ok. So you said you have not tested the futures contracts prior to 2007 and both the futures and the cash are profitable afterwards. In that case I thiink you should consider the changes that have transpired since 2007 in terms of market maker behavior. Your system may be capturing market maker tendencies that did not exist prior to 2007, the most notable of which is the NYSE Supplemental Liquidity Program introduce in 2009 and dominated by Goldman Sachs. In fact, even if you told that me that the futures contracts work prior to 2007 despite the cash not working, I would start with this thesis.
 
Quote from horton:

Your system may be capturing market maker tendencies that did not exist prior to 2007, the most notable of which is the NYSE Supplemental Liquidity Program introduce in 2009 and dominated by Goldman Sachs.
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Horton, in your experience how has this program changed the market micro structure since 2009, can you elaborate please. Thanks.
 
I did not trade the futures prior to 2010 so I don't have direct experience with the issue, although I can clearly see the way the order flow in the futures and the cash is manipulated, particularly after the close of Europe equity at 1030 CT.

But I have heard alot of talk from those that did trade prior to 2008. They complain about the lack of rotation in the ES etc. now that the Goldman algos are in charge.

Perhaps the most notable indication that things have changed significantly comes from Marty Schwartz. He stopped trading the S&P futures a few years ago because of these issues. Think about that. Even Marty Schwartz struggles in the new paradigm.
 
Gmst here is the strategy i am working on now. Its now live but it works on trading intraday noise - again this one also breaks down on cash market prior to 2007.

Not traded any of price action strats as i don't have faith in them.

Anyway have a look at some of the screenshots:

1st on the NQ, works on 1min chart - usually holds for about 5-30mins on average. No overnight trading
-only tested with one contract (1 contract max)
-no compounding:
-max 2 trades per day
- no slippage as every single one is limit order
- tested with fact that price must trade though for fills
 

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Quote from horton:

I did not trade the futures prior to 2010 so I don't have direct experience with the issue, although I can clearly see the way the order flow in the futures and the cash is manipulated, particularly after the close of Europe equity at 1030 CT.

But I have heard alot of talk from those that did trade prior to 2008. They complain about the lack of rotation in the ES etc. now that the Goldman algos are in charge.

Perhaps the most notable indication that things have changed significantly comes from Marty Schwartz. He stopped trading the S&P futures a few years ago because of these issues. Think about that. Even Marty Schwartz struggles in the new paradigm.
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Thanks horton for your views.

In my experience:

2005-2006 was a very low volatile period for ES and most of my strategies on ES that work very well 2007 onwards, have bad performance in 2005-06. Market was basically dead after first hour in these 2 years.

To the OP - So, if you find that your strategies don't perform well especially in the 2005-2006 period, I will say don't worry too much about it - take it as a market anomaly or unnatural markets for a brief period and trade what you have now which is suitable for current markets. Just that you have to be careful about market conditions if they change going fwd. A good way is to look at your max. historical DD and if you hit that then stop trading the strategy for some time.
 
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