Should we look at recent price action behavior to forecast direction?

sjain100 said:
Seems like a lot of traders emphasize and search for patterns unfolding like a breakout, ascending triangle, wedge, etc. Do professional traders search for similar price action that may have unfolded recently and look for the outcome?

For example, if I'm trading e-mini dow futures, I happen to notice a downward trend on the 15 min(4 consecutive bear bars + steep downward trend angle), should I look out for something similar/close as possible to what is unfolding now and see how the price action behaved in the past, which could potentially forecast my current price movement?

Basically, In addition to simply identifying a pattern and knowing the probable outcome, I'm assuming we should also check against recent price behavior (past few hours/days) on a similar or "close enough" move?

Any insight would be helpful:
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The difference between an expert and a experimental scientist is the expert thinks what the experimental scientist discovers is impossible.

Trading is no different. Every expert will tell you trading is random and past does not predict future.

But a market is not random, and past does predict future.
 
spooz said:
It's all I've ever done for the past 35 years. A casual look at any actively traded market should illustrate the point. It's impossible to back test in my opinion. "Just" learn to read the market and then forward test it. I should say that I find no value in the vast majority of patterns in books such as Edwards and Magee. Its not a science its a skill and the market changes. I miss stuff all the time. You will see new behavior emerge and vanish only to re-appear a few days latter. Good Luck!
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Love your assessment about back testing. I backtested hundreds of stocks and learned the hard way it does not predict the market. Just as you stated, "Just" learn to read the market and then forward test it." We go in circles until blown accounts and desperation teaches many that JUST READING WHAT WE SEE. AND TRADING WHAT WE SEE is effective. No amount of back testing would have predicted the parabolic ES move around 5:20am this morning.

Back testing is human natures innate desire to find predictability
in the face of market chaos. It's hard for some to believe a mental
framework and methodology that adapts to uncertainty is an EDGE.

Just my experience, but the only thing back testing did for me
was fill me with naive irrational exuberance, only to be
knocked down again and again.
 
sjain100 said:
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I totally agree "So important to stay patient and still wait for a solid setup. "...patience for the high probability setup is key!
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You're using the phrase "high probability setup"...that's a phrase used by someone that knows either the backtest results of their trade strategy or they know the quantitative statistical analysis of their trade performance with real money.

Regardless, the market conditions we've been seeing the past month are very unusual because of the Russia/Ukraine geopolitical situation (WAR) and the United States economic woes.

Simply, watch your back when trading in today's markets.

wrbtrader
 
mikeriley said:
Love your assessment about back testing. I backtested hundreds of stocks and learned the hard way it does not predict the market. Just as you stated, "Just" learn to read the market and then forward test it." We go in circles until blown accounts and desperation teaches many that JUST READING WHAT WE SEE. AND TRADING WHAT WE SEE is effective. No amount of back testing would have predicted the parabolic ES move around 5:20am this morning.

Back testing is human natures innate desire to find predictability
in the face of market chaos. It's hard for some to believe a mental
framework and methodology that adapts to uncertainty is an EDGE.

Just my experience, but the only thing back testing did for me
was fill me with naive irrational exuberance, only to be
knocked down again and again.
More...


Hmm, I have the exact opposite experience. Of course I agree and know forward / live testing is absolutely critical. With that said backtesting used properly is an extremely powerful tool. The past certainly adds and allows you to calculate probability of futures moves, despite of course not guaranteeing it will happen.

There are certainly moments of market chaos, but for the most part this is just a "debit" and "credit" game as far as day trading. Larger players are making setups and traps to basically just move smaller players money into their accounts. If you position yourself properly to survive the "debit" phase, than you get to join the "credit" side.

The market generally isn't random movement. Think about this do you really think larger players are just slamming in orders of 100's and 1000's of contracts left and right without a goal? or without the intention of getting a net weighted average? Or is it more likely that they are being very calculated with how they are applying their capital in a way to create traps for others and/or obtain the net weighted average they desire. A lot of times when they are doing this they leave behind clues, which can also be patterns you can pick up on.

Anyways not sure I did a great job of explaining my point or made it very clear, but there it is.
 

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Hmm, I have the exact opposite experience. Of course I agree and know forward / live testing is absolutely critical. With that said backtesting used properly is an extremely powerful tool. The past certainly adds and allows you to calculate probability of futures moves, despite of course not guaranteeing it will happen.

There are certainly moments of market chaos, but for the most part this is just a "debit" and "credit" game as far as day trading. Larger players are making setups and traps to basically just move smaller players money into their accounts. If you position yourself properly to survive the "debit" phase, than you get to join the "credit" side.

The market generally isn't random movement. Think about this do you really think larger players are just slamming in orders of 100's and 1000's of contracts left and right without a goal? or without the intention of getting a net weighted average? Or is it more likely that they are being very calculated with how they are applying their capital in a way to create traps for others and/or obtain the net weighted average they desire. A lot of times when they are doing this they leave behind clues, which can also be patterns you can pick up on.

Anyways not sure I did a great job of explaining my point or made it very clear, but there it is
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Hi Concinnity,

I really do understand your explanation. Of course with all things trading, what works
for one may not work with another. I think my past experience with back testing made me susceptible to relying on the past without a constant appraisal of present price movements.

I do much better now just using a rectangle around consolidation and waiting for a breakout.
Appreciate your insight.
 
Overnight said:
Down, because war.
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I don't necessarily think this volatility is due to war. This is a daily chart and one way I track the nasdaq, and the volatility was actually greater in January before the war (which was set up well before that imo.)

100days1trdd2021a1220311205051.png
 
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