Quote from achilles28:
Market structure never changes, brother.
Your system catches high range trends, and loses in range-bound/tight markets. Right?
The market goes up, down and sideways.
Its the amplitude of that movement that kills traders.
When the market consolidates into tighter and tighter ranges, the more long-term trend followers get killed.
When the market contracts, only scalpers profit. By scalper, I mean guys with 10 pip emergency stops, that go for minimum 10 pips, per trade.
Why only scalpers? Because the market trends 85%+ of the time, on lower time frames. What is chop, head-fakes, and whipsaws to long and medium-term traders are pure, clean and exploitable trends to scalpers on the 10/30 second chart.
IMO, market structure can be organized into 9 subsections, according to direction and amplitude. A successful day-trader must be able to exploit at least 7 of these conditions to profit long-term. Why? Because market amplitude expands and contracts. If a trader can't avoid losses in a tight market, they won't make a living at all.
The following description of market structure is from the vantage point of a scalper trading off a 30/10/ or 5 second chart. Where the market trends, they can profit.
1) High range, up markets = trend = profitable
2) Medium range, up markets = trend = profitable
3) Low range, up markets = trend = profitable
4) High range, down markets = trend = profitable
5) Medium range, down markets = trend = profitable
6) Low range, down markets = trend = profitable
7) High range, sideways markets = trend = profitable
8) Medium range, sideways markets = trend = profitable
9) Low range, sideways markets = NOT EASY.
Market conditions most difficult to trade are tight ranges (10-15 pips) on weak-trending/sideways markets where price action is "jumpy" (ie. price quickly jumps 3-5 pips in anticipated direction before a decent signal is generated. Doesn't sound like much, but thats 20-50% of the move, right there!)
This is actually the most difficult incarnation of #9, and happens much more often than one would think.
Monday last week during late New York Session is a good example.
I am still trying to figure out how best to profit from days like this, but its the hardest trading out there. Basically, a trader needs to focus on the higher time frame chart (5 mins) to determine direction and possible entries, than use no latency entry signals (support and resistance) or price action off low latency charts (1 or 2 second). Very little margin of error on these days...
Anyway, from the sounds of it, your system profits during #1, 2, 4 and 5. Its no wonder you're taking heavy losses as the market does #3, 6, 7, 8, and 9, and your system can't exploit those periods.
Basically, you need to change your strategy and learn how to scalp off lower time frames. Then you can profit from 80% of market movement, which will cover the losses from the other 20%. In time, that 20% can be widdled down to 10 or 5%.
