Qualifying Quality TS Entries

[CapTech]

I am new to MTPredictor but have found that by applying certain internal filters to the TS entries you get a more quality setup entry. When a TS fires and is within all exceptable WPT and appropriate wave levels. I will look at the trin, the tick trend, tick level along with the ES premium levels. I will also look at the quality of order flow to support a impulsive move. Are there large hands coming to the plate at this pivot or are they just weak handed specs throwing singles at the market.

Yes, you may miss a runaway reversal bar extension but you will usually get a lower initial risk entry and your profits will be the same. Using just the YM contract over the last 47 trades has only been stopped out 8 times by filtering these TS trade entries by using immediate internal indications. I know this may go against the MTPredictor trade plan in part but since you have the same or better initial risk with the same profit or better potential. Why not take a more advantageous trade setup without any more risk.

How do others filter a more quality signal? Without getting too complicated and changing MTP's philosophy.

[BrianK]

It's always best to try to stick with the trend whichever way one measures trend (moving averages, channel lines, or whatever). Signals can be filtered out this way. On the other hand, some of the signals are a bit early, particularly when the trend is about to change (using a lower time frame could help somewhat). At other times the signals are bang on. So, filtering out signals using additional criteria makes sense. The bottom line is to control the risk.

[Steve Griffiths]

Hi Guys,

Thanks for the input, and I am always interested to hear how different traders filter or use MTP trade set-ups.

47 trades with only 8 losses is defiantlya good ratio, so it sounds as if this additional filteration is working well for you ..... well done.

Thanks

Steve

[CapTech]

Understand that these are only scalp trades and use the TS entries with filters. I only consider intraday positional trades when TS setups are in confluence with price cycles on different periods along with other intraday internal indications. I will with time have enough confidence in MTPredictor and it's methodology to allow price extensions to the forecasted WPTs.....Jimmy

[tombtrader]

Steve, about what percentage losing trades would you expect without filtering using 3/5 minute data for futures such as russell, eurox fx, emini es?

[Steve Griffiths]

Hi,

This is the wrong question, and a common mistake made by many new private traders. The size of the winning trades in relation to the losing trades is actually far more important.

Phillippe's (an MTPredictor user) analysis in another post on this board demonstarted this very well were he made a fanstatic % Dollar return even though his losing trades outnumbered his winniners.

Amateur traders worry about being right (high % of winning trades) whereas the succesful professional trader focus's on the $'s and actually making money over time.

Small losses and large profits is the real Holy Grail of trading you need to focus on, and not just on the % of winners to lossers :)

Steve

[tombtrader]

I agree with you in theory Steve, but as an ex-floor trader and a user of many methods over the years, I know I need to know the EXPECTATIONS of what is coming. While a 70% win rate is more comfortable to trade than a 51% win rate, I know that if the win rate is only 15% (and still profitable on backtesting) then there is no way I will be able to stick to it. However, if my expectation is, say, a 60% win rate then I will not be uncomfortable when the drawdown occurs.

That is really the focus of my question - expectaion. If there are any info on this, albeit eyeballed or guestimated, it would be of help.

Thanks

[Matt Bowen]

Hi Tom,

First off, let me congratulate you for being able to move off the floor. Many people don't know how difficult of task this really is. I have worked with some floor traders from the Comex, CBOT and CME and in all but one case they said it was harder than starting from square one because they had to deprogram themselves from the habit of scalping 1 to 4 ticks all day.

The hardest thing for a trader to get over is the "need to be right more often". I'm not going to go into all psychological ramifications in this post, but if you get some time you might read the interview with Van Tharp:

http://www.mtptrader.com/Van1.pdf

One thing you might also take into consideration is your equity curve. Instead of looking at it on a trade by trade basis, look at the curve on a weekly basis. For example, Tony Beckwith traded MTPredictor for 1-year using the standard guidelines and produced more than 273% return (all of these trades were from 3 and 5 minute setups) in one year and Tony's win rate was 39%, take a look at the metrics here:

http://www.mtpredictor.com/pricing/RTRecordold.html

Also, if you plot the equity curve on a weekly basis take a look at what happened, you have 37 winning weeks and only 17 losing weeks:

http://www.mtpredictor.com/pricing/documents/RTPerformanceCurvedata220705.pdf

This proves that win rates mean nothing in regards to a trading system's profitability. The real problem is that it's psychological issue because at 39% winning trades, the trade feels like a loser, my only question is what is happening with the equity curve? I agree, trading with only a 39% win rate requires an incredible amount of faith on the part of the trader, but this is exactly why most people fail at trading...they don't believe in the system and ride-out the draw downs the will inevitably occur.

Best regards,

[tombtrader]

Thanks Matt. Thats exactly what I needed. If I have a 40% win rate then I can work out what I need in a minimum win/risk per trade. So out of 100 trades, if my risk is 1 point, then I will lose 60 points. To break even, my 40% winners must be at least 1.5 plus costs, so your minimum "good trade" of 2 to 1 is right on.

Thanks again.

[Steve Griffiths]

Exactly,

40% - 50% profitable with an average profit to loss of 2or3 to 1 would make very good money over time.

Ideally once you become experineced then the % profitable should rise as should the Profit to loss figure. Ths is why I encourgae all users to move up the techniques curve and become more experienced with the software. This is why I write a daily trainning letter as well record regular monthly trainning seminars

Thanks

Steve