I really want everything I do to be within an MTF context, although sometimes I don’t know if that’s a good thing or a bad thing. On one hand, it makes perfect sense. On the other hand, maybe it’s not necessary when all you need is 10 or 20 pips. How can you tell anyhow?
A theory I’m trying to work on as a background for what I do in the future is for things to “make sense”. I may have posted about this before, but transient bars have made this internal battle really difficult. Logic states that to trade just pure probabilities and PTZ bars as they were defined in the scope of the thread is slightly misleading. I feel like it’s trying to brute force an edge out of the market. If you can get an edge, than great! But if it’s not grounded in something deeper, the edge may fade away. What I mean by this is that if there isn’t some additional theory to back it up, there’s no explanation for why future stats should continue as they have. Something grounded in support and resistance will continue to function because support and resistance (interest levels) is how the market fundamentally works. For time based highs and lows.. I can’t be so sure. This goes back to a discussion I had over a year ago about pips and time (long run). If your edge gives you 5 hard pips, that’s good, but is 5 pips now the same as it was 10 years ago? Will it be the same 10 more years from now? This is one of the core reasons why I have a hard time testing for k values that are fixed at 5, 10, or any other constant number. BUT! Even this point has it’s argument. 5 pips may not always be 5 pips, but what if it’s close enough for our needs? For example, the euro could disappear completely! But if that won’t happen in the next 100 years, do I even care? Further, it’s always possible that what is seen as brute force by one person actually has sound theory behind it but it simply isn’t understood. What a dilemma!
As for the actual theory, I’ve recently been thinking that transient bars and pure probabilities favor trend following tactics. Wonderful. The issue has been time and time again, where to put the stop? I think Pivots are a way to solve this, and I’ve been putting in some time into thinking of what an MTF pivot looks like and how it plays out (and how I can see it play out in a way that’s quantifiable). The point of no return as I’ve studied it seems to be better studied under not the context of “launch bar”, but rather more like a “decision node”. These are better referred to as simple Support/Resistance areas. But In real life, I think these must be zones, not actual prices. I think to maintain flexibility, purely using a single price point for S/R is incorrect (using single price points still has its uses though). The reason I say “real life” is because the theory that I have is that true market makers (banks) aren’t stalking specific prices. They’re looking to get in and out at various prices, and often at whatever they can get. Unless True movers are staring at screens like we are, they’re more likely doing other things and make their entries based on “good enough”. That’s not to say they’re willy nilly about it, but I do think they’re more “discretionary” as we would say. Thus, to create a mechanical system for an occurrence that is truly discretionary is a bit tough to do (though I maintain the stance that it works).
So! For pivots to “work”, I think that in a MTF context, it should end up displaying a zone of prices that should be recognized as Support and Resistance zones. I should actually expect then that the percentage of pass through/no pass through to be okay or decent (not great) and for an additional filter to bring out the value in it. I will say though that often times I feel like I create goals and plans for things that I don’t actually have the resources or capabilities to accomplish. I still think they’re good to think about though hah.
The current pivot work and stats I’ve done look not too great as a start (the ones shared), but after playing with them a little, there’s actually quite an initial edge in them. Very interesting!