2015issue C1036-41
Price and volume rules over pattern shortcuts
Indicator-only buy signals and matching chart patterns are not a complete decision procedure. Price-and-volume context and a three-stage process of preparation, execution, and review make entry, exit, and abstention rules testable together.
- Indicator-only buy signals can produce both favorable and unfavorable outcomes in successive weeks, so they are not a complete decision procedure on their own.
- A complete procedure replaces isolated setup rules with a context check of which force, buyers or sellers, is in control before any entry, exit, or abstention.
- A chart pattern that matches a mental template can still be the start of distribution at higher-timeframe resistance or late in a trend.
- Money targets and win and loss statistics are incomplete process goals compared with assessing whether preparation, execution, and review were followed.
Isolated signals are not a procedure
Indicator-only buy signals can produce both favorable and unfavorable outcomes in successive weeks, so they do not by themselves constitute a complete decision procedure.
A complete procedure can replace isolated setup rules, such as buy if X, Y, and Z, with a context check that asks which force, buyers or sellers, is in control before any entry, exit, or abstention.
Price and volume as the context check
Price-and-volume context is part of that procedure. Wide ranges with higher closes and active volume are presented as evidence that buyers are chasing price through resistance.
A chart pattern that matches a mental template can still be the start of distribution if it appears at higher-timeframe resistance or late in a trend, so appearance alone is not a sufficient entry rule.
Prepare, execute, and review
Under risk and uncertainty, default mental shortcuts that work in everyday choices are treated as an unreliable input to live trade decisions.
The testable process is specified as three stages: high-quality preparation before a trade, execution while in the market, and constructive self-assessment afterward.
Money targets and win and loss statistics are treated as incomplete process goals compared with assessing whether preparation, execution, and review were followed.
Paper trading as rehearsal
Paper trading simulation is defined as simulated trading of an account prior to live trading. It is the rehearsal step that makes the same entry, exit, and abstention rules testable before capital is at risk.
All readings on this track · 24 readings
- 1988Process goals, journals, and pre-trade stress checks
- 1989A written plan before impulse takes command
- 1991Step-through construction of a currency range tactic
- 1999Relocating expiration break-even with a bull debit spread
- 2003Rebuild testable trading rules after a drawdown
- 2005Forex stops, lot count, and reward as one budget
- 2010Predefined rules before discretion in a mechanical trading system
- 2010Evaluating euro-gold intraday lead-lag rules
- 2011How to turn an FDA-calendar sample into a testable bio-runup procedure
- 2012First-hour countertrend entries after broken levels
- 2012Time-box simulation before live decision pressure
- 2013Adding markets without liquidity and emotion rules
- 2013Precommit the exits on leveraged trades
- 2013Check the currency cross, the margin, then the demo fill
- 2014Test entry, exit and abstention as one procedure
- 2015Paper-trade the system you refuse to complicate
- 2015Four-step system vetting before live trading
- 2015Price and volume rules over pattern shortcuts
- 2017Closing a Friday news fade into one entry and exit procedure
- 2019Hype-resistant trading process: paper checks and ruin risk
- 2020Paper trading cannot validate a live decision process
- 2020Tenth-size futures as a small-account ruin filter
- 2020Evaluating systems with paper trading and walk-forward windows
- 2020Sizing protective puts with micro index options