Wednesday, 3 August 2011

Context Matters

The DAX chart I have posted today has two types of trades on it. The small arrows and white writing are the trades without context. The big RED and GREEN arrows are the trades with the context. I turned the logic off in Flo that is context related to show the difference that this makes.

Also, using Hybrid trading (me managing the exits) I have marked the manual exits with  CYAN "X". The difference in profitability is considerable. Most optimised targets and stops are "average" and the dynamic ones, although better, still give more back than I can manage manually. HYBRID TRADING is the best of all worlds for me.

If you compare the context entries and without context entries, you can see an improvement in win rate as well.

Having said all that, the benefit of fully auto trading should not be ignored. It requires a lower skill level as it's possible to create/buy an algo and be CP without having the ability to manually make trading decisions in the heat of battle. This is a benefit even if the fully auto profitability is not as high as that of an expert trader. Trading a number of markets in full auto mode can offset that deficit, as can the ability to be CP without yet having acquired all the manual trading skills.


  1. Hi EL,

    When you say "market context" are you referring to Market Profile, or just what's on the trading chart (moving averages, fibs, CCI, etc.)?


  2. Tom, by the looks of it your context in this case means being at the MA's. Couldn't you just add that to your algo to improve profitability?
    Or am I wrong and is there more to it like levels from MP giving context to these entries?

  3. Context to me means everything on my charts. As far as an algo is concerned, the adding of context filters is more complex due to the fact that then filters are applied in all combinations while in manual discretionary trading you may ignore one. That's why Hybrid is the answer - let the algo enter and then selectively manage.