I always have this philosophy when making a strategy, you only need 2 filters ,3 MAXIMUM.
which is:
ONE DIRECTIONAL filter.
One to Two VOLATILITY filters.
DIRECTIONAL filter:
>> This filter purpose is mainly to take as many trades as possible, don't waste your time too much on optimization on this filter, as its main purpose is only to bring trade signals.
>> A good Directional filter is one that takes a lot of trades and considers if the market is a more Momentum market or a Mean-Reverting market.
VOLATILITY filter:
>> A good volatility filter will make a bad Directional filter look good, because its main purpose is to not trade when the market is either experiencing a low market volatility or high market volatility.
Note: don't optimize so much on the settings,, Use common sense settings to avoid curve-fitting (i.e. 5 days 20 days ,etc.)
56 is quite random number and not common sense, unless you did the optimizing and found out that when you change 56 to say for example 50,51,52,53,54,55,56,57,58,59,60 and the profit/dd result don't vary much from 56, then you can use 56.
However for an Intraday approach, I would also consider 3 time filters:
-Hours of the Day (time allowed entry & time must exit all position) -> only trade from 8am to 3pm.
-Days of the Week (use it carefully as this filter is more vulnerable to curve-fitting)-> don't long on Wednesday & don't short on Mondays.
-Months of the Year (this is a seasonal filter, as per year you can see which months of the year is CONSISTENTLY bad month for longs or bad months for shorts)-> never long on August, never short on July.
which is:
ONE DIRECTIONAL filter.
One to Two VOLATILITY filters.
DIRECTIONAL filter:
>> This filter purpose is mainly to take as many trades as possible, don't waste your time too much on optimization on this filter, as its main purpose is only to bring trade signals.
>> A good Directional filter is one that takes a lot of trades and considers if the market is a more Momentum market or a Mean-Reverting market.
VOLATILITY filter:
>> A good volatility filter will make a bad Directional filter look good, because its main purpose is to not trade when the market is either experiencing a low market volatility or high market volatility.
Note: don't optimize so much on the settings,, Use common sense settings to avoid curve-fitting (i.e. 5 days 20 days ,etc.)
56 is quite random number and not common sense, unless you did the optimizing and found out that when you change 56 to say for example 50,51,52,53,54,55,56,57,58,59,60 and the profit/dd result don't vary much from 56, then you can use 56.
However for an Intraday approach, I would also consider 3 time filters:
-Hours of the Day (time allowed entry & time must exit all position) -> only trade from 8am to 3pm.
-Days of the Week (use it carefully as this filter is more vulnerable to curve-fitting)-> don't long on Wednesday & don't short on Mondays.
-Months of the Year (this is a seasonal filter, as per year you can see which months of the year is CONSISTENTLY bad month for longs or bad months for shorts)-> never long on August, never short on July.
Steps to profitability: Collect data, money management, stay bored
