DislikedMicrostructure is fine, but as a retail trader we're outside of that perspective........Ignored
I only use strength/weakness to determine which pair(s) to trade, and (in terms of the long term trend) which direction. I use the technical criteria I described in post #82 to manage my exits.
"So you've essentially got an exit signal approach? ........I would be concerned that a good entry could be destroyed by a bad exit."
Not quite sure what you mean by a "bad exit".
"I tend to use self-optimizing targets. At least with mechanical systems....."
I think this is possibly where our approaches differ; although I have rules (post #82) about exits, they are applied with discretion, rather than by using optimization. It sounds like you're way ahead of me in this regard.
"I look at it differently. I think if you have to optimize a parameter, you're already in a losing position. From my experience, the markets often behave chaotically. That means any parameter you use is subject to changing randomly over time. I prefer parameters that automatically adjust from market data."
Definitely agree about the chaotic behavior, and market behavior changing over time, necessitating re-optimization. It's one reason why I prefer to operate discretionally.
"My concern with orderflow is that, from our perspective, it's essentially random. Sure there is a pattern to it, but we can't see that as retail traders. We can't see when someone is planning to put a large trade in. All we can see is price has reversed at a previous level, and so orders may be stacked there. What kind of initiative trading results from those orders... we can't know in advance."
I see "someone putting a large trade in" as a problem for every method, whether orderflow-based or not. The more orders stacked around given levels, the greater the probability of a reversal occurring at or near them. In this respect, S/R frequently creates a kind of 'self-fulfilling prophecy' effect. Hence I see this as a potential contributor to a methodological edge.
"Basically it's a measure of price movement to end price change. .......Instead, I tend to use an average pips measurement to determine the stop and start, but you get the basic idea."
Many thanks for the clear explanation.
