TMTs New Paradigm.
The nucleus or central formula is a switching mechanism that dictates when to use and when not to use particular types of trading strategies for the duration of the cycle.
TMTs models are composed of several indicators when they reach an extreme in the same time window, they anticipate the context of the markets, which creates a strategy bias for the upcoming period.
Understanding what the forthcoming market backdrop is likely to be can help you see the better market strategy opportunities, see average or normal opportunities and helps you see risk when the market context contradicts the market strategy.
This is a key many say cannot be known. To, know when your systems is about to run well or when it is about to go into a drawdown or worse yet a max drawdown. However, this is what TMTs Technical Event Model provides!
It is not a microscopic filtering out of individual trades, so there will be losing trades from any robust trading system.
Rather, it is a top-down method that is looking for Micro events to pre-stage market condition or context.
TMT wants to know what the larger accounts are doing. In order to do this, the filters are applied to larger bars compared to the bar the system is actually trading.
In other words, small accounts trade the smallest bar possible and larger accounts trade the bigger bars, the time horizon of small money and big money are also the same relative proportions.
The model is the combination of my %C-Original and TMTs Historical Volatility.
The model looks at them both on a larger bar. So depending on the bar size the system is trading it may be a daily bar down to a 30 minute bar day trader, or a weekly bar down to a daily bar swing trader.
I have observed and created four rules, applicable to the pro directional / trend following, volatility breakout / range expansion? types of strategies first because they are the most popular and normally profitable strategies.
Given that most good trading systems trade well most of the time when TMTs filters reach two rules they are the catalyst for normal trading conditions, one rule precedes the best trading context and one rule will signal a contradictory backdrop for the respective systems style.
It does not matter if you are trading for an average or have adopted a hedge fund posture of 80/20 trading, the micro-filtering will help your trading results.
Jack F Cahn, CMT
Thinking Mans Trader does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions express here are my own and grounded in sources I believe to be reliable but not guaranteed.
Thinking Man’s Trader strategy developer and trader since 1989