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“Since 2013 I have developed a highly efficient trend following algorithm. However, I am struggling with how and when to apply it using probabilities…”

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Dear Michael, I’ve been listening to your podcast for almost a decade. Since 2013 I have developed a highly efficient trend following algorithm. However, I am struggling with how and when to apply it using probabilities. I think the answer lays in the probability calculation mentioned in Larry Hite’s book ‘The Rule’ (observable fact divided by no. Times observable fact followed by event). However, I’m still unsure how to use probabilities with what I see occurring around market events. When I get the direct right in backtesting, the algo will risk 1.5% to make between 40 and 140%. Can you offer me any advice or guidance with regards to using probabilities or the application of probability theory?

What is your strategy exactly? Time frame?

My current strategy is – be in the market either long or short. (Get in the game) as Larry put it. I look for confluences with net COT position and MCRI seasonal tendency. It takes at least 15 days for the algo to build a position and get stopped out in profit if the move is in favour. I’m currently trading EURUSD and recently adapted the algo to XAGUSD and WTIUSD.

I can’t help. What you are doing is so far away from trend following (and Larry Hite) it could be on another planet. I would toss that strategy.

Well that was certainly thought provoking! Thank you. Yes I agree, it needs to be ditched and probabilities applied. That’s the bit I’m trying to figure out.

The issue is strategy. Why not go trend following and go robust?

Isn’t a trend following strategy based on probabilities though?

Trend following is based on following the trends.

Since our last communication I’ve worked tirelessly on my trend following systematisation and diversification. I’ve been trading over 20 Markets, and things were looking up! However, it appears the MT4 broker has caught on to my trend following ways and has decided to upset the “probabilities.” I’ve listened to you from the start. I value your no BS approach to life. Can you provide any fatherly encouragement?

If your broker is somehow the reason your trend following is failing? You are not trend following. Bottom line I have no idea what you are doing.

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