教学

HOW-TO: Integrate Probabilities into Mechanical Trading Strategy

If you want to skip all the explanations and start working with the OptiRange indicator right away, skip to the last paragraph.

What are the two main approaches in manual trading?

In the world of manual trading, there are two main approaches: mechanical and discretionary trading.

Mechanical or systematic trading is about sticking to a set of predefined rules, almost like following a recipe. Even though you're still executing the trades manually, the decisions are made based on a systematic approach that doesn’t waver. This method is designed to leverage a specific edge in the market, reducing emotional involvement and decision-making stress.

Discretionary trading is a trading approach that relies heavily on the trader's judgment and intuition. Unlike mechanical trading, which follows strict, predefined rules, discretionary trading involves making decisions based on a subjective evaluation of market conditions, price patterns, news events, and other factors. Traders using this method often seek to add confluence—multiple signals or pieces of evidence—to support their trade decisions.

However, this approach can sometimes mislead traders into believing they are identifying high-probability opportunities.

This can create a false sense of confidence, forcing you more likely to take trades that don't actually align with any proven edge. The result is often poor trading decisions, driven by overconfidence rather than objective analysis.

Why isn't mechanical trading talked about more often?

Many people aren't aware of mechanical trading because most trading mentors and courses focus on discretionary trading. This method is more intuitive and accessible, especially for beginners who are interested in learning how to read charts.
Discretionary trading is often seen as more engaging and gives traders a sense of control, which can be appealing.

If mechanical trading is so effective, why do most mentors teach discretionary trading?

Discretionary trading is easier to understand and start with It also appears to offer more flexibility and engagement. As a result, it's more commonly taught and discussed, which means many traders don't get exposed to the benefits of a systematic, rules-based approach like mechanical trading. This leads to a lack of awareness and understanding about the potential advantages of mechanical trading strategies.

Why aren't more mentors switching from discretionary trading to mechanical trading?

Many mentors stick with teaching discretionary trading because it allows them to cover up losses and highlight their winning trades more easily. They can always justify their trading decisions with various explanations, keeping their clients entertained and engaged. This approach creates a dependency, as clients often feel they need ongoing guidance to navigate the complexities of the market.

In contrast, if a mentor were to teach mechanical trading, students would learn a clear set of rules and strategies. Once these rules are understood, traders can become independent, reducing their reliance on the mentor. This independence can be less appealing to mentors who want to maintain a steady stream of clients. Thus, the lack of transparency and the ability to mystify trading strategies keep the focus on discretionary trading methods.

Why consistency is key in trading?

Consistency is essential in trading because it directly affects your results. When your approach varies, such as with discretionary analysis that changes with each setup, your outcomes become unpredictable. Sticking to a set of rules, however, gives you predictable and reliable results.

When you adhere to a fixed set of rules, your actions remain consistent. This consistency leads to results that are also reliable and predictable.

With mechanical trading rules, you're not relying on guesswork or intuition. You have a clear, predefined set of actions, knowing exactly what to do and when to do it.

What are the first steps I should be taking to become a systematic trader?

The first step towards becoming an independent systematic trader is accepting that consistently beating the market with discretionary trading is highly challenging. Despite what you might see on social media—traders getting funded and posting their success—these stories are often disconnected from the reality of intuition-based trading. Many traders spend thousands on challenges, and while some might get lucky and achieve initial funding, they often end up blowing their accounts after a few emotional sessions.

Instead, I want you to shift your focus to developing your own understanding of systematic trading. Know the fact that sticking to pre-defined rules and executing a mechanical trading strategy is key to long-term success. This approach requires you to take it seriously and act responsibly, adhering to a structured, rules-based system that removes emotion and improves your consistency.

The second step is to study the market on your own and identify setups that occur repeatedly across multiple timeframes. Develop clear, step-by-step rules for your strategy and understand the logic behind each rule. Once your rules are written out, create a flowchart to visualize and follow them daily, ensuring you stick to the strategy without introducing flexibility.

Afterward, spend several months backtesting your strategy to verify that the edge you plan to execute is genuinely profitable. This thorough testing will help confirm that your approach works under different market conditions and provides the consistency needed for systematic trading.

Luckily for you, I have done it all. it took me one year to test and validate the strategy by manually going through data collection and backtesting and one year to fully code the strategy into an indicator so I can trade it as systematic as possible.

I'm more than happy to share this with rule-driven individuals who are serious about excelling their trading business.

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How does the OptiRange indicator work?

Market Structure: The Optirange indicator analyzes market structure across multiple timeframes, from a top-down perspective, including 12M, 6M, 3M, 1M, 2W, 1W, 3D, and 1D all the way down to hourly timeframes including 12H 8H 6H 4H 2H 1H.
Fractal Blocks: Once the market structure or current range is identified, the indicator automatically identifies the last push before the break and draws it as a box. These zones acts as a key area where the price often rejects from.
Mitigations: After identifying the Fractal Block, the indicator checks for price mitigation or rejection within this zone. If mitigation occurs, meaning the price has reacted or rejected from the Fractal Block, the indicator draws a checkmark from the deepest candle within the Fractal Block to the initial candle that has created the zone.
Bias Table: After identifying the three key elements—market structure, Fractal Blocks, and price mitigations—the indicator compiles this information into a multi-timeframe table. This table provides a comprehensive top-down perspective, showing what is happening from a structural standpoint across all timeframes. The Bias Table presents raw data, including identified Fractal Blocks and mitigations, to help traders understand the overall market trend. This data is crucial for the screener, which uses it to determine the current market bias based on a top-down analysis.
Screener: Once all higher timeframes (HTF) and lower timeframes (LTF) are calculated using the indicator, it follows the exact rules outlined in the flowchart to determine the market bias. This systematic approach not only helps identify the current market trend but also suggests the exact timeframes to use for finding entry, particularly on hourly timeframes.

According to the above trade plan, why do we only look for mitigations within Fractal Blocks of X1/X2?

In this context, "X" stands for a break in the market's structure, and the numbers (1 and 2) indicate the sequence of these breaks within the same trend direction, either up or down.

We focus on mitigations within Fractal Blocks during the X1/X2 stages because these points mark the early phase (X1) and the continuation (X2) of a trend. By doing so, we align our trades with the market's main direction and avoid getting stopped out in the middle of trends.

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To illustrate how the script analyzes market data and the thought process behind it, let's go through an example.

Example:

12M Timeframe: EURUSD

6M Timeframe : EURUSD

3M Timeframe : EURUSD

1M Timeframe : EURUSD

2W Timeframe : EURUSD

1W Timeframe : EURUSD

Hourly Entry: EURUSD

Final HTF TP: EURUSD

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Don’t worry about understanding every detail of how the script works.
It's only to show you how the indicator calculates multiple timeframe and how it guides you on when to sell/buy or stay away.Last paragraph:
You can simply turn on the Screener in user-input so that the indicator instantly does a top-down analysis for you using the strategy flowchart and decides for you what hourly timeframes you should be using to get your entries.

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Now that you understand how the OptiRange indicator works, you can start using it to execute a mechanical edge from today.

If you have any questions or need further assistance, feel free to leave a comment!