Trader Tom ยป Scenario strategy
Overview
This is the scripted implementation of Trader Tom's first "scenario-based" trading strategy he described in a talk he gave in London in 2020.
To learn more about the scenario please watch the following video (from 11:53):
Trading Psychology Talk London 2020 by Tom Hougaard Part 2 of 3 - https://www.youtube.com/watch?v=sg_OTc0lRko&t=712s (all 3 parts are worth watching!)
While Trader Tom did not give concrete instructions on when to enter into a position once the entry criteria is valid, or where to set take profits and stop losses, the strategy script is implemented on top of the Whitebox Strategy Engine, so you are free to experiment with various Entry and Exit strategies.
Settings
This strategy does not use any technical analysis indicators as entry signal.
Instead, an entry is made, if the open/high/low/close of the days being compared match a particular condition.
Three criterias can be used for both long and short entries. Each criteria forms an AND relationship with a previous criteria.
Once each criteria is valid, an entry order is submitted at the chosen time.
Long Scenario Settings
Short Scenario Settings
Visuals
Background colour
- Red: Monday
- Orange: Tuesday
- Yellow: Wednesday
- Green: Thursday
- Blue: Friday
- White: Saturday
- Purple: Sunday
This can be turned on/off via:
Scenarios
1. How often is Monday the high/low of the week?
He talks about this scenario at 15:09: https://www.youtube.com/watch?v=sg_OTc0lRko&t=909s
He asks: if Monday so far is the highest traded point for the last 3 days, i.e. Monday, Tuesday, Wednesday, then how often is Thursday going to trade below the low of Wednesday?
How to test this short scenario with the script?
Well, the theory is that if Monday's high is above Tuesday's and Wednesday's high, then there is a good chance that Thursday is going to trade below the low of Wednesday.
We can tell the strategy to enter into a short position at the end of the trading day on Wednesday if the condition outlined above is valid:
The entry and exit strategy is not specified in the scenario, so try experimenting with the various entry / exit strategies offered by the script.
2. If Thursday is higher than Friday, then what does Monday look like?
He talks about this scenario at 18:20: https://www.youtube.com/watch?v=sg_OTc0lRko&t=1100s
He asks: what happens to Monday if the previous Friday trades below the highs of Thursday?
How to test this short scenario with the script?
Well, the theory is that if Thursday's high is above Friday's, then there is a good chance that the following Monday is going to have a gap down (i.e. trade below Friday's low).
We can tell the strategy to enter into a short position at the end of the trading day on Friday if the condition outlined above is valid:
The entry and exit strategy is not specified in the scenario, so try experimenting with the various entry / exit strategies offered by the script.
3. Your scenario here
There are virtually limitless ways of combining the criterias and entry / exit strategies into scenarios.
You are encouraged to test your own theories!