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In today’s article I would like to introduce an interesting thing on which I have spent quite some time. It’s about a few simple comparisons which I believe will interest common day traders. I will indicate new possibilities on how to grasp day trading.

So, what is this about? As I have already mentioned several times in the last few months, I have really dedicated a lot of time to the subject of Market Internals. I think I have become by and large an expert in this area – apart from completely exhausting study of various applications, possibilities, and versions of Market Internals (MI) and subsequent creation of more than 30 personal MI applications, often with original and extraordinary ideas; I have also gradually integrated a few ideas into my personal trading and fund that is in preparation. Recently I have spent a time with MI in a bit of a different way as well – I have been occupied with a possibility to apply it for common discretionary day traders.

Generally speaking, the impact of the application of Market Internals on day trading can be absolutely essential and it can really bring an “unfair” advantage against those who have never heard about MI before. One trading system can be developed into numerous versions by only integrating different possibilities of MI – and without even modifying the original system itself; without even touching it! As needed, we can, with the help of MI, improve practically anything in our system – from average profit per trade, to success rate percentage or drawdown and quality of equity.

I have personally created a truly broad study of MI usage on a simple day trading system based on my basic, core idea which I have traded discretionarily for years and that is my TNG method (Touch-And-Go). It is about a simple bounce from EMA 34. I haven’t traded with such method discretionarily for some time now (all my trades are fully automated), but that doesn’t mean I don’t use anymore principles I learned during my discretionary trading.

The system which I have used to test possibilities of MI for day traders is based on the TNG method and I have tested it in a completely automated way which one of my students prepared and shared with me (thank you). This automated version of the system based on TNG allowed me to test possibilities of MI for day traders much faster, more accurately and in a simpler way. I was quite surprised how one system can bring an immense number of versions without the need to interfere with the system itself in any way!

So, as promised, let’s have a look on a few demonstrations.

First of all, the basic version of the system – it looks like this:

A very decent equity (the TNG idea is still very powerful and universal), to my taste, with only one pattern it generates far too many trades which is taking its toll on an average profit per trade (in basic system 51 USD). A reasonable decrease of number of trades, decrease of drawdown to half (original variant of the system has a maximum DD 3500 USD), increase of average trade and possibly a slightly better equity – those would certainly be pleasant “bonuses”. The good news is that all this is possible with the application of MI. What I wanted to demonstrate is the variability which the application of MI in a single system can bring – without touching the original system itself, without changing anything.

For example, one of my own MI techniques based on MI moving average managed to reduce radically the amount of trades, dramatically reduce drawdown, and adequately increase the amount of trades. And also considerably change the character of equity:

My next technique with the application of my personal MI Bollinger Band application, for change reduced the system by approximately 20% of the worse trades and contributed to an overall considerable improvement. The equity stayed the same, but it is slightly smoother, the parameters of the system improved, 20% of trades disappeared (among them some of the worst ones) – and all that without touching the original system whatsoever:

I have gained a similar reduction and similar improvement with another technique as well; a very simple one based on strong MI values:

What could be very interesting is the possible combination of both previous techniques – I believe that in such case all results would further improve.

The last demonstration comes from a different MI area, identification of optimal MI volatility and allowing the system to trade only such trades:

What could be very interesting here is to isolate the most optimal MI volatility and subsequently to apply one of the previous techniques (MI moving average or MI Bollinger) on it. All these are certainly impulses for further improvement. It is fascinating how one technique can dramatically and fundamentally influence a day trading system without the need to interfere with it.

And what is truly significant: A lot of the most important changes occurred on the level of statistics. I am not going to itemize all of them as there would really be many of them. Basically the most fundamental ones are:

  • It was revealed that any parameter can be improved with one of the MI techniques; it was possible to decrease drawdown by half(!),

  • What was particularly impressive – MI can be great in helping to manage the number of contracts: i.e. for example to add a contract in an especially strong situation, confirmed by Market Internals,

  • MI can, in certain applications, truly help to exit the trade when the sentiment on the market dramatically changes, i.e. even before the basic stop-loss and in this way dramatically improves results,

  • It is possible to dramatically increase a not very impressive avg. trade of the original system through a few MI techniques (the weakest link of the original variant of the system completely vanished).

Personally, I am continuously impressed by the possibilities of MI, especially when used in an innovative and creative way. I am surprised how few day traders are aware of this technique or how few actually use it.

MI are truly a unique technique which can have exceptional impact on your trading if used in a right innovative and creative way. Then MI are literally becoming an “unfair” advantage.

Happy Trading!


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What others are saying

"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

Andrew Swanscott,

"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

Martin Lembak,

Systems Trading Expert,


"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

William Galwas, President Of Striker Securities, Inc 

"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

Craig Peters,

semi-advanced trader,

United Kingdom 

"Tom's approach to Automated Trading Strategies design, tests of robustness and portfolio diversification is really unique. He has been a professional trader for many years and the depth of his understanding of Breakout strategies and Market Internals is hard to find elsewhere."

Antonin Fisher,

Hedge Fund Manager,

Czech Republic 

"Tom´s systems and trading approach do really work and can bring good, stable and reasonable returns. I can highly recommend him as a teacher."

David Hruby,

Trader, Czech Republic 

Author: Tom Nesnidal (more about me
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