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In today’s article, I will show you, step by step, how effective work with Market Internals can lead to drawdown reduction by up to 70%, taking just seven minutes of work (on a regular PC - using a laptop would take a little more time). So, let’s get to it.

In this example, we will work with an extremely simple idea, which is to buy EMD.D (15-minute chart), when the first bar closes above yesterday’s close (i.e. breakout at 8:45 Exchange time or rather at 15:45 local time for me in Spain).

The code looks like this:

This simple idea doesn’t look bad at all; it seems like it has a decent potential – although there is still a long way to go in order to reach a completed, successful system:

There is definitely a need to decrease the number of trades, filter out “the bad ones”, increase average profit per trade and, what is most important, to substantially reduce the drawdown. It isn’t even important to present complete statistics – the first look at equity already shows what we are talking about. And how do we accomplish such an improvement? That is exactly the task for Market Internals!

First of all, I have put the above code in my Market Internals smart code and I have prepared a special chart/workspace for such purpose:

This MI smart code contains a few of my own MI conditions (it took me 6 months to put all of them together) and now I let TradeStation run all these conditions and let it find the one that is the most suitable one. To avoid the danger of over-optimization right from the beginning, we need to apply this process on 70% of In-Sample data and we keep the remaining 30% as Out-Of-Sample data:

Now we run optimization, which will take around 2 minutes on an average PC (around 6 minutes on a laptop):

As soon as optimization finishes, I arrange the In-Sample data by using the fitness function. In this case, it was a TS Index:

Now it is time to choose only one from the TOP solutions. Most of the time there is more than one usable solution. One that we can find roughly in the top 5-10 of the best outcomes (this isn’t a classical optimization of systems, but moreso a search for the most suitable switches – i.e. Market Internals conditions – there is quite a lot of these conditions in smart code, therefore more than one can work really well). In this case, the solution I like the most is in row number two. Therefore I will choose this solution and I have a look at the In-Sample data:

The outcome looks great, so I will verify it in the Out-Of-Sample data:

Everything looks fine here as well, so let’s quickly check the overall equity:

A look at the overall equity tells us that OOS isn’t much too different from IS. This means that everything is perfectly fine. Of course, I could carry out some more robustness testing etc. – but that is up to each and every trader individually.

The whole procedure took me less than 7 minutes – and I am done.

Below is the comparison of the system outcome BEFORE and AFTER I applied the MI condition:

Drawdown improved by 69%, NP/DD ratio improved 120%, AVG Trade improvement was 65% - what else can you wish for after just 7 minutes of work?

This is just another demonstration of the application and power of Market Internals. If you want to learn more about Market Internals, get the FREE Market Internals Starter Kit on

Happy Trading!


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"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 

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