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Day Twelve

 Hey everyone,

After the recent, shall we say, "humbling" experience with my news straddle strategy's backtesting (ouch, those 10-pip losses!), I've had to take a serious step back and re-evaluate my entire approach. It's easy to get caught up in the excitement of "algo" and "bots," but sometimes, the best path forward is to slow down and deepen your fundamental understanding.

And that's exactly what I'm doing.

Back to Basics: Alex Morris's Supply & Demand Strategy

I've decided to shift my primary focus for now. Instead of immediately trying to fix my news straddle algo, I'm dedicating my effort to learning the components of Alex Morris's Supply and Demand strategy from The Trading Cafe.

This isn't abandoning algorithmic trading, but rather taking a strategic detour. The "Six Figure From Scratch" book and the accompanying chapter readings have been incredibly insightful, and I'm realizing the importance of truly understanding a trading edge manually before attempting to automate it.

Supply and Demand trading focuses on identifying institutional footprints in the market – areas where large banks and institutions have previously bought or sold, creating zones of potential future price reaction. It's a price action-based approach that relies heavily on chart reading and discretionary decision-making.

My goal now is to:

  1. Learn the Components Individually: I'm breaking down Alex Morris's strategy into its smallest, most digestible parts. This means understanding exactly how to identify valid supply and demand zones, how to recognize specific entry and exit patterns within those zones, and the nuances of confirmation.
  2. Gain Confidence in Manual Application: Before I even think about coding, I need to be able to consistently identify and apply these components on a chart myself. This is where hours of screen time and diligent practice come in.

The Path to Automation (Eventually!)

My journey into algorithmic trading isn't over; it's just temporarily on pause while I build a stronger foundation. The plan is to follow a disciplined progression, focusing on manual mastery first:

  • Confidence in Components: Master each individual element of the Supply and Demand strategy.
  • Backtest the Whole Strategy: Once confident, I'll manually backtest the entire strategy rigorously, just as I did with my news straddle. This will involve significant chart replay work.
  • Demo Trade the Whole Strategy: After a successful backtest, I'll move to a demo account, applying the strategy in live market conditions without risking real capital. This tests psychological discipline and real-time execution.
  • Live Trade the Strategy: Only after consistent profitability and confidence on a demo account will I consider live trading with small capital.

And then, only then, if the strategy proves consistently profitable and definable in a rule-based manner, I might look into creating an algorithm for it.

This feels like a more sustainable and ultimately more effective path. Building a solid manual edge first will not only give me a deeper understanding of market mechanics but also a much clearer blueprint for any future automation efforts. It's about patience and building skills step-by-step.

Have you ever taken a step back from automation to master a manual strategy? What were your key takeaways? Share your thoughts in the comments!

Happy learning,

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