Liquidity-Based Intraday Trading: An Experimental Evaluation

Sammanfattning

This thesis investigates the problem that discretionary trading frameworks promoted in online trading education are often described in discretionary terms and are rarely translated into explicit rules that can be tested reproducibly. The study focuses on the intraday liquidity-based trading approach described by the trading educator known as TJR and asks how this approach performs in terms of cumulative return, maximum drawdown, win rate, and Sharpe ratio when translated into explicit operational rules and backtested sequentially on NVIDIA stock in MetaTrader 5 under stated execution assumptions. The research uses an experimental strategy based on a controlled historical trading simulation. The verbal trading process is translated into a deterministic Expert Advisor written in MQL5 and tested on historical intraday NVIDIA data from Dukascopy. The implementation combines higher timeframe liquidity reference levels with lower timeframe reversal and continuation logic. Because the available data did not contain the extended trading hours needed to reconstruct Asian and London session ranges consistently, the final implementation uses the previous day high and low as a proxy together with recent one-hour and four-hour highs and lows. The final backtest produced a total net profit of USD 1,838.54, corresponding to a cumulative return of 18.39 percent on an initial deposit of USD 10,000. It included 275 trades, with a win rate of 43.64 percent, a maximum equity drawdown of 9.37 percent, and a Sharpe ratio of 4.45. The profit factor was 1.18 and the expected payoff was USD 6.69 per trade. The results show that the implemented version of the TJR framework was profitable on the tested NVIDIA sample, but the findings should be interpreted cautiously. The study evaluates one explicit rule translation on one asset and one historical period, so the conclusion is not that the framework is generally profitable, but that it can be operationalised, tested reproducibly, and critically evaluated under stated assumptions.