The Anomaly Mentorship - Garrett Backtesting

Summary

The video is a live trading lesson that combines a brief market recap with a historical backtest of index futures. The instructor emphasizes reading higher-timeframe context, comparing related markets, waiting for confirmation, and avoiding trades when price action is unclear.

Main Ideas

• Build a directional view from higher timeframes. Review the daily and weekly context, including whether price is expanding or consolidating, where relevant highs and lows sit, and which liquidity levels might draw price.
• Use related markets to assess confirmation. Compare indices such as ES, NQ, and YM. Their relative behavior—whether they move together, diverge, or one fails to make a new high or low—can help identify SMT, changes in relative strength, and potential lagging-asset trades.
• A gap or SMT signal alone is not enough. The instructor rejects several setups because the signal lacks confirmation, is located at an irrelevant swing, or appears in poor-quality consolidation. A trade should fit the broader framework, not just one chart feature.
• Be cautious during consolidation and after large expansions. After a pronounced daily expansion, the instructor expects less certain or more sideways conditions and is less inclined to anticipate another clean expansion. He skips sessions with no clear liquidity draw or conflicting price action.
• Accept that some moves will be missed. If the required confirmation never arrives, the instructor prefers not to enter—even if price later moves in the expected direction. He treats selectivity as part of the process, not a failure.

Trading Approach

Start with the Larger Picture

• Review the weekly and daily charts.
• Mark relevant highs, lows, equal highs and lows, gaps, and likely liquidity draws.
• Decide whether the market is expanding, retracing, or consolidating.
• Form a tentative directional bias, but do not treat it as an entry signal by itself.

Compare Correlated Assets

• Observe how ES, NQ, and YM behave relative to one another.
• Look for SMT or a change in relative strength—for example, one asset taking a meaningful high or low while another fails to do so.
• Prefer a clearly identifiable leader or lagging asset. If leadership is ambiguous, wait or skip.
• When trading a consolidation, the instructor generally waits for an asset to manipulate the range and then looks for a failure to continue, or for the assets to synchronize.

Wait for a Suitable Intraday Trigger

• Pay attention to session timing, especially the market open and later windows such as 10:00 or 12:00.
• Look for confirmation, such as a change in relative strength, a price reversal pattern, or a relevant gap interaction.
• For questionable setups, wait for more evidence—such as a candle close or clearer confirmation—instead of entering prematurely.
• A potential scalp or lagging-asset setup may be considered when a higher-timeframe reversal is unconfirmed, but the instructor rates these as lower probability.

Plan the Trade and Manage Risk

• Place stops at levels that invalidate the setup; do not choose an artificially tight stop simply to improve the reward-to-risk ratio.
• Favor a safer stop location over a more ambitious target when needed.
• The instructor discusses targets such as around 2R, while noting that lower-probability trades may be taken only to secure a modest result or complete a trading day.
• In one example, a relevant lower-timeframe level associated with SMT and a gap acts as a protected level. Once price has moved beyond it, the instructor considers moving the stop to breakeven.
• Use less risk for low-confidence setups and more only for stronger, higher-quality ones. Do not increase risk simply because a prior trade lost.

Backtest Observations

• The initial market recap suggested a bullish framework for indices, but the expected confirmation did not appear, so the instructor did not force an entry. He also considered gold a skip because it lacked convincing SMT confirmation, while describing oil as having a cleaner setup.
• Several backtest sessions were skipped because of consolidation, conflicting signals, weak liquidity objectives, or unusually large prior expansions.
• Some trades lost despite meeting the instructor’s criteria. He treats losses as part of the process and distinguishes between a valid setup that fails and a setup that should not have been taken.
• One evaluation example took roughly a month and about 14 trades to complete. Later, the instructor describes a slower period with about five trades over 13 days, attributing the lower frequency to expansion followed by consolidation. These are examples from the session, not promises of typical results.
• The instructor cautions that an 80% win rate is unlikely to persist. He considers a win rate of roughly 50–60% more realistic, while noting that a favorable reward-to-risk ratio can still produce strong results. The backtest sample is limited, so these figures should not be treated as guaranteed performance.

Speakers and Sources

• Primary speaker: The trading instructor, apparently Garrett based on the video title, who leads the lesson and explains the charts and trades.
• Viewers and chat participants: Referenced through questions and responses, but no separate viewer is clearly identifiable as a featured speaker.