Trading Systems in 'New Concepts In Technical Trading Systems' by J. Welles Wilder

Trading Systems Free Forex Trading Systems
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WOW!!! I never perceived myself as a ‘geek’ but I’ll tell you that the artice ‘says it all’ i.e. I am ‘officially a geek’ as of now!!!

Seriously though: I HAVE to ‘move on’ from this ‘moving on’ thing. It’s the strangest thing: I ‘move on’ when the system IS working NOT when it’s NOT working and, to be honest, the article has given me insight as to why!!! Actually: I had a good ‘chuckle’ when I read the part about the ‘mono typeface’ and here is why: Online Forex Brokers and Traders South Africa - Fintrans Transport and Investments (Pty) Ltd!!! I ‘sh*t’ you not: I finished the page YESTERDAY (before reading the article today)!!! Like I said: it’s ‘official’ now!!!

OK well: you’ve found ‘my brokers’ i.e. GCI and Delta Stock. You cannot really compare either of their platforms to MT4 i.e. they’re both just ‘too different’ from MT4 to compare and the’yre both very different from each other in turn. GCI has a lot to offer by way of commodities, metals, and indices (depending on whether you open a CFD Account or a Forex Account i.e. the CFD Account offers more of these instruments but has limited forex pairs on offer whereas a Forex Account has just about every pair ‘known to man’ but does not offer as much in the way of indices, commodities, and metals). Also: I would not open an account with GCI and be ‘under funded’ i.e. dont’ be ‘sucked in’ by the fact that you only need $500 to open an account!!! It’s REAL EASY to ‘mess up’ at GCI when you’re trading commodities and metals believe me and the overnight interest can sometimes be quite ‘heavy’ (Soybeans especially) although the ‘payout’ if you’re in ‘good trades’ can be ‘astronomical’ (again like Soybeans)!!! What a lot of people do not know is (and for some of the other reason GCI themselves don’t even advertise this fact) that GCI has GENUINE INSTANT ORDER EXECUTION I.E. NO DEALER INTERVENTION on the major pairs and on the Dow, Nasdaq, and S&P (remember that these are the index futures not the ‘main’ indices as you would trade at Delta). This is NOT an invitation to ‘scalp’ though i.e. the INSTANT ORDER EXECUTION is only during peak times (like during the NYSE Session) and the last thing you want is to get into a trade ‘instantly’ and then have to wait for the dealer to execute your exit order believe me (and this CAN and DOES happen). GCI is also ‘known’ for ‘slippage’ on stop orders but, as I have said before, if you can’t afford to have an order ‘slipped’ by a pip or two (it’s never more than that) then I personally don’t think that you should be trading in the first place because it then means that you just don’t have enough money to be trading with if a pip or two ‘slippage’ is going to ‘kill you’. Personally I’m probably ‘emtionally attached’ to GCI because that’s where I lost a small fortune last year!!! Delta is a fantastic broker i.e. excellent customer service, never had ‘slippage’, and very few ‘requotes’. Their platform does take some ‘getting used to’ but once you’ve ‘got your head around it’ it’s great to work with and has quite a few ‘features’ that GCI does not have. My only ‘issue’ is that Delta’s daily charts ‘roll over’ on Bulgarian time whereas GCI is ‘smack bang’ on New York time and, I don’t care what ANYBODY says, it can and DOES make a difference depending on your trading ‘system’ or ‘methodology’ and what you’re trading. If you’re going to trade the Dow at Delta then there is no problem i.e. you’re still trading the NYSE session times but if you’re taking ‘momentum’ into account I find that any ‘momentum reading’ is far more reliable when taken from a daily chart based on New York time. To sum up: if I had ‘big bucks’ I’d open an account at GCI but if funds are limited I’d go with Delta (they’re going to kill me for saying that BUT at Delta you can change your lot sizes ‘at will’ whereas at GCI your lot sizes are ‘fixed’ i.e. $50 mini / micro lots or $500 standard lots and with 200:1 leverage this can, and does sometimes, get you into a ‘world of sh*t’ if you don’t have sufficient margin I can promise you).

Anyway: I hope this all helps. Just one thing (at the risk of coming across as a ‘beggar’): if you DO open an account at either broker then PLEASE mention me as the Intoducing Broker or ‘IB’ (it’s ‘Dale Brenton Paterson’ for both brokers). It’s going to cost you nothing at all i.e. same spreads and everything BUT it (obviously) means that I get a little ‘comm’ ‘on the side’!!! YES: I KNOW: THIS IS A CHEAP SHOT (and if anyone has objections then let me know and I’ll remove my ‘plea’)!!! Can’t blame a guy for trying though!!!

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Listen here!!!

Am I the only one working around here (or could it be that this ‘stuff’ is as good, or even better, than I said it was and, therefore, needs no further discussion)???

chirules54:

How’s your Volatility System trades going???

(By the way: take a look at the pictures of Belize. This is what I paid my broker last year to sit and have a look at!!! This year it’s ‘payback time’!!! Hell: I might even take ol’ ‘Welles’ with me!!! Now that would be money well spent i.e. imagine having a day or two to ‘pick his brain’ at your leisure!!!).



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By the way:

If you’ve ever doubted the merits of pivot points then I challenge you to take a look at the attached monthly chart of the Dow.

Now ‘what’s the bet’ that the Dow trades to S2 before the end of the month (which I think would be very sad I must say)?

I’ll tell you that if trades to S3 before the end of the month then I reckon ‘that’s the bottom’ for sure.

Anyway: I find myself using the pivots more and more often these days (with Wilder’s systems) because a) they ‘temper’ my emotions and b) they give me something to look at all day (now that’s REALLY sad)!!!

dow monthly 11032008 0948.jpg700×433 66.2 KB

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Here is a little ‘tidbit’ for those of you who are ‘curious’ about Wilder’s ‘Delta Phenomenon’.

It unfortuanately seems to bear out what I said in my post prior to this one i.e. the Dow has a way to go ‘south’ yet (see attached chart). It MAY rally (up) for a day or two (possibly even today and tomorrow) but it will then go ‘south’ again (probably in my estimation to S3 as I mentioned previously). From around the 21st March 2008 we should see a strong rally up and it is my belief that from 21st April 2008 the Dow will either rally to 14 000 and beyond OR it will go further ‘south’ (and then my friends we are looking at Dow below 10 000 which is pretty much going to be a ‘disaster’ for the US stock market).

I’m afraid that, again due to copyright reasons, I’m not at liberty to give you more information AND I must also add that I’m still ‘very wary’ of (or should I rather say ‘timid’ about) basing any trading decisions on ‘The Delta Phenomenon’ as yet due to my lack of experience with it and my limited knowledge and understanding of it BUT this should be a good ‘test’ of my understanding of it (firstly) and secondly I just thought that you may find it interesting and I’d like to see where we actually go from here.

(I know this is not ‘New Concepts In Technical Trading Systems’ ‘theory’ BUT it’s still ‘Wilder’ and ‘the man’ paid a small fortune to patent and copyright the ‘phenomenon’)!!!

dow daily delta phenomemon 11032008 1027.jpg700×336 39.1 KB

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Greetings All,

Looks like while I wait for “New Concepts in Technical Trading”, I need to order the delta phenomenon and then get undone by the reading and understanding curve…

Well it feels as though I’m coming down with some sort of bug so I may even get the time to read to the point of understanding… A mixed blessing at best…

Later

Brian

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Sorry Dale, been a bit busy lately. Anyway, the volatility system is still working ok, I am tracking gold, gbp/jpy, aud/jpy, and usd/cad at the moment. The only open trade at the moment is short aud/jpy, which was in profit as much as 300 pips but is now back down around 30-40 pips at the moment. I have not yet got any other signals, although gold is getting closer and also gbp/jpy. I hate to say this, but something happened yesterday with the TBP system, and 8 of my 10 trades hit the stops!! :mad: It wiped out about 70% of the profits I had made with the system over the past month. I still plan on using the system, it looks like things are setting up for me to gain some of that loss back in the next few days as some big moves in several pairs seem to indicate some reversals, at least in the short term. I want to start using the swing index system, and I am almost done with school for the term so I will have some free time in about a week.

With regards to my “weighting” theory, it is really quite simple. Let’s simplify it by only using 3 pairs: gbp/jpy, eur/gbp, and eur/usd. First I would find the difference between the TBP target and TBP stop for each pair, for the past 30 days or so, and find the average of this, which is the “range”. I calculate this by taking the “ABS” function in excel (gives the absolute value) and then subtracting the stop from the target level, so if I come up with a negative number it is changed to postive by the “ABS” function. This “range” is basically a measure of the volatility of the pair, as more volatile pairs will have a bigger difference between the stop and target (obviously). Then, I convert this range into pips, by dividing each of the ranges by their “pipfactor” which for non-jpy pairs is .0001 and jpy-based pairs is .01. With my calculations, (which are a bit outdated so don’t try to recalculate them) I came up with a range of 376 pips for gbp/jpy, 179 for eur/usd and 78 for eur/gbp. Just from these numbers it is obvious which pairs move more than others. The next step is to figure out the actual weighting of the pairs. The first thing I did was decide what my “baseline” trade size is, which for me is $0.20 per pip. Since I trade 10 pairs with the TBP, I found the median range of these ten pairs (which happens to be eur/usd at 179) and set that equal to the baseline, so my trade size for eur/usd is $0.20 per pip. To get the trade size of the others, I calculate a multiplier by taking that pair’s range, subtracting it from the baseline and then divide by the baseline to get the % difference from the baseline. Then, I add 1 to get the multiplier. So, for eur/gbp the range is 78, minus the 179 baseline divided by 179 is -.436, plus 1 equals .564, which means that the range of eur/gbp is 56.4% of the baseline, so the trade size needs to be increased to make up for the lower volatility. To get the final trade value, take the baseline level ($0.20 per pip) and divide by the multiplier for each pair, so for eur/gbp you would get $0.35 per pip. Since eur/gbp moves less, you are trading with bigger pip values to average everything out, so pairs like gbp/jpy have much lower pip values (only around $0.09 per pip for me).

I apologize for all that, hopefully it makes sense, if you have any questions about it just ask, or I can e-mail the spreadsheet if you want. The only problem I see with it are if certain pairs “behave” better than others, like if you get more winning trades with eur/usd than with chf/jpy for example, since this weighting system totally ignores that aspect. Also, if your broker does not allow you to change your lot sizes like this, then it is not possible to weight the pairs exactly like I have. Oanda lets me make my lot sizes whatever I choose, so I can buy $500 worth of eur/usd, $2,000, or $5,231… it doesn’t matter. I can even buy $1 worth if I really wanted, but it would tae quite a move to make any money :wink:

Anyway, I had a question for you Dale: Since it has pretty much been determined that stock indices and commodities follow these systems better, I want to eventually switch to trading these instruments exclusively. The problem I am having is finding a broker that will let me trade cfd’s and stocks with a lower account balance. The lowest I have been able to find is $2,000 which is a little out of reach for me. I realize that you are dealing with different lot sizes and such and need more margin to cover it but I was wondering if you knew of any brokers with lower account balance requirements. I see that GCI only requires $500 for a forex account, but $2,000 for a stock/cfd account…

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Hello and good morning!!!

I’m really sorry to hear about your stops being hit. Believe me: I KNOW it’s a ‘very bad feeling’ especially after you’ve been making money and now most of your hard work is ‘down the drain’ and you basically have to ‘start over’. I’ve had to ‘start over’ too many times to mention and it gets harder and harder everytime but ‘hang in there’ because the irony of the thing is this (and funny enough not five minutes ago I was having this conversation with somebody): the MOMENT you stop trading a system because you’ve lost you can ‘bet your bottom dollar’ that no sooner will you have stopped trading it and it will ‘do what it was supposed to do’ and you WOULD have made you a lot of profit had to ‘stuck with it’. It’s the hardest thing to do I know. I STILL go through this even now with the Swing Index System let me tell you but experience over the past few months has taught me this: when you first start using ANY system you’ll ALWAYS start using it at the ‘wrong time’ AND the moment you STOP using ANY system the market will ‘miraculously’ ‘fall in’ with the system that you’ve just stopped using!!! I don’t know WHY but I do know that this ‘phenomenon’ definitely exists for whatever reason!!!

Thank you for the detailed (and may I say ‘complex’) explanation of your weighting system. You know: it’s funny but I was thinking about you and the TBP System and your weighting system the other day and I did not want to post this until I’d heard how it was going but now maybe this is the time to post my thoughts. I was thinking: if you only traded ONE pair EVER then you would not have to worry about this ‘factor’ with the TBP System. That’s for starters. Secondly: I had this thought (and I KNOW I’ll be ‘slated’ for this because it really ‘smacks’ of the ‘Martingale Strategy’ i.e. ‘doubling up until you win’ in gambling BUT hear me out first before you comment anyone): The TBP System is purported to be profitable 70%+ of the time (which I believe is true after working out ‘trade for trade’ how many times your TP is hit). So what about this: you only ever trade ONE pair AND you start with one lot (does not matter what size because your capital would / should determine this). You keep trading this lot size UNTIL you get stopped out at which time you take the next TBP System trade with double the lot size and, if your TP is hit, you revert back to your initial single lot size. If you get stopped out you double up on your lot size again. Get the picture??? Now: this IS different from the ‘Martingale Strategy’ for the simple reason that you DO HAVE a system that is profitable 70%+ of the time so it’s not like with a typical ‘Martingale Strategy’ where you are sort of ‘betting’ on a 50/50 chance that you’re ‘right’. Does that make sense??? Obviously you have to ensure that you have enough margin to ‘pull this off’ but look at it this way: if the TBP System is profitable 70% of the time that means that 7 out of every 10 trades is profitable so it means that you theoretically only have to ‘double up’ a maximum of 3 times in a row (actually its not ‘double up’ it’s more because it would have to go something like this if you had 3 successive losses: 1/2/4 and maybe even 8 lots and you have to allow for the losses as well). OK: it might sound ‘risky’ and yes you need margin (or smaller lot sizes) BUT remember that statistically the TBP System ‘delivers’ 70%+ of the time (which I’m sure you can vouch for at this stage as well) so (and I HATE drawing parallels between gambling and this business but there is no better way to put it): the ‘odds’ are ‘stacked’ in you favour with the TBP System.

Thoughts? This also (obviously) ‘does away’ with the need to weight pairs against each other AND also ensures that you have not inadvertently ended up with two pairs that, because of the correlation between the two, you effectively have a ‘double lot’ e.g. long Gold and long AUD/USD!!!

As far as GCI is concerned: I don’t know if they’ve changed anything but I know I opened both of my accounts with $500 last year (which is a mistake at GCI as far as I’m concerned but be that as it may). I’ll check with them although I’m pretty sure that the $2 000 is for a ‘Standard CFD Account’ and that account has a minumum lot size of $200 and, at 200:1 leverage, I can assure you that it’s ‘playing with fire’ at GCI. Anyway: like I said: I’ll check up with them and come back to you.

Keep on trading!!! It WILL work out for you. You have good ‘tried and tested systems’ in front of you.

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Thanks for that Dale… it makes a lot of sense. I’ve been thinking about cutting back the pairs I am trading, it would make things a lot simpler and perhaps more profitable. I like your “martigale strategy” and I am thinking about testing it somehow. The only issue I have with it is that say you use it with the TBP system, and you are trading one lot and you hit the stop (lost trade). Since the stop is further away than the target, a win (even with the doubled lot size) may not bring you back to even, since the target is usually much closer than the stop. I’ve read about martigale betting systems before, and from what I’ve read, the main reason they wouldn’t work in a casino is because there is a cap on what you can bet. You can be playing blackjack at $50 a hand, but the table max can be $5,000 or $10,000 so if you keep doubling after consecutive losses you will eventually hit the limit so to speak and the system doesn’t work. However, with blackjack the casino always has the edge (unless you can count cards of course) but with the TBP for example, the system is right 70% of the time so the odds of consecutive losses which could wipe out your margin are relatively low. Because you have suggested this idea, I have a question for you… if you would trade any forex pair with the TBP, volatility and SI systems, which would you choose? I know commodities are better but I was just wondering what you thought with regards to forex pairs. I appreciate you checking on the GCI business too, I’d like to open a CFD account with them, but I realize that trading with only $500 margin is a bad idea, but I don’t have $2,000 to work with either, so maybe I will aim for $1,000 if I can open an account with that.

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Hello,

OK: just one thing: I PERSONALLY have NOT tried this i.e. I was only thinking about it the other day MAINLY because of this ‘weighting story’ first of all and also because of the HUGE TBP Systems stops. And yes: you are right about the losses i.e. somehow you would have to ‘factor in’ the losses as well and adjust your ‘new’ lot size accordingly after every loss. You are quite right about the reason that ‘Martingale’ does not work too well in gambling (because of the table maximums) BUT as you have noted this is NOT the same thing i.e. your ‘odds’ with the TBP System are NOWHERE NEAR 50/50 AND there is no minimum so basically you’re only limited by your capital. I did read somewhere about some or the other ‘Reverse Martingale System’ for forex i.e. you START with MORE lots and DECREASE your lot size with every PROFITABLE trade (or was it LOSING trade???) (to be honest it never made sense to me anyway).

I have just checked GCI’s website AND contacted them and they tell me that the account opening minimums changed in January this year!!! I did not know that (and I had better go and update my website after posting this message)!!! I see that $2 000 is NOW the minimum for ALL their accounts AND they no longer seem to have ‘Micro’ and ‘Mini’ and all of that. I will now contact my ‘connection’ over there and see if they can do anything about this minimum or if there is a way around it. I’ll let you know.

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Thanks Dale, yes that is a bit disappointing about how they changed their account minimums, we’ll see what happens I guess. Anyway, I had a few hours of free time last night and I read about the swing index system, it is more complex than the TBP system but I am getting a pretty good grasp on how it works. Like you said in an earlier post, it seems the day you give up on trading a certain system is the day that it will start working again… well my patience is wearing out with the TBP system. I think starting tomorrow I am going to switch back to only trading one pair with it. Today again I have hit 4 of the stops out of my 10 pairs and my account balance is now below what I started with. I don’t want to give up on the system altogether, but I now need to choose a pair that will give the best results… I was thinking one of the majors like gbp/usd, eur/usd or usd/jpy, I am not sure though. I can also trade gold through oanda, but I’m not sure if trading it would be better than a forex pair… it is a commodity but it seems to be not doing too much lately, what do you think? I also had a crazy idea… what if you were to trade the TBP system and either the volatility and/or SI at the same time with the same pair/commodity? The TBP is more of a “short-term” system since you get trades every day and it follows the intraday fluctuations, but the SI and volatility systems are more long term and tend to follow trends… do you think this could work? I think it could except for the fact that certain forex pairs are probably better suited for the TBP system, and some are better suited for the SI or volatility (ones that trend more and have a higher asx or csi). So maybe choose one pair/commodity for each system and “stick to it”.

edit: Sorry, another thing I just thought of. Since Wilder himself says that you can still use two systems (TBP and reaction trend) during times where the adx is below 20, and to only use the trend following systems (SI, volatility) when the adx is favorable, or above 20-25, you could follow these rules by using BOTH systems on a pair/commodity when the adx is good, but drop the trend-following system when the adx turns sour and stick to the tbp system only, only to return to using both when the adx comes “back to life”. Sorry for throwing all these ideas out there, just trying to make sense of everything.

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Hi,

No problem (and again I’m sorry to hear about the stops). If it’s any consolation I’m having a REAL bad day too i.e. the SI System is causing me ‘grief’ today as well AND as a matter of fact I need to make a VERY important announcement to everyone (you of course included):

DO NOT TRADE THE SWING INDEX SYSTEM LIVE UNTIL WE HAVE DISCUSSED SOMETHING ABOUT IT!!! Get to know it, familiarise yourself with it, BUT DON’T TRADE IT - AT LEAST NOT ON FOREX PAIRS UNTIL WE’VE HAD TIME TO DISCUSS AN ‘ISSUE’ THAT I HAVE FOUND!!! Don’t get me wrong: the SI System DOES work, and well, but I’ve spent most of the day ‘checking something out’ and I THINK I’ve found the ‘keys to to kingdom’ with the SI System anyway i.e. I’ve THINK I’ve discovered a way to make it work in ALL markets ALL THE TIME but there is no point in me explaining it to anybody until we’re ‘all on the same page’ i.e. until you know the ‘ins and outs’ of the SI System so that YOU know what I’M trying to explain. If I’m right you can ‘scrap’ ALL other systems I promise you.

chirules54:

If I can give you any advice right now it would be to go through the SI System NOW and stop trading the other stuff for a while (do NOT wipe out your account). I don’t know what’s going on with the markets at the moment but it sure looks like everything that I do at the moment is also ‘turning to sh*t’. I’m just sorry that I did not make my ‘SI discovery’ yesterday or the day before i.e. I’d be ‘smiling smiling smiling’ right now but so be it.

Edit:

I’m also finding that with forex pairs the ADX and ADXR are meaning ‘less and less’ at time goes on. The only thing I’ve found that POSSIBLY improves matters is changin the default period of 14 to 7 i.e. this makes is a little more ‘responsive’ and ‘reliable’ when it comes to the TBP System and the RT System BUT it still seems to keep you out of a lot of good trades even with a period of 7 but it’s at least more ‘accurate’.

You know: it’s at times like this that I find myself having to remind myself that these systems were developed in 1978 (or prior) and the markets were a lot ‘slower’ then. What we need to do is ‘feed them some steriods’ for todays markets (especially forex). Either that: or we all trade JUST Soybeans!!!

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Yes, I think that is a good idea and I am not going to open any new positions with the TBP or volatility systems for now. The only good thing is since I was doing so well with the TBP system in the past few weeks that even with the two straight days of catastrophic losses I am still at about 80% of my original capital. I am tempted to keep trading gold alone with the TBP system, as even through the past week it has still done pretty well for me. I am going to study up on the SI a little more tonight, so I should have a good grasp on it by then.

edit: I am only trading gold with the TBP system at the moment, so far 2 for 2. :slight_smile: A new trade was opened at midnight ny time yesterday (5 hours ago or so) and is currently up about 350 pips, the entry was at 994.25 and the target is 1002. Hopefully gold can break into the 1000s again tomorrow! I also couldn’t resist and took a short usd/jpy trade yesterday not based on any system, but just the fact that it broke 100.00 for the first time in 12 years! It’s rebounded to around 100.50 right now, but all the information I have been reading says that it has nowhere to go but down, especially after the upcoming fed rate cuts, I think citibank projects it to hit 95.00 in the next 3 months or something.

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Hey Dale, I have the weekend free and I am getting more familiar with the SI. I’m wondering if your “fix” has been successful. Anyway, it looks like my usd/jpy short trade I mentioned above is doing quite well, I almost took profit when it broke 99.00 but I held on because I want to see what happens next week. The gold TBP trade also hit the target at 1002, so that’s 3 for 3 with only trading gold :slight_smile: My lone short aud/jpy volatility system trade is also doing well again, it hit new lows again today and its now around 310 pips up. The only scary thing is that the SAR point is still about 200 pips above what I entered the trade at, but the trend doesn’t look complete yet. Like you said, I am not going to enter any new trades (except for gold with the TBP) until we can talk about the SI “fix”. I am writing a spreadsheet for the SI right now, I should have it done in a few hours. Anyway, hope your trading is back on the rebound…

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Hi Dale and chirules54,

Sorry I’m a bit slow in catching up with you folks.

I’m working on the SI at the moment and I still have a concern over the value of Limit in the equation when not working on the commodity example. I know in both this thread and the ParaSAR you’ve experimented with a pip size multiplier but I dont think its just as simple as that. It seems the Limit of 3.00 is the maximum that his example commodity can move in a day (though it appears to move further than this on days 28 and 45) and i’m guessing we need to get a figure which simulates this idea of the maximum likely move.

I have a couple of ideas - perhaps using a multipler of ATR or using a distribution curve to identify where the vast majority of ranges lie and cut off before we get to the extreme outliers.

I wont get a chance to look at this again until later this weekend but I’ll let you know as soon as I have any more information.

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Good (Saturday) Morning Folks,

Sorry I have not posted this week (it’s been a ‘helluva week’ trading wise but ALSO NOT TO MENTION everytime I have TRIED to post this week the site is either VERY slow OR I get those ‘pesky’ ‘Page Not Found’ errors. Is anyone else experiencing this?).

When I say ‘helluva week’ I don’t mean it’s been a ‘good week’ either i.e. lot’s of bad trades and not many good ones unfortaunately. Not losing but not making either (which to me is the same thing as losing)!!! Even Soybeans decided to ‘f*ck’ with me yesterday afternoon!!!

OK: issue by issue:

midulster:

As you have correctly noted the ‘limit’ is the ‘limit up’ or ‘limit down’ imposed by the various exchanges on the various commodities and you’re also quite right when you say that in his examples the prices move WAY past the ‘3.00 limit’ in the example formula. To be honest with you: I cannot see where this makes any difference at all though (but if you figure it out then please let me know because maybe I just did not ‘get it’) i.e. if you either simply remove the ‘limit’ from the equation or use it as in the example I dont’ see the difference in the result. In MY spreadsheets (and automated indicators) I have included the ‘limit’ of ‘3.00’ but divide the the end result of the equation by my ‘PIPFactor’ to get a an ASI specific to a instrument. If you don’t do this your ‘Trailing Index SAR’ becomes meaningless e.g. if you simply use the ‘standard’ equation for Silver you’ll end up with a ‘Trailing Index SAR’ that when calculated (as 60 points plus or minus the ASI depending on direction) will never EVER get ‘hit’ or give a stop and reverse signal (not in your lifetime or mine) but the same calculation for Soybeans works perfectly. Like I said: I have included the ‘limit’ of ‘3.00’ and used my ‘PIPFactor’ but if you EXCLUDE the ‘limit’ altogether you STILL need a ‘PIPFactor’ and it makes absolutely no difference to the way the ASI is ‘plotted’ i.e. it makes NO difference to the ‘shape’ of the ASI when ‘plotted’ as in indicator or using a chart to ‘draw’ or ‘plot’ the ASI in Excel. As a matter of fact if you remove the ‘limit’ AS WELL as the ‘50’ multiplier the ‘plotted’ ASI is exactly the same i.e. only the resulting values become smaller. Anyway: like I said earlier: maybe I have just not ‘got it’ and believe me when I tell you I have tried so if you come up with an explanation I’d be real glad to hear it because this HAS been ‘bugging me’ now for a very long time and I’m STILL not convinced that I’ve got it right and, like I said, I have spent WEEKS ‘playing around’ with the formula and what I’m using is the best that I can come up with.

chirules54:

Firstly about GCI:

They are prepared to let any of my ‘clients’ open an account with whatever amount of money they like AS LONG AS I open a seperate account with the $2 000 minimum that they require (sort of like a ‘deposit’ account). This is so that they can ‘comply’ with the / their regulations i.e. as long as the new accounts are ‘associated’ with a ‘main’ account (‘associated’ by way of an IB Agreement i.e. not necessarily a ‘managed account’) that has a minimum balance of $2 000 then they’re ‘compliant’. I’m prepared to do this BUT I need some more clients to justify this ‘action’ i.e. the $2 000 will be ‘dead money’ i.e. it cannot be traded or anything like that SO if you can ‘hang on’ a month or so (I’m assuming that by then I’ll have some more GCI clients waiting to open accounts) then I’ll do the necessary. They cannot / will not use my live trading account as this ‘deposit’ or ‘compliancy’ account for the simple reason that (obviously) I trade on this account (and I suppose they’re ‘worried’ that based on my past performance my live account balance could at any time drop below $2 000 and who can blame them for being worried about this although it CERTAINLY is not my intention to ‘end up’ like that again I can assure you)!!!

As far as the (your) Volatility System trades are concerned I need to ask you something: looking at your current trades what do you THINK would have happened had you used a ‘constant’ value of LESS than ‘2.8’ i.e. used something like ‘1.0’??? I’ll tell you why I ask. I’ve spent some time this week looking at the Volatility System again and (as I said previously) what worries me is the fact that it ‘adjusts’ the SAR point depending on volatility and unless you have PLENTY of margin I still believe that this can ‘catch you in the tail’ if you’re not careful. The system is designed to keep you in the trade for as long as possible but he is assuming that we, like him, have LOADS of margin and are able to ‘ride out’ the inevitable ‘dips’ along the way which sometimes can be quite ‘stellar’ (just look at the Dow yesterday for example)!!! The Volatility System really is just a ‘break out’ system and it is using a ‘factor’ of ‘2.8 times or 3.00 times the 7 day ATR’ to determine whether the instrument has ‘broken out’ or not. The 7 day ATR is ALREADY a HUGE range in itself i.e. WITHOUT then still multiplying it by a constant I believe. What I’m saying is that if you changed the ‘constant’ to ‘1.0’ in which case the ARC then is effectively the ATR value then you’re going to get a lot more trades and the price does not have to move so much in order for you to stop and reverse if the trade is ‘bad’. I have no way of backtesting this ‘modification’ so your opinion would be appreciated. I know that the ideas of the ARC is to avoid ‘whipsaws’ BUT this is a ‘double edged sword’ i.e. in order to avoid ‘whipsaws’ you need LOADS of capital and LOADS of time on your hands.

NOW!!! The Swing Index!!! Hmmmmm!!!

I’ll tell you what my problem is (or rather what my problem has ‘become’ i.e. when I first started out using the SI System it could ‘do no wrong’ BUT it has ‘failed me’ often during the past two weeks) and here is the problem: too many times lately the SI System has given me a signal to place a stop order (either because the price has passed an LSP or a HSP or the TISAR has signalled a stop and reverse). SO: I’ve placed the orders (just like before) ‘a couple of ticks above or below’ the signal bar and more often than not (in the past two weeks) the orders have been executed and no sooner has that happened and the price has done an ‘about turn’ and ‘route marched’ my positions into ‘nice big fat jucy losses’!!! The ‘fix’ that I tried out this week basically involved not ‘waiting for the close’ i.e. THE MOMENT that you got a stop and reverse signal based on the TISAR i.e. when the ASI had moved plus or minus 60 points on itself I placed market orders and then used the LSP or HSP (as per the system) as my stop loss value. This seemed to work very well BUT it’s risky and to be honest I’m not happy with the ‘method’ i.e. it’s too ‘loose’ for want of a better desciption or rather it does not ‘hang together’ nicely. To make things worse you would not be able to trade my ‘fix’ if you were using Excel to plot the ASI i.e. you have to have the ASI being updated ‘on the fly’ so that the moment the TISAR gives a signal you can place a market order. The only other way is to ‘calculate’ the relationship between the movement of the ASI and the instrument being traded as a ‘factor’ of the ASI and price AND I have tried working this out but it’s different for each instrument AND it seems to change on a daily basis i.e. a couple of points movement of the ASI in relation to the price today may not necessarily be the same as the same couple of points movement of the ASI in relation to the price tomorrow (although I’m not 100% sure of this right now i.e. if there IS a way of working out an ‘ASI price factor’ for each instrument then you would be able to place orders as before knowing what the price must be in order for the TISAR to be ‘hit’). Another thing that I have noticed is that it keeps you out of ‘FANTASMIC’ trades as well. Again, as an example, look at the Dow this week. This is what WOULD have happened if you were following the system ‘to the letter’: you would have placed an order on Monday to go long; the order would have been executed on Tuesday (and a profit was made); on Wednesday you got a TISAR stop and reverse signal and the subsequent order placed was executed on Thurday sometime and then on Thursday the price direction reversed and wiped out all your profits thus far; and then (thank goodness) your TISAR stop and reverse order was not executed on Friday and you missed the entire move down on Friday. Basically: a ranging market if there ever was one. Now what I’m saying is this: had you been trading the TISAR (that’s actually what your’e trading now by doing it this way i.e. the Swing Points are of no consequence anymore) you would have ‘caught’ ALL these moves from what I can see (I did not trade it on the Dow but have just been ‘following’ the ‘theory’ although I did use my ‘fix’ on a couple of pairs with ‘OK’ results i.e. profits on moves that I would have missed out on). Take a look and tell me what you think. If you’re going to ‘stick’ to the system as it was designed then we HAVE to come up with some sort of ‘failsafe’ method of placing your orders far away enough so that they only get hit if it is a ‘sure’ move OR you have to introduce stop losses or something like that because this system will ALSO ‘kill you slowly but surely’ if the market is ranging and I’m afraid to say that even the ADX / ADXR offers very little or NO protection against this from what I can see. The only other idea that I have ‘come up with’ (this morning actually i.e. I ‘dreamed’ about it last night would you believe) is to use the Volatility System with a constant of ‘1.0’ (as I described earlier) and ONLY take SI System trades when the Volatility System is giving you an SAR signal in the same direction. Check all of this out and post your ideas. I’m not prepared to keep taking loss after loss (no matter how small) and the last two weeks are starting to ‘f*ck’ with my 280%/100% gains and this is ‘not on’!!! Bascially what I’m saying is this: EVEN the SI System needs a ‘filter’ of sorts i.e. in todays markets, with the volatility that we are experiencing, and the ‘data on tap by the second’ that we have nowadays, even a system as good and as well thought out as the SI System is susceptible to ‘whipsaws’ BIG TIME and we need to find a solution for this OTHER than waiting for a trend to develop because, as we know, the market only trends a very small percentage of the time. Now while Wilder MAY have had ‘gazillions’ of USD to be able to take ‘knock after knock’ UNTIL a trend developed my name is not Wilder and I don’t have his resources behind me so I CANNOT take ‘knock after knock’ until a trend develops!!!

This IS the purpose of this thread and now that some of us are all ‘on the same page’ maybe we can feed these systems some ‘steroids’ and get them better suited to todays markets. We have a good ‘basis’ i.e. there is no doubt about it that Wilder’s systems are ‘top notch’ and very well thought out but some ‘tweaking’ is really necessary for todays markets (and this time it’s not me ‘tweaking’ for the sake of it i.e. these are real problems and issues and problems and issues which, if addressed, may very well result in some ‘holy grail systems’ of sorts).

93

Hi Dale,

I was about to go to bed (3am local here) but I figured I would make a quick post before I get offline.

First of all, that sounds like good news with gci, thanks a lot for dealing with that stuff, I really appreciate it, I just need to save up for another month or two because I want to start with $1,000 before I “graduate” from forex to trading the “good stuff” (I’m sure you would agree :smiley: )

I need to refresh my memory with the SI a little tomorrow morning, so I will post about that tomorrow, for now I will concentrate on the volatility system. As you know, I only have one open trade (short aud/jpy) and it is doing well so far (+310 pips). I am also tracking gold, gbp/jpy, and usd/cad. usd/cad has done nothing but range lately so I am staying out of the market looking for a long trade, the sar signal isn’t until 1.0100 or so. With gbp/jpy, I again am looking for a long trade, since the trend for the past month or two has been a downtrend from the 227 area, and i didn’t want to get in late, although it appears that if I had just entered short 2 weeks ago when I started following the system I would still be in good shape (closed around 200.00 today). Gold, I am also looking for a short entry, because when I started tracking it, it was in the middle of this huge uptrend (which is still obviously ongoing) and I didn’t want to get in until I actually got a signal, which appears to be a long way off as far is gold is concerned, I think the sar point right now is 946 or so. Keep in mind that this is with a 2.8 multiplier for the arc point. I tried changing the multiplier to 1, and for the aud/jpy trade it would have got me out several days ago going long again, only for the pair to continue to drop. I must say though, that the current downtrend aud/jpy is in is a bit choppy, it is making its way down but it’s not a nice “clean” downtrend where you get 4 or 5 consecutive bear candlesticks, its more like 2 down 1 up, 2 down 1 up if you know what i mean. I played around with the multiplier a bit and I totally agree with you that 2.8 or 3.0 is way too high, especially because right now I am in profit around 300 pips on the trade (which has been open for almost 2 weeks) but the sar point is WAY up there still, if I hit it and reversed to long, it would be a loss of around 230 pips on the trade. In other words, it gets you in late and gets you out late. I think using 1 as the multiplier might give a few too many whipsaws and take you out of slower developing (but still profitable trends) just like a parabolic sar reversal can sometimes. I tried 1.5 and 2, and these seemed to work better with aud/jpy, but I think the best way to test it is somehow program it so it can appear on a graph, then you could “track” each trade by seeing what it really looks like and then fiddle around with the multiplier. I only wish I was more proficient in coding, because once you got it on the charts it would be pretty easy to tweak the multiplier to see what gives you the best entry/exit points, less whipsaws etc. But to summarize everything, YES I believe the multiplier SHOULD be reduced to make the system more reactive and provide more trades, but not all the way down to 1, which I think it a little extreme. Anyway, like I said I feel i need to “read up” a bit more on the SI tomorrow before I give my opinion so I will post that tomorrow…

94

Thanks for the reply.

It’s a pleasure (about GCI I mean). I don’t know why everything has changed over there but I have to be honest with you: I for one am quite happy because they are now obviously being ‘forced’ to comply with some or the other laws whereas before I think it was a case of ‘anything goes’ and this, coupled with their location, was always at the ‘back of my mind’ although I’ve never had any problems with them. Like I said: I have no problem doing this for you (and others) but I just need to find some ‘others’ to ‘justify’ the ‘action’ but I’m sure they’ll be ‘lining up’ (I hope so at least) to open accounts at GCI. Just one thing (for anyone that wants to open an account with GCI): you ALSO CANNOT be a citizen nor resident of the USA, the UK, or Quebec (Canada) again for ‘compliance’ reasons. They WILL allow ME to open an account on YOUR behalf if you live in those countries BUT it then has to be a ‘managed account’ which, I would imagine, nobody would want to open with me until I can post CONSISTENT trade results with gains in the order of last months 280% (and I’m nowhere near that this month so far)!!! Bear in mind of course that there are other brokers where you can open accounts to trade commodities and metals and the indices etc. etc. etc. i.e. Saxo Bank is one who is supposed to be reliable BUT you need $5 000 to open an account (although at Saxo Bank you can OPEN the account with $5 000 and then immediately withdraw whatever you like after that which you cannot do at GCI - I did check - BUT of course you lose ‘all the way’ i.e. fees and exchange rate changes and bank charges etc. etc. etc.).

As far as the systems go:

I came up with another ‘brainwave’ later this morning (while I was out shopping):

Combine the Volatility System with the Swing Index System i.e. use the Volatility System with a ‘constant’ of ‘1’ and place your Swing Index System orders HERE instead of ‘a couple of ticks above or below’ the signal bar. While this MAY keep out of some trades it LOOKS like it will keep you out of most of those ‘good trade turned bad’ things!!! Also: you could even trade BOTH system together i.e. place Swing Index System orders as indicated by the Volatility System and open an additional position if and when the price CLOSED past the Volatility System SAR (as per the original Volatility System).

Anyway: I’ll post some charts and things later on today (need to go and have some lunch now)!!!

95

OK, well here is a chart showing what I mean.

(I have put the chart on my business website for clarity i.e. babypips tends to ‘compress’ the size of the charts when you upload them and for this chart I needed all the space I could get so that you could see what I’m ‘going on about’. You need to download it first and then use an image viewer to view it full size i.e. just clicking on the link and viewing it in your browser makes it look worse than ever. The chart is in a .PNG format and if you can’t download it or view it then let me know and I’ll make another plan for you).

http://www.forexbrokersonline.net/charts/gbpusd_asi_volatility.PNG

It is a chart of GBP/USD as at the close on Friday. Now this is what I was saying. Especially because of what MAY happen with the interest rates in the USA next week I can guarantee you that if you placed a stop order ‘a couple of ticks below the low of the signal bar’ (the book says to use ‘5’) the order would get executed and not too long after that the price would probably turn and you would then only stop and reverse at the close on Monday which is going to cost you LOADS of pips if this happens. If, on the other hand, you place your order using the value as indicated by the Volatility System (using a ‘constant’ of ‘1’ and not ‘3’ or ‘2.8’) then MAYBE (HOPEFULLY) the only time your order will get executed is if there is INDEED a ‘proper’ downward movement. Also: if the price CLOSES BELOW the Volatility System SAR (again in this example using a ‘constant’ of ‘1’) then you could open another position based on the Volatility System alone.

Now to explain my ‘fix’: look at the chart and you’ll see that the price went up on Thursday and turned down on Friday and now you’re only placing a stop order to go short as indicated by the Trailing Index SAR at the close on Friday (for Sunday) SO you’ve missed the WHOLE of Fridays’s downward move. IF, on the other hand, you’d placed a market order THE MOMENT the ASI moved back on itself by 60 points on Friday you would have caught THE ENTIRE MOVE. That’s the ‘fix’. Why I say it does not ‘hang together’ nicely is because WHAT IF the price retraces enough to cause the ASI to move 60 points back on itself but then sometime later in the day the price turns and starts to move up again (and passes your opening price) i.e. at what point do you take a loss or stop and reverse??? The ‘concept’ of the Trailing Index SAR in the Swing Index System ‘assumes’ that 99% of the time the price will never reach your SAR order and it will turn and continue in the direction of the trend as before. Problem: this MAY have been the case when the book was written but more often than not the SAR IS IN FACT ‘HIT’ AND THEN the price turns costing you LOADS!!!

Take a look see and give us all some ideas. I’ve tried EVERYTHING including using a MA of the sum of the shadows of the bars as well as various other combinations of Wilders calculations and the order is either placed too far or too close i.e. it’s the ‘sweet spot’ that we need here.

96

Hey!!! What’s happening!!! No messages!!! (Do you people know that I work my are off on this sht)!!!

Anyway: FURTHER to my previous post I have spent YET MORE time looking at the Volatility System and the Swing Index System and it’s fascinating just how many ‘combinations’ of the two systems COULD produce fantastic results I think.

For one:

Using a ‘constant’ of ‘1’ for the Volatility System and using IT together with the Swing Index System seems to produce good results but you have choices:

1 - If the Swing Index System is giving you a signal to stop and reverse as per the Trailing Index SAR you place an order as per the Swing Index System signal BUT USING the value of the SAR as dictated by the Volatility System for your order value.

2 - If the Swing Index System is giving you a signal to stop and reverse as per the Trailing Index SAR you wait for a CLOSE below the value of the SAR as dictated by the Volatillity System (this seems to be the ‘better’ of the choices).

3 - If the Swing Index System is giving you a signal to stop and reverse as per the Trailing Index SAR you place a market order as soon as the price penetrates the Volatility System’s SAR. Once this happens you set a stop loss (in keeping with the ‘normal’ stop loss ‘rules’ i.e. risking no more than 1% - 5% of your capital) so if the price continues in the ‘right’ direction you’re ‘good to go’ but your potential loss is limited. Instead of placing a stop loss in this ‘variation’ you could stop and reverse at the same place where you would have placed a stop loss in this example.

4 - If the Swing Index System is giving you a signal to stop and reverse as per the Trailing Index SAR you place an order as per the Swing Index System signal BUT USING the value of the SAR as dictated by the Volatility System for your order value. You then place a stop and reverse order at the ‘normal’ place where you would have placed the order as per the Swing Index System. In other words if your order that was placed at the Volatility System’s SAR is executed but the price ‘turns’ then you’re assuming that if the price ‘turns’ to the point where the ‘normal’ Swing Index System order would have been placed then it’s going to continue to move in that direction i.e. it’s ‘bounced’. This would be a ‘counter Swing Index’ trade.

Using the Volatility System on its own you also have some ‘creative’ options here:

As one example:

Instead of waiting for the close above or below the Volatility System’s SAR you place a market order THE MOMENT the Volatility System’s SAR has been penetrated setting a stop loss order or a stop and reverse order ‘a couple of ticks’ the OTHER SIDE of the Volatility System’s SAR.

These are but a few ‘variations’ that I have come up with.

Take a look at them and ‘play around’. There are even more variations.

While you’re doing this you need to bear this in mind:

In my experience of using the Swing Index System it is either ‘right’ or ‘wrong’. In other words: most of the time if a Swing Index stop order is executed and the price does not ‘turn’ within a ‘short’ while then the trade is ‘good’ but if the price hits the order and ‘turns’ almost immediately the ‘chances’ are that the price is going to continue going in the ‘wrong’ direction. There very often does not seem to be a ‘middle of the road’ i.e. very seldom will the price hit a Swing Index stop order, retrace, and then start going in the ‘right’ direction again and CLOSE in the right direction. I must just mention that I had a very similar problem with Bill Williams’ ‘Trading Chaos’ system using fractals. The same thing kept happening: you were supposed to place an order ‘a couple of ticks above or below the signal bar’ (the signal bar being the bar where the last ‘valid’ fractal was being shown). Almost 99% of the time the order would get executed and the price would ‘turn’. I stopped using the system for this reason (well this was ONE of the reasons) and only this year has it become apparent to me that a fractal actually represents support and resistance so what you’re actually doing is placing an order right at the point of support or resistance and in most cases the order was executed and the price ‘bounced’ off the support or resistance point and then from that moment on your trade was ‘doomed’. I’ve been ‘analysing’ those very same ‘Chaos Theory’ trades and if instead of going ‘with the system’ you traded ‘against it’ you’d be ‘right’ a lot more times than you’d be ‘wrong’. The alternative was to NOT place an order ‘a couple of ticks above or below the signal bar’ but rather to wait for a CLOSE above or below the signal bar AND THEN place your order.

I know I’m ‘moving around’ here (from one system to another) but this is NOT me ‘up to my usual antics’!!! All of this is ‘food for thought’. As I have said before: all of Wilder’s trading systems are ‘ingenious’ I think BUT they definitely need a ‘tweak’ or two a) to work in todays markets and b) to work with / on forex pairs. The main problem with the Swing Index System is where to place your orders i.e. you have to be CERTAIN that you’re not placing orders right on a support or resistance line and this is the ‘key to the kingdom’ with the Swing Index System. I’m ‘surmising’ that the Volatility System is actually ‘giving’ you the support or resistance values (with a ‘constant’ of ‘1’). As a matter of fact it’s ‘uncanny’ how sometimes the Volatility System SAR value is EXACTLY on a previous support or resistance line SO you MAY even have to place orders ‘a couple of ticks’ above or below the Volatility System SAR!!! Another ‘variation’!!!

Edit:

One OTHER thing you could ‘throw’ into the ‘mix’ is pivots. I’ve noticed that a lot of the time the ‘bounce’ of a Swing Index System stop order normally happens when the stop order is placed at, or near, some or the other pivot point i.e. it makes NO sense whatsoever to place a Swing Index stop order to go short when the instrument has just traded close to, or is at, it’s monthly S3 level!!! Of course you have to know how to CORRECTLY use pivots (something which I’m still not too ‘comfortable’ with) and even after doing extensive reading on the subject there does not seem to be a ‘hard and fast’ method of interpreting or trading pivots so if anyone KNOWS if there actually IS a ‘hard and fast’ method of using pivots then please let us know!!!

97

OK - well - it’s official!!!

I just watched the price of GBP/USD move PAST a Swing Index stop and reverse order (to go short as per the Trailing Index SAR signal from Friday), go down to within ONE SINGLE PIP from where the Volatility System’s SAR is (using a ‘constant’ of ‘1’), move right back up to where it opened, then ‘spike’ back down to it’s low, and then move back up again!!! Had you (I) had an order placed there it would be a nice ‘loser’ right now. On the other hand I’ve just watched some other trades (three actually) moving ‘furiously’ in the right direction and the difference: the Swing Index had given a stop and reverse signal AND the price had CLOSED below the Volatility System’s SAR (again using the ‘constant’ of ‘1’). At this point it seems that the Volatility System (using a ‘constant’ of ‘1’) sure is a good ‘filter’ for the Swing Index (or visa versa). Time will (of course) tell but if nothing else I hope my posts will promote discussion.