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

[Ray_1]

Congrats to everyone who contributed to this thread. I am the lucky 1000 guy.

[dpaterso]

Good (Sunday) evening all.

1000 posts!!! Great stuff!!! Well done and thanks to everyone who has contributed to the thread!!!

I guess it's fitting that this 'milestone' has been reached because I can tell you that another 'milestone' HAD BETTER be reached tonight by all these officials that are having meeting after meeting and coming up with nothing concrete!!! Rumour has it that they really only have until the Asian markets open tonight to come up with something 'of note' otherwise we're going to continue to see these WILD swings. To be honest: it's the reason I've not been posting of late: I've been utterly speechless!!! I watched the Dow drop on Friday at the open and sat and watched it for the rest of the session in absolute AWE (and I know I was not the only one)!!! For what it's worth: the ONLY 'system' that appears to carry any 'weight' at the moment is Pivot Points (or RTS Levels) and even those get violated most times on the first penetration. Having said that though: one thing that is GLARINGLY obvious is the fact that me trying to be a 'long only shop' has been a very big mistake at this time. If you take a good look at the Dow, Nasdaq, and S&P, as well as at those currencies that have a very high correlation to those indices there was HUMUNGOUS profit to be made by being short on those instruments using the VSC(1) or the SIS (or EVEN the DMS although I think that IF or when things turn around the DMS will 'allow' for a lot of profits to be 'eaten away' before reaching the SAR point). So no: things are NOT going too well at the moment and I'm going through one of those 'I want to kick myself' periods. I SHOULD have been short all these things but was not not so maybe it's time to rethink this 'long only' 'strategy' because all it's done is cost me money and time (not to mention just how frustrating it is to watch these things 'tank' and knowing that you could have made a whole lot more than the 'scraps' off of the odd Pivot Point (RTS) 'bounce'). I suppose the only 'positive' is the fact that 'what goes down must go up' although in this scenario I don't believe things are going to 'go up' with the same 'fervor' as they went down!!! And so much for my 'Delta Phenomenon' 'predicitions' (at the moment anyway) i.e. the Dow settled at around 8 443 on Friday so we're already WAY past my 'Dow prophecy'!!! On the other hand: it COULD rally tomorrow and the next day and then close at my 'predicted' level on Tuesday. Should be interesting to see (well for me anyway). The BIG problem of course is that if this DOES happen: THEN where are we going??? I'll tell you this: if there are no announcements by all of the politicians tonight we're going to find out soon enough!!!

That said: there are loads of long trades on their way I reckon so don't miss them.

Have a great week!!!

[dpaterso]

Good (Tuesday) morning everyone.

Hmmm. I see the 'euphoria' has 'set in'!!! As fast as 'they' went down as fast as 'they' are going up!!! DO NOT BE TEMPTED folks!!! I'm 'holding on' to my 'Delta Phenomenon' 'prophecies' for now in spite of my 'niggle naggly little doubts'. Today is 'pumpkin day' i.e. 14 October 2008 and while we will probably close higher today (unfortuanately 'The Delta Phenomenon' is not accurate to 'the day') I believe our next leg down is imminent so don't get too carried away with GBP/??? and EUR/??? longs and USD/??? shorts. Put it this way: if I'm long and in profit on any of those pairs by the close tonight I'm taking profit and I'm 'out' of them.

I know you'll appreciate this Boca:

I'm having 'a whale of a time' trading the Dow, Nasdaq, S&P, and DAX (all the Futures Contracts) using Pivot Points as per Mr Carter!!! It's the only way you can trade these markets at the moment from what I can see. I'm also watching and waiting for a signal from his 'squeeze' but I have not got to a point where BOTH the upper and lower Bollinger Bands are inside the Keltner Channels (well: on the one occasion this DID happen the trade was 'bad' i.e. the Bollinger Bands moved outside of the Keltner Channels but by the time the Momentum Indicator had given an exit signal the trade was already 'south'). (Sorry: I know that was 'off topic' but if you have Carter's book, as some of you do, you'll know what I'm talking about).

Other than that: I've nothing to add really. Our trading systems are all 'holding up' as best they can from what I can see so just 'hang in there' i.e. these are 'trying times' I'll tell you.

[sirkeen]

Hello all,

Seems a little quiet around here, however I guess it is expected with the market conditions we have seen over the last couple of weeks. I hope everyone is holding there own.

My Delta account is up and funded, and I have actually been trading (small lot sizes) over the past couple of weeks! What a great feeling after spending so much time learning, reading and now getting to put it all the test. I figured I would benefit from keeping my lot sizes small for now just to get my feet wet, and when the markets stabilize, advance to correct money management techniques.

So far, I am 4/4 (with one at just above break even) and about to set up a fifth here as the European markets open. The Asian and Euro session this evening has helped me pass the time on this overnight shift, but my free time is almost up.

Anyway, hope all is well with the regulars (and passers by for that matter).

Regards,
M.

[dpaterso]

Good (Saturday) morning all!!!

All I can say AGAIN is 'WOW'!!!

Sirkeen:

It is quiet around here I must say (although I can honestly say that the reason I'm not posting of late is because I'm 'trading and concentrating my ar*e off')!!!

Well FINALLY I am able to post results (mainly because GCI does INDEED has some superior reporting features which, unfortuantely, Delta is lacking BIG TIME)!!! The attached graphic is a 'screendump' of my last 30 trades this week. Now it's NOT being posted to 'boast' (although I have to admit I'm pretty proud of myself) i.e. it's being posted so that you can see what is indeed possible using a combination of Pivot Points (RTS Levels) and the SIS on the 1 hour charts.

Now I'm not going to lie to you: it was pretty 'touch and go' the week before i.e. the swings in these markets were giving me a 'whole new set of grey hairs' I can assure you and I cannot honestly say that making these profits was a pleasureable experience i.e. my nerves are 'shot to hell' at the moment and whatever 'sleep pattern' I used to have is no longer. Having said that though: using the 'systems' mentioned I've managed to prosper in an impossible market (so far anyway) so 'take heart'!!!

(By the way: I PAINSTAKINGLY removed the 'Account Number', 'Ticket Number', and 'User' information for security reasons so don't go telling me that the report has been modified because I'm telling you that it HAS been modified to this extent. It must also be mentioned that these are CLOSED trades i.e. actual REALISED profits and losses).

Now you'll notice that I mentioned the 1 hour charts. Yes: can you believe that coming from me??? The reason I've been 'giving this a bash' is that because of the market volatility I believe that the daily charts (for the major indices anyway) are useless at this time i.e. with the Dow moving 700 - 1000 points in a day the last thing you want is a stop order to be executed because of a price spike or because of the volatility and then to be 'wrong' on the trade I assure you. I am also not advocating this 'style' to anyone who cannot do this full time and / or is undercapitalised because you WILL 'see your ar*e'. I have not tried the VSC(1) on any of these trades simple becuase I have not made the required changes to the system for the GCI platform but I will probably add this to my 'style' this coming week to compare results (although, as I have said before, the VSC(1) and the SIS almost always give you the same signals at the same time).

You will ALSO notice that I took some losses. YES LOSSES!!! ME!!! The reason being is that at GCI I cannot use my 'Enron System' i.e. you cannot buy or sell partial lots so using my 'Enron System' at GCI would result in positions being 'perfectly hedged' and, as I've found out the hard way before: these are almost impossible to get out of and, eventually, you end up 'caving in' and realising the loss anyway and by this time you've paid a fortune in interest.

Regarding forex trades: I'm not doing NEARLY as well but it's mainly because I'm not really concentrating i.e. I don't want to 'spread myself too thin' and try to trade too many instruments on different platforms at the same time so I'm sticking to the daily charts for forex pairs but again nothing 'out of the ordinary' is happening.

(I thought I should just mention that my 'clients' don't have to worry about the fact that my forex trades are not being 'nursed' at the moment i.e. the profits made at any and all accounts are all part of the 'kitty' as it were so YES: some of the profits that you see are YOURS)!!!

As far as indicators and systems are concerned: there have been no changes at all to them (other than one or two colors that I changed only because I was getting 'bored' with looking at the same things every day and it gave me something to do between 'hours')!!! One very INTERESTING thing that I have found out though: the Pivot Points that John F. Carter refers to in his book 'Mastering The Trade' are commonly known as 'Floor Pivots' and the calculations differ from 'Standard' or 'Common' Pivot Points. I am using 'Standard' or 'Common' Pivot Points to trade these markets at this time and they seem to be working very well (obviously). The main difference really is that R1 and R2 and S1 and S2 are the same but from there on the levels differ (which ironically is where our HBOP and LBOP levels are i.e. our HBOP and LBOP levels are CLOSER to the Main Pivot than R3 and S3 would 'normally' be which makes me wonder if it's not possible to use BOTH together i.e. sell at HBOP or buy at LBOP but use the 'Standard' or 'Common' Pivot Levels R3 and S3 for stops. Still thinking about this one).

Anyway: have a GREAT week. I really need to catch up on 'R&R' before we 'go into battle' again on Monday!!! At least THIS month I'll have some RESULTS to show again!!!

Regards,

Dale (forexbrokersonline.net).

(PS: WHY do we no longer have 'signatures')???

[Bocajunior]

Hello Dale, Hello all,

Great results you posted there from GCI Dale. Now that is trading my friend. Well done.

I also have spent the last couple of weeks taking a step back, studying and looking at lower timeframes trying to do some candle trading and applying Carters "Squeeze" technique. I Have not looked at the swing index for quite some time but plan to do so.

It is interesting to read your comments about Carters pivot points because I made up an excel sheet the same as in his book and when I applied it to GCI daily closes, I could never get them to match with what GCI post in their daily letter, I was confused there so is good that you mentioned that.

May i just ask you about GCI. I noticed that sometimes I "lost" my connection to their platform, though all my other internet applications appeared to be ok. Have you experienced this? It is possibly my connection. Delta on the other hand seems to remain connected all the time, however sometimes I need to click on things a few times to get them moving. Minor issues really.

On the global financial meltdown.. any ideas on where we're going? Personally I have this to say.... I haven't got a clue.

Anyway,, enjoy your RnR and spend some time with the family. I'm away to drink gin and watch the "soccer".

Hope to hear from you soon.
Rgds to all

[dpaterso]

Hey Boca,

Nice to hear from you (I was hoping you'd get to see my posts about Carter and Pivots).

I've actually never cross-checked nor cross-referenced Pivot Levels given by GCI (or Delta for that matter) but that could indeed be the reason. It does not stop HERE either i.e. I've found out in that past couple of weeks or so that there are also Camarilla Pivots as well as DeMark Pivots (and I think there were two or so more but they just don't readily come to mind right now)!!! One problem that I have found at GCI of late (well about a week ago anyway during all the 'craziness') was that there were errors or 'noise' on the charts sometimes i.e. they were having data feed problems so sometimes there was an erroneous 'spike' (NOT the broker 'stop hunting' I assure you) and, of course, this rendered the Pivots (well my Pivot Point Indicator anyway) totally useless for the next day and the coming week unlike the SIS which does not really 'care' about such things!!!

As you know: GCI was my very first broker so it's about (plus) two years I've been trading with them now. I've only ONCE had a problem with connectivity that was THEIR fault (they simply decided to do a system upgrade during the middle of MY trading day which, admittedly, was very early in THEIR morning but this was AGES ago)!!! Aside from that I have had connectvity problems between me and them once or twice but those have always turned out to be some connectivity issue between South Africa and the USA (GCI has a 'tracking utility' that shows you where the problem is in relation to the 'world'). Interestingly enough: I think that GCI's platform uses HTTP to connect whereas Delta's uses TCPIP. The reason I say this is that I have had occasion where I could not connect to GCI but I could connect to Delta no problem and this has only ocurred when my service providers DNS Servers have been down i.e. as long as I've had a connection to the Internet, even although I could not actually browse websites, I could still connect to Delta but not GCI at the time. This could explain the anomally to which you refer.

I must just tell you (while I / we're on the subject of GCI): I'm not sure if they're 'under new management' or if someone decided to 'take charge' and 'step up to the plate' but since I've been trading THIS TIME AROUND (using our trading systems) I find that orders are almost always executed at the price of the order and they now have instant order execution of many more instruments. There are one or two exceptions to this rule though and ONE of them is Platinum i.e. you NEVER get the price of your order and I've noticed that the Platinum price on the platform appears to hardly move during the day but when it does it's in big increments. I'm not sure if this is just how Platinum trades or if it's one of those instruments where they do not have a 'realtime feed' (or whatever you'd call it). Other than that though: I must say they have really done an 'about turn' (but then again: maybe it's just me that 'sort of' knows what 'things are about' now i.e. not sure to be honest)!!!

One thing you have to be careful of though (especially the 'new trader') at GCI: the cost of each lot is 'fixed' (in my case a single lot of ANYTHING only costs $25 in margin at 400:1 leverage). SO: the temptation is ALWAYS there to NOT follow our money management rules. At Delta for example, using our 1.875% margin per lot, you'd currently need about $3466 per full lot (10 000 units) of EUR/USD which would give you a $1 per pip movement. At GCI that very same EUR/USD $1 per pip movement would only cost you (me) $25 in margin so the tempation is always there to open 3 lots (which is still 'roughly speaking' not violating our 1.875% money management rule by too much). The problem NOW of course is that you're NOW getting $3 per pip movement and at THIS point you are INDEED now violating our money management rules and it's real easy to overtrade the account if you're not careful which, in hindsight, is probably the NUMBER ONE reason why I lost so much money at GCI in the past!!! I've found one or two trading statements lying around that I must have printed out last year. They're a joke now!!! There was like $800 in the account and I had like 10 positions open on different instruments (like the Dow for example). Now even although it APPEARED that I had LOADS of free margin there was INDEED a potentially HUGE problem. Remember that even back THEN the Dow could move 200 - 400 points in a day so you only had to be 'wrong' once and half your account was gone (which I managed to get 'right' countless times)!!! OH THE JOY of learning the hard way: no trading system and no money management!!! And even ASIDE from having robust trading systems and money management rules you also have to be VERY careful which instruments you trade at GCI (I've mentioned this before). The Bovespa Index can move in increments of $400 on a good / bad day for the same margin cost!!! The DAX as well!!! I AM, as a matter of interest, trying to work out some sort of money management rules based on the 'expected volatility' of an instrument for this reason so if anyone has any ideas then please feel free to comment. In other words: given the SAME margin cost you can trade EUR/USD AND the Bovespa at GCI BUT EUR/USD will only ever move SOOOOO much in a day whereas the Bovespa can make those same EUR/USD moves in a day look like 'market noise'!!!

Lastly: according to me and 'The Delta Phenomenon' I believe we're still going another leg down!!!

Regards,

Dale (forexbrokersonline.net).

[dpaterso]

Good (Sunday) morning everyone!!!

'I had a dream' (last night) about our money management rules and how they should be carefully adjusted according to the instrument being traded!!!

Let me explain (this follows on from my previous post where I mentioned to be very careful when using our money management rules 'as they stand' on certain instruments):

Right now the margin cost of a full lot (10 000 units) of EUR/USD at Delta is about $68. Using our money management rules (let's say you're using the 'original rules' i.e. 1.875% of total capital as the maximum margin cost per position) you'd need about $3627 of total capital to take this trade.

(I'm using EUR/USD as a 'standard' or 'baseline').

Now the 14 day ATR for EUR/USD currently 0.0253 or $253 (rounded up).

Dividing our total capital requirement of $3627 by $253 gives me a 'factor' of 14 let's say.

So I'm saying now that you need at least $3627 total capital to trade one full lot of EUR/USD which is a margin cost of $68, you're getting $1 per pip movement, and the current expected $ range is $253 per day. Agreed???

Now I need to 'equate' this to GCI so:

At GCI the same EUR/USD trade would cost you $25 in margin. However: the same trade on the Bovespa Index would ALSO only cost you $25 in margin so using the 1.875% rule is useless here.

HERE is the difference though:

The Bovespa's 14 day ATR is currently 3915 and the $ value per point movement is $0.50. This gives you a daily ATR in $ of $1958 (rounded up)!!!

So using the 'factor' of 14 that I arrived at above:

You need a minimum of $27412 (14 x $1958) of capital to 'run the same risk' trading the Bovespa Index as the 'risk you are running' trading EUR/USD!!!

Does that make sense to any of you??? Can you think of another way of calculating this??? If so then please let me know.

Here is another example:

The Dow (Futures) Index currently has an ATR at GCI of 686 and the $ value per point movement is $1. This gives you a daily ATR in $ of $686.

So again using the 'factor' of 14 that I arrived at initially:

You need a minimum of $9604 (14 x $686) of capital to 'run the same risk' trading the Dow (Futures) Index as the 'risk you are running' trading EUR/USD!!!

Make sense???

Whichever way you do it though: it's GLARINGLY obvious that you MUST take into account the $ value per pip / point movment as well as the expected 'range' of an instrument into account at GCI (because the lot sizes are 'fixed') before making any trading decisions on a particular instrument (and I'll be totally honest with you: JUST from THOSE calculations I should STILL not be trading the Bovespa Index)!!!

Now whether or not using the 14 day ATR is the correct way I'm not sure. Maybe to be 'on the safe side' you would take the MAXIMUM movement ('range') in a week for the past 52 weeks or the MAXIMUM movement ('range') in a day for the past 365 days or something like that (which, of course, would dictate that you need quite a bit more capital but, of course, you'd be 'safer')!!!

The point really is this though: can you see just how easy it is to be 'sucked in' to trading an instrument that EVEN ALTHOUGH the margin requirement is minimal and is APPARANTELY NOT violating your money managent rules you should not even be LOOKING AT trading that particular instrument with a given amount of capital in your account!!!

Thoughts welcome!!!

Regards,

Dale (forexbrokersonline.net).

Edit:

Now strangely enough (maybe not so strange I suppose): using the same 'logic' above BUT taking the values from the 1 hour charts (for example) you COULD argue that given the same amount of capital BUT trading off of the 1 hour charts increases your 'ability' to trade certain instruments that you would not normally be 'allowed' to trade using the daily charts. In other words: the 14 HOUR ATR in $ is a lot less for EUR/USD and the Bovespa Index than the 14 DAY ATR in $ for both instruments. Just a thought. Of course: the likelihood of 'whipsaws' increases exponentially with the shorter timeframe so this you also have to somehow 'factor in' I'd imagine.

[kaalilaatikko]

Dale, I rise my hat high and bow deep! I've been hit a bit hard recently and reduced my trading very considerably. I've come to the same conclusion that trading on daily charts has been very unsure recently, but unfortunately I have no chance to work on shorter timeframes. I have applier a lot of enroning, in spite of the relatively small trade sizes, and this has effectively stopped the positions from sinking further. I am glad that I have followed my money management rules - which were bound to the pip prices rather than only margins, much like just discussed. My problem has just been that I have had too many positions open at the same time, and while not violating the rule of the total maximum margin, they have all turned severely sour at the same time. And I have been looking at VS SARs, while VSC1 enroning SARs as discussed a while agowould have been a better choice.

But anyway, I'm far from any margin calls and the account balance is still good. I'll just have to live with the bad positions for a while now. Though it would be very tempting to open a number of positions again, I will be very careful on that from now on and look at only a couple of instruments at a time. One thing I've now seen well in live action is the "forming orders" concept by Delta and think I'm getting the idea what's really behind enroning. And the idea (by Craig, if I remember correctly) of seeing the monetary figures just as a score about how you are performing is a great way to search for the zen of trading.

[dpaterso]

Hello,

Nice to hear from you (and thanks for the compliment).

I still 'like' my 'Enron System' but it has one severe 'psychological drawback': you can very easily sit with losing positions for a VERY long time. Now whether or not this is WORSE than realising a loss I'm not sure. I'm starting to suspect that it IS worse i.e. if you realise a loss it's 'gone and forgotten' after a while whereas the losing 'Enron' positions 'stare you in the face' on a daily basis!!! Of course: once you DO close out an 'Enron' position at profit then the 'negative' is IMMEDIATELY forgotten!!! Just something to think about!!!

Now further to my previous posts here is yet another 'method':

I created an 'indicator' that simply gives me the MAXIMUM difference in pips / points between the OPEN and the CLOSE for the entire number of bars being displayed on any given chart or timeframe. It would be better to use the MAXIMUM difference in pips / points between the HIGH and the LOW for the entire number of bars being displayed on any given chart or timeframe BUT at GCI (because of data errors) this is not possible (although it should not be a problem at Delta because Delta 'cleans' their charts if a data error occurs).

Now using similar logic as detailed in my previous posts (I'm not going to repeat the money management 'stuff'):

The biggest difference between the OPEN and the CLOSE on EUR/USD since 2007-08-16 (GCI's daily chart only goes back this far) is 0.0322 pips or $322. Dividing our total capital requirement of $3627 by $322 gives me a 'factor' of 11.

For the Dow (Futures) then: the MAXIMUM difference in points between the OPEN and the CLOSE for the same period is 1061 points or $1061. Therefore the total capital requirement is $11671 (factor of 11 x $1061).

For the Bovespa Index: the MAXIMUM difference in pips / points between the OPEN and the CLOSE for the same period is 5051 points or $2526 (5051 x $0.50). Therefore the total capital requirement is $27786 (factor of 11 x $2526).

This is even more conservative (by the looks of things) than using the ATR.

It once again proves two things:

1 - Be CAREFUL which instruments you trade

and

2 - I SHOULD NOT BE TRADING THE BOVESPA (at this stage on that account anyway)!!!

You know what I don't get:

Last year I had a HELL of a time as you all know. Now aside from the fact that I did not have our trading systems and could not SPELL 'money management' correctly let alone APPLY money mangement rules: NONE of this was EVER explained ANYWHERE!!! EVEN IF I applied some form of money mangement rules as they are given from time to time on the 'new traders' thread I'd STILL have run into a problem which is now evident from the above. In other words: EVEN IF you were using some of those money mangement rules that stipulated that you never risk more than a certain percentage of your capital on a single trade you'd STILL have a problem i.e. if you did not take into account the particulars of the instrument being traded (like the Bovespa Index for example) you'd STILL 'wipe out'. Why??? Because if you used THOSE money management rules you'd ALWAYS get stopped out on the Bovespa no matter what. In other words: EVEN ALTHOUGH you WERE INDEED following money management rules your capital would STILL 'slowly but surely' get 'eaten away' on each and every single trade.

I NOW understand COMPLETELY for the first time why I've heard of people who traded the Dow for YEARS and made nice profits. Then they've moved to the DAX (for example) and 'wiped out' (this ASIDE from the fact that the movements on the DAX are in EUR and converted to USD on the charts).

Interesting. Very interesting!!! NEVER a 'dull moment' in THIS business!!!

I suppose to 'summarise' (unless someone else comes up with a better idea):

This should be factored in to your money management rules:

Take the ATR of an instrument, get the equivalent $ value of the ATR, multiply THAT by a factor of between 11 and 14 (10 and 15???), and the result is what you need in capital to be trading a single lot of that instrument to be 'safe' and avoid a potential 'wipe out' (margin call)!!! AND THIS IS DIFFERENT BY THE WAY from Wilder's CSI i.e. the CSI is giving you 'the best bang for buck' instrument to be trading. What it's NOT telling you is IF you should be trading that instrument, given the amount of capital that you have in your account, or not!!! There is a very 'subtle' difference there!!!

Regards,

Dale (forexbrokersonline.net).