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

[dpaterso]

I've just gotta tell you this:

These systems are THE BEST man!!!

I just watched a long position on GBP/USD 'tank' down to an almost $300 loss. Now it's back in profit!!! Every other system on the planet that I know of would have stopped you out for a loss but NOT 'the old mans system(s)'!!!

[chirules54]

Thanks for all your help Dale, I really appreciate you taking the time for me but I need to take a break from this until I get done with class tomorrow because I am just getting frustrated. No matter what I do I still seem to get the same stupid incorrect values that increase by way too much every day.

The following applies to Gold, data used is last 6 weeks or so
I'm calculating the SI values like this exactly: 50*(S7/R7)*(J7/3)
Where S7 is the numerator, or C2-C1 + .5 (C2-O2) + .25 (C1-O1)
R7 is R
J7 is K
and 3 is the limit

After getting these values, which for me are ranging between about -1200 and 500, I calculate the ASI by adding yesterday's ASI to today's SI value. These values are ranging between about -1000 and 2000. Finally, I take the ASI, and divide it by the pipfactor of 0.1 and get a new column called pASI where the values range between about -10000 and 20000. The only problem is, these values fluctuate thousands each day, which tells me that I'm doing something wrong.

[dpaterso]

No problem. It's always a pleasure. SEND ME AN EMAIL!!! (I promise I won't 'spam' you)!!! Let me send you another Excel worksheet to make your life easier!!!

[chirules54]

Thanks Dale.. e-mail sent. The title is "swing index" in case it went to your spam folder, and my e-mail address ends in @onid.orst.edu

-Nick

[chirules54]

Ok Dale, I got the e-mails and I looked over the spreadsheets. My sheets look like yours now, so it appears that everything is correct now. The only thing that is still bugging me is how the ASI values change so much. In the book, the ASI goes back on itself 60 points from the high or low value only 4 or 5 times it seems, while with our data it seems that it happens a lot more frequently However, the system seems to be working great for you, so I'll have to start it myself tonight

I wanted to ask you though, is there any particular reason you are following gbp/usd with the system? One of the sheets you sent me was gbp/usd and I was just wondering if you traded gbp/jpy as well, or if you were just using it as an example. I plan on doing gbp/jpy and gold, but if you think there are better pairs to trade I will take a look at those.

Also, that business about having opposite positions (like long and short gold at the same time) you mentioned earlier was a problem for me initially, but Oanda allows you to open sub-accounts so I can have opposite positions open at the same time. I had my short VS gold trade open yesterday, but the TBP gave me a signal to go long, so when I did this, it closed out my VS trade for a few minutes until I realized what happened. Now I have a sub-account for my VS trades, one for the SI, and one for the TBP.

[Bocajunior]

Good day all,

Ok, I'm currently trying to figure out how to calculate the CSI for various currency pairs and Gold and Silver and I just want to run it by you that I am doing this correctly.

I know you guys have been talking about Pip factors for ATR and how it could effect the calculation.

So in this example for a mini lot of USD/CHF I have the following:-

ADXR = 43.9
ATR (14) = 0.0134 (134 pips)
Margin = 200 $
C = 2.95 $
V = 0.98 $

So when I run it through his equation I get a rating of 266 for this pair. Does this sound right? Without worrying about the specifics of ADXR or ATR, I just want to check that I am understanding the equation correctly.

Thanks all

[chirules54]

Hey Boca, that's what I get also when I calculate it, so it looks like you are doing it correctly. You'll notice that the CSI values can change quite a bit depending on how the adx and atr values change day to day, but there always seem to be a couple pairs (like gbp/jpy) and of course gold that are pretty much always high on the scale.

[dpaterso]

Good morning everyone!!!

Nick:

I'm glad you got your stuff sorted out. Did you find out what was different between your calculations and mine? I mean I know you got it 'sorted' but what was the problem just for interest sake?

I honestly believe that the reason we have so much more movement is because of the difference between the markets today and the markets back then i.e. volatility. Also: as much as I love 'the man' he ALSO makes the same mistake as most other i.e. the examples are always 'best case' scenario!!!

As far as forex pairs are concerned I really only trade the major pairs and their crosses i.e. GBP/USD just happened to be the spreadsheet that I sent you i.e. no particular reason for sending you that one. The only 'commdoll' that I MAY trade if I get a signal is AUD/USD and I stay away from the 'exotics' and pairs with HUGE spreads. It must be said though that I do have all the ???/ZAR pairs open on my quote screens so that I can see what our exchange rate is doing and now and then when I look at their charts it would appear that the SI System will also work on pairs like this (but do you REALLY want to trade a pair with a spread of 500 pips like GBP/ZAR although I must say that the 'payout' on pairs like these is great if you're on the right side of the trade).

Good and clever thinking about the sub-accounts. An idea for me and others that want to trade with multiple systems on the same instrument at the same time.

Boca:

Looks right to me to. Just one thing though (and I'm not ENTIRELY sure that I'm right about this but anyway): in my opinion you need to be careful with the CSI when comparing the CSI values. What I have found is that you cannot compare something like (again) GBP/ZAR and EUR/USD for example. The reason being is that GBP/ZAR WILL ALWAYS have higer CSI rating EVEN IF it has no directional movement and EUR/USD is moving up and down 'in leaps and bounds'. The reason (I think anyway) is AGAIN because of the difference in the quoted prices i.e. GBP/ZAR if quoted as 15.4708 and EUR/USD is quoted as 1.5658 so the ATR and ADXR value for GBP/ZAR will ALWAYS be greater than the ATR and ADXR value for EUR/USD. I think a 'PIPFACTOR' is also needed here in order to ensure that you're comparing 'like for like' and 'apples with apples'. THEORETICALLY because of the NATURE of the CSI calculation it should not make a difference i.e. maybe I'm wrong and something like GBP/ZAR IS always the 'best deal' to be trading because of the payout??? Maybe Gold IS ALWAYS the best metal (commodity???) to trade??? All I know is that at one stage I 'tracked' the CSI for ALL the pairs available to me for about a week some time ago and pairs like GBP/ZAR and EUR/SEK were ALWAYS the highest on the CSI scale which worried me. As I said: I'm not sure about what I'm saying myself and tend to no longer use the CSI. Feel free to comment about this and if I'm wrong then please do correct me so that I don't impart 'nonsense' here!!!

And by the way (not to spoil anybodys day) but I thought that you should know that I've gone from being UP over 20% to being UP only around 1% this morning (no point in only telling you about the good stuff)!!! I've not had any stop and reverse orders executed as yet either and I'm sticking to the system regardless but I just thought that you should know. Basically a whole weeks work with almost exactly $0 profit give or take a few $$$ (so far anyway)!!! I personally think that it's because everyone is now waiting for the jobs numbers this afternoon so nothing is really moving. At least I HOPE this is the reason. (Strangely enough as I was typing this message to you I see the profits starting to climb again)!!! All I'm saying is to not get discouraged when you're down i.e. one thing I can say about this system is that is very rarely just stops you out for nothing i.e. even although the prices of 99% of my open positions have retraced to their original opening prices they're still open (and it would appear that the positions are all still in the right direction) and this after there were HUGE spikes up and down yesterday. Put it this way: I'd rather break even and have made exactly $0 profit by the close tonight than having lost money!!!

[chirules54]

Hi Dale, the only differences I found with my calculations and yours was that I was using the wrong pipfactors, and a couple little errors with my formulas like using absolute values in the wrong spots.

I just wanted to make sure before I started trading live, in the book when he says to place the stop order a "tick or two" above or below the sar price, you set the graph to display the average price (not the bid or ask price) and used 1.5 times the spread, correct?

Once again, thanks for all your help.. And you know I'm kind of intrigued by the reaction trend system because it has components for ranging periods and trending periods.. I think it will be my next project.

[dpaterso]

Hello again,

As far as my order are concerned: that's ALMOST correct (at Delta anyway) i.e. 1.5 time the spread PLUS 5 ticks / points / pips. Sometimes it may LOOK as though the orders are FAR away from the price but believe me they get hit and you tend NOT to get 'caught for nothing' by a slight movement up or down. It's just personal preference though I guess. At GCI (by the way) I can't do this i.e. the price shown on the charts is ALWAYS the bid price i.e. you don't have a choice so at GCI I used 1 times the spread minus 5 ticks / points / pips for short orders and 2 times the spread pluc 5 ticks / points / pips for long orders.

I think that the Reaction Trend System is probably the most UNDERSTATED system in the book. The only thing that concerns me about the system is that 'B', 'O', and 'S' 'day labelling' i.e. you'll see in the book that it's based on the premise that we get three days up and two days down and I'm not ENTIRELY sure that this still applies. I promised myself that I would write some sort of indicator or calculator or something that will go through the data for a particular instrument and work out the 'average ratio' of up days to down days but I have not got around to it yet. And even when I do then I need to work out how this would affect his 'day labelling' i.e. would it have to be altered or what? Like I did say the other day though: I have used JUST the HBOP and LBOP from that system as a 'system' on it's own i.e. the idea was to ONLY take 'Trend Mode' trades and it worked pretty well the few times I tried it I must say. I even wrote a standalone calculator for it at the time i.e. to calculate the HBOP and LBOP by entering the previous days prices. To be honest though I never used the system for any extended period of time so I can't REALLY comment on the effectiveness of the system as a whole. Conceptually it looks good though.