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

[dpaterso]

I was just thinking about something that I'm not SURE actually NEEDS to be said BUT I'm going to say it anyway:

PLEASE just remember that I'm just an average guy who desperately wants this to work for him. I am really NO different from any of you and I DO NOT know more than any of you. The reason I'm telling you this just to remind you all that when I post 'stuff' about the systems in the book I am giving you MY OWN interpretation and I COULD BE WRONG sometimes (the calculation of the 'Trailing Index SAR' and the use of a 'PIPFACTOR' come to mind). Even although what I'm doing appears to be working: WHO KNOWS??? Maybe I'm NOT getting the best out of the systems because I've made an error in judgement i.e. maybe I could be doing EVEN BETTER!!! See what I'm saying??? Yes I HAVE spent a very long time studying the systems and seeing what 'makes them tick' but you never know: sometimes when you've been looking at the same thing too long you may be missing something that someone else may just 'pick up on' when using a 'fresh pair of eyes'!!!

[dpaterso]

As a matter of fact I DO INDEED have a question about something that I do not 'get' in the book (strangely enough after posting the above post):

On page 97: 'Fig. 806' and 'Fig. 807':

He shows the labels 'Significant High Swing Point' and 'Significant Low Swing Point' on those diagrams. What I don't 'get' is WHY are THOSE points 'Significant' and the other 'little swings' on those diagrams NOT 'Significant'???

I know in the 'DEFINITIONS' section of the Swing Index System on pages 101 and 102 the HSP and LSP are identified as such if an ASI has higher or lower ASI's on either side of an ASI (blah blah blah) BUT do you think THAT is the reason that the above points are 'Significant' and the others are NOT 'Significant'??? By LOOKING at the diagrams it sure would APPEAR that they have higher or lower ASI's on either side of the HSP's and LSP's or is this just an 'optical illusion' or a 'scaling' problem??? (Or am I 'dumb')???

[Bocajunior]

All,

Thanks for the responses to my questions on the CSI. You are right Dale that it may require more thought if we are goingt to use it on so many different currencies and commodities.

I wonder how it would work if we could factor in the ATR as a % of the price, then it would apply to all instuments, wouldn't it. Just a thought for now.

Anyway, what about Gold and Silver?

For 10 ounces of Gold I have the following:
ADXR = 23.47
ATR(14) = 22.41
M = 181.39
C = 4
V = 0.1

CSI = 253. ATR was 22.4 but I used 224 for the equation.

But for 1000 ounces of Silver? I am a bit confused here:-
ADXR = 33.5
ATR(14) = 0.7644
M = 349.4
C = 40
V = 0.1

I am getting about 720 or 72 depending on how I play with ATR. What are your throughts on that?

Cheers

[dpaterso]

Hello.

It's an idea (ATR % thing): let's look into it.

Again: the reason you're getting sort of 'either / or' answers with Silver for instance is because of pretty much the same reason I think. Silver is ALSO one of those instruments where is you use the EXACT CSI formula it also gets a high CSI value and I can tell you from experience that Silver is really a 'dog' to trade i.e. sometimes it can just meander in a range for hours and hours on end and 'in my book' that does not make for 'stirling' trades and therefore I don't think 'warrants' or 'deserves' a high CSI rating.

The only other thing that I can think of is that maybe applying the same 'PIPFACTOR' that I devised for the Swing Index System will 'get the CSI in line' i.e. a 'constant' i.e. now 'comparing apples with apples'. I'll take a look later on today.

[dpaterso]

By the way Nick,

I'm not sure what timeframe you're trading but if Gold closes above 908.26 then there is a nice Volatility System trade in the making on the 4 hour timeframe. I'm currently long Gold anyway so I MAY even add to the position i.e. add double the current amount of lots and follow one half of the trade through with the SI System until stopped out i.e. I won't stop and reverse but only stop and then stay in the balance of the trade with the Volatility System. I've also been waiting for an entry on GBP/JPY on the 1 hour timeframe but if I get one I'll only open a small 'test' position i.e. the pair is too dependant on what stocks are doing and stocks are extremely volatile right now i.e. up one day and down the next. Anyway I'll see. What's happened to your Volatility System trades? I know you were waiting for an entry on Gold. Did you get the entry?

Edit:

Nope. Gold JUST missed the VS SAR!!! Looks like it MAY close above by the close today which is unfortuanate i.e. gonna have to wait until Sunday. I decided to drop the idea of using the VS on the GBP/JPY 1 hour i.e. too many false signals by the looks of things.

[dpaterso]

Hokay!!!

Done for the week!!!

I managed to close up for the week BUT ONLY JUST!!! Better than closing down I suppose. I'll tell you something: I don't know if this week was any different from any other week but this is the WORST performance I've had with the SI System since I 'standardised' on it!!! Weirdest thing. Twice this week all my accounts were up around 28% on their starting capital balance on the first day of the month and both times things went (almost) pearshaped. Probably did not close up by more than 2% or 3%!!! Lousy for a whole weeks work I'll tell ya'!!! BUT: I suppose it has to happen sometimes right???

Anyway: as always I have a good feeling about the rest of the month!!!

And by the way: GOLD MADE IT to close above the VS SAR tonight so I think a long VS order on Sunday will be 'the thing to do'!!! Let's see: MAYBE this time the analysts got it right and Gold makes it to $1 200 an ounce!!! Now THAT would be 'spectacular'!!!

And, again, as always, I'll check in over the weekend so feel free to post and compare notes (actually it feels like I was the only one working today)!!!

[chirules54]

Hi Dale.. my VS trades are not doing so well right now. USD/CAD is down 150 pips and I got a signal to go long GBP/JPY at the close last night and after initially going up it closed the day at -235 pips. The short volatility trade with gold started a week or so ago is still intact, as I got in at 943.50 but the sar point is still at around 960 or so, which is ridiculous to me because gold was as low as 885 or so, and this still did not lower the sar point. I'm trading it with a multiplier of 2.8 and on the daily charts, and even with a 3.0 multiplier I would have entered these same trades, just a little bit later.

This is purely my opinion, but by looking at how the markets operate now, I believe that the VS is "too slow" for the daily charts anymore. If you look at how long it takes for the SAR to adjust, especially in the case with gold where you say that you are getting a long signal on the 4hr chart (which seems to look correct) my reversal signal for the daily chart is still very far away. If you look at the 4hr charts, it seems to trend much more often than the daily chart, where the trends seem to be longer, more gradual, but not as frequent. Also, if you look at the amount of movement in a day compared to 30 years ago, it's not even close. You mentioned how nowdays it's not uncommon for the Dow to move 400 points in a day, where as back then that would have been absurd. It seems like a 4-hour candle from today is almost equivalent to a daily candle from the 1970s with regards to volatility and daily movement. Despite all of this, the TBP still seems to work well with the daily charts, so I think I'm going to stick with that on the daily charts for now.

Because of this, I think I am going to trade the VS and SI on the 4hr charts from now on. The only thing is, I need some sort of alert so if a possible trade comes up in the middle of the night, I can get on and see what's going on. I have metatrader 4, so if I can figure out how to set an alert for a 60-point drop in the ASI for example, and something for the volatility system it would be perfect. During school hours I have my laptop anyway so I can see the alerts during class.

Let me know what you think of this idea...

[Bocajunior]

Chirules54, Dale,

May I ask a question concerning shorter timeframes?

I'm interested to know how you guys have the time to update your systems worksheets on an hourly or 4 hourly basis. I'm up to my eyes keeping up with the dailys?

And another one. Do you guys have any spread sheets for his systems that you'd care to share. I'm not being lazy but I'm pretty hopeless at creating xcel sheets. If you do that would be great.

Thanks all

[dpaterso]

Good (Saturday) Morning All!!!

Nick:

I'm sorry to hear about your VS trades. By the sound of things it IS what I expected though and that's why I've stayed away from it until now i.e. because the VS SAR adjusts itself according to the volatility I reckoned that it would be possible that if the price movement was JUST not enough to close above or below the VS SAR then the VS SAR could be 'gently nudged' away 'forever and a day' which could result in huge losses before getting a stop and reverse signal from the VS. I have been 'tracking' the VS on Gold on the four hour charts as I said and now have an entry to go long on Sunday night so I'm 'gonna give it a bash'. Maybe you DO have a point i.e. about the price movement on todays four hour charts being roughly the equivalent of the price movement on the daily charts back then. One other thing that I have noticed while 'tracking' the VS on the four hour Gold chart (and on the one hour chart of GBP/JPY) is that you DO NOT go long or short at market as he says to do in the book i.e. you place stop orders in exactly the same way as you would with the SI System i.e. yesterday on the one hour GBP/JPY chart the price closed below the VS SAR and the very next bar the price shot right back up again and closed above the VS SAR again. Had a person gone short at market when the bar closed below the VS SAR in this example the price movement in the very next hour would have resulted in a huge loss BUT had a person placed a stop order to go short 'a couple of ticks above the high or the low' of the signal bar then the order would not have been hit and you would either have been left in your current long trade if you were already long at that point OR you would NOT have got yourself into a trade that went immediately 'bad'. Of course (we have discussed this before) the other way is to actually reduce the constant and I'll wager that there probably is an 'ideal' setting for each instrument particular to a timeframe and THAT would be 'first prize'. The ONLY platform that I know of that would be able to perform backtests on this to find the 'ideal' setting is MT4 BUT I have not spent enough time with MT4 to know how to do it. I have an MT4 demo account open at Alpari so I will see what I can do BUT it's going to take some time because I have to create the VS for MT4 before I can do any backtesting and I have not done any MT4 scripting before so it's going to be a huge learning curve (I have not bothered with MT4 for the simple reason that as you know neither of my brokers are MT4 brokers). Unfortuanately neither GCI nor Deltastock have a 'backtest' feature on their platforms. Look: I DO believe that the concept of the VS is fantastic but it would appear that it's just one of those things where we need to do a bit more 'homework' and experimentation. I did at one stage remove the constant altogether i.e. made it equal to '1.00' which means that you are using ONLY the value of the ATR but I never got around to following a trade through from start to finish. You could try using a constant of '2.00' for example based on the 'logic' that sometimes people use 2 x ATR to place stop losses on other systems and that's ACTUALLY what the VS SAR represents i.e. it's a stop and reverse as opposed to just a stop. Again: the VS could possibly be THE MOST profitable system in the book but it DOES need some work done to it I think especially in light of what's now happening to you (Nick). There are just so many possibilites. On the other hand of course we have always known that there would be some losses along the way so maybe it's just 'bad luck' at the moment that your Gold trade did not work out and maybe when you stop and reverse as per the VS your loss will be covered and a nice 'big fat profit' will be the end result of the trade. Who knows. One thing is for sure though: without FANATICAL money management and enough capital I reckon that Wilder's systems (as good as they are) would also be able to 'wipe you out BIG TIME' if you're not careful because definitely the VS and SI System work on the premise that your account can handle HUGE swings and ranges before 'coming back to reality' as it were. Always bear that in mind.

As far as creating MT4 alerts is concerned: cannot help you right now on that one for the reasons mentioned above.

Boca:

I can't speak for Nick but I have all the systems 'coded' as indicators so I don't have to use Excel to calculate the ASI or the TISAR so it saves LOADS of time. Interestingly enough though: with the SI System I've started to be able to 'pick out' the HSP's and LSP's WITHOUT having to use my 'indicators'. I suppose it's like anything: sit and stare at the charts long enough and you HAVE to eventually 'get the picture'!!! The only thing I have found to be a problem is in the 'judging' of the TISAR i.e. sometimes it may APPEAR that the ASI has gone back on itself by 60 points but when you look at the ASI values it actually has NOT moved that far and I have found myself placing an erroneous order or two to stop and reverse where there should NOT have been one (fortuanately I've been able to pull the orders before they were executed). On the other hand (before I had finished 'coding' the systems into my platforms) I was using Excel no problem on the daily charts to calculate the ASI and did not have a 'time' problem. Are you sure that you're not trying to trade too many instruments at once??? While I doubt it because I figure you'd know better it needs a mention though.

As far as spreadsheets are concerned there is an easy answer for you: EMAIL ME (dpaterso@forexbrokersonline.net)!!!

[dpaterso]

Nick:

For what it's worth I just had a look at the daily Gold chart and I see that my VS SAR (looking for a long entry) is at 961.28 which is correct and close to yours by the sounds of things. As I assume you already know the VS SAR is only going to move down if you get a lower close than the close on 1 April 2008. On the other hand: this is Gold 'my man'!!! I reckon that the price of this metal is manipulated in 'LEAPS AND BOUNDS' i.e. I've watched Gold for too long and I've lost enough money on Gold to be at very least 'suspicious' of its movements!!! What I'm saying is this: it really was not THAT long ago that Gold was around the $700 mark so don't be TOO surpirsed if the VS actually keeps you in short and the price gets down there (or even below $700). Don't be too surpised at all!!!

Speaking of Gold and analysts here are two 'amusing things' for ya:

I remember joking with someone in my household the day that they had analysts on Bloomberg saying that Gold would now go to $1 200 (the day it closed above $1 000) and I said that I'll bet you that it's now going to 'tank' and sure enough: not a day or two after that the correction started BIG TIME!!! EXACTLY what happened to me last year when I lost so much money on Gold!!!

On Bloomberg the other night one of the anchors made a joke about analysts i.e. he said that if you had nine analysts in a room you'd get fifteen different opinions!!! Many a true word spoken in jest!!!

Hang in there my friend. You've gotta remember that Wilder used these systems successfully for many many years and they made him enough money to be able to afford to pay some guy $1 000 000 for an 'idea' which he then ran with and copyrighted ('The Delta Phenomenon'). I'd be prepared to stick my neck out here and say that his systems are probably the ONLY systems (at least of the ones detailed on this and most other sites like this) that can lay claim to success like that (and 'man oh man' you have NO idea how badly I need to be 'right' about THAT statement)!!!

Also: like I said to someone the other day (this week as a matter of fact): Wilder systems have a great 'habit' of making HUGE profits on one day and then wiping out those profits the next and then making even BIGGER profits the next day!!! As I said in my last post yesterday: all my accounts were WELL UP at two points last week and then WELL DOWN the rest of the week BUT in spite of the fact that I got some false stop and reverse signals (they were not actually false by the way but those pesky 'news spikes' that caught some orders which would never have been executed by the SI System during the normal course of events) and these resulted in losses I still managed to close UP on Friday (not by much but UP nevertheless)!!! I can tell you that a couple of months ago I would have taken the profits when the 'euphoria kicked in' when profits were showing and then I would have taken the losses on the days when the losses were showing when I felt I could not 'take any more' and there is no question in my mind that I would have ended up with a nice loss on Friday. (I closed out all positions on Friday by the way because I needed to adjust something in connection with my money management system or rules and could not do this without closing the positions otherwise I would have left them open and followed the trades through which is 'key' to these systems).