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

[kaalilaatikko]

Dale,

Please do not confuse yourself too much with ADX vs. ADXR. While I think that ultimately it is you that only can select the correct one of those that suits for your trading, maybe the following helps to interpret Wilder's ideas.

Although this book is not a scientific publication, Wilder has been quite consistent about what he has been writing. One part of such clear writing is to always introduce the concepts first and only then use or refer to them.

On page 40 there has been no discussion about ADXR so far, so Wilder cannot mention it before introducting it. But he wants to say this chapter about trading, so he has to use ADX only.

ADXR gets introduced on p. 44, so now it is available for use on p. 47. And no more does he talk about ADX as the #1 ranking tool. Here he mentiones the lower limit for ADXR and refers to CSI, which was also introduced for the first time on p. 44.

More detailed discussion about CSI on p. 111 is just a confirmation of the importance of ADXR.

Now have another look at the text on p. 40. It says the following: "you have probably already figured out... ADX scale. If so, you have a good understanding of the text SO FAR, BUT THERE IS A LITTLE MORE TO IT THAN THAT."

So, that's it! He is not telling us to use ADX as the primary classifier. He is just speculating that an apt reader could have come to that conclusion based on what he has presented SO FAR. But: that is NOT the whole truth YET, so "dear reader, please read on."

J.

PS. I wish you success in your financial recovery. As sportsmen say when they are down: "there is only one way from this, and it is up!" I also remember the following story about Donald Trump, who has experienced rough times in addition to good ones. In one of his books he tells that he had managed to make 9 billion dollars worth debt after a real estate market crash. Trump tells about seeing a beggar on a street and thinking “That beggar is 9 billion dollar richer than me”. Not any more!

[dpaterso]

Good (Tuesday) morning everyone.

J.:

FINALLY: an explanation that makes LOGICAL SENSE (to ME anyway)!!!

So ADXR it is then!!!

(And thank you for your words of encouragement: they mean a lot. It's not easy to 'get up' from the what? Fifth time? Sixth time? Seventh time? I've lost count MYSELF. BUT: I'm here and there are too many people depending on me to 'get this right' so I SHALL persevere to the end)!!!

There is something that is CONSTANTLY worrying me though about the DMS (and MAYBE with your 'analytical reading skills' you, and others, could shed some light on the following or tell me what you think at least):

Are we (and when I say 'we' I suppose I mean 'I') not interpreting this ENTIRE system incorrectly???

Let me explain why I say this:

Ever since I created the ADXAC (which shows whether ADX is rising or falling) I've noticed that by WAITING for ADX to start rising before taking a trade (this in SPITE of the fact that ADX or the ADXO may have given a signal a few bars prior): in MANY cases this makes the difference between that trade being a total loss whereas had you IGNORED the ADXAC and simply acted on the FIRST ADX or ADXO signal then the trade may have just broken even and in some cases even made a profit as opposed to making an outright loss (the SAR point being a signal from ADX or the ADXO in this case).

Now I feel that the above goes toward interpretation of the text once again.

On Page 47: 'the old man' notes that '... it is seldom a bad time to take some profits.' (when ADX turns down AFTER crossing above BOTH DI lines).

Examining this statement 'to the letter': two things 'jump out' at me:

1 - it would appear that the assumption is made that there are INDEED profits to be taken at this point in time. In other words: is he NOT (maybe) saying to use the first downturn of ADX to take some profits 'off of the table' IF THERE ARE INDEED profits 'on the table'??? In other words: if there is a LOSS showing could one then not argue to NOT close the position at the first downturn of ADX but rather let the trade run its course as per ADX or the ADXO?

2 - it would appear that using the FIRST downturn of ADX AFTER crossing above BOTH DI lines is important. In other words: is he not referring specifically to the VERY FIRST downturn of ADX AFTER the LAST ADX CROSSING above BOTH DI lines? This is DIFFERENT from what is specifically stated on the next page where he talks about ADX turning up again, after turning down, while STILL ABOVE both the DI lines.

WHY does this make a difference?

Well as I'm seeing it (on a daily basis now):

There is a BIG difference between entering a trade at a certain point which turns to PROFIT and THEN REENTERING the trade later (after being stopped out) with this 'profit cushion behind you' and entering a trade late BECAUSE you were waiting for ADX to start rising, the INITIAL trade turns to a loss, and if the REENTRY trade ALSO turns to a loss then the ENTIRE TRADE is a 'nett loser' whereas if your REENTRY trade goes against you then you will either breakeven or end up with a smaller profit but NOT a nett loss.

I'm not sure if that makes sense but I'm trying to explain anyway.

In other words could THIS not be said:

Your INITIAL trade is based SOLELY on a signal from ADX or the ADXO (with the proviso that ADXR is above 20 - 25 and that ADX is not below BOTH the DI's). Checking whether ADX is rising or falling at this point is IRRELEVANT for your INITIAL trade. If ADX is INDEED falling at this time you simply hold on to the trade and, if all goes well, ADX will start to rise, and, at some point it will start to fall again and ONLY THEN do you use the falling of ADX to book some PROFIT. Can you see what I'm saying here??? In other words: your INITIAL trade is entered (possibly) MUCH earlier than would normally have been possible had you been monitoring ADX as WELL at the time thus giving the trade MUCH more 'opportunity' to turn to profit. Also: it is said to REENTER if ADX turns up again after turning down. These REENTRY trades, it would seem to me, have FAR LESS 'going for them' as it were. In other words: this COULD be part of the 'last pip syndrome'. Your INITIAL ENTRY (in other words) is 'the trade' and anything made above and beyond your INITIAL ENTRY or trade i.e. by REENTRY: is simply 'fat' and, if the REENTRY trade is a loser, then at least the NETT result of the ENTIRE trade may STILL be a profit.

From the above text one could ALSO argue that a 'valid' DMS trade is a trade where ADX has been BELOW BOTH THE DI's and rises above them for the FIRST TIME. Anything AFTER that is a REENTRY and NOT deemed as a 'valid OPENING DMS trade'. I hope this is making sense???

And YET ANOTHER POSSIBLE 'misinterpratation' of the text:

Between pages 47 adn 48 'the old man' refers to both 'reverse points' and 'stops'. Could this not ALSO, MAYBE, be interpreted differently??? In other words: there is a BIG difference between placing a SAR order when signalled to do so i.e. and IMMEDIATE 'stop and revers' and placing a STOP order when signalled to do so and only placing the REVERSE order after the close??? MAYBE: you place a STOP when signalled to do so, you place the REVERSE order after the close, and you place a REENTRY order as per the ADX upturn??? BIG DIFFERENCE because what CAN (and unfortunately DOES) happen from time to time is that a profitable trade hits the SAR order and then the price immediately turns against you and, of course, now, you're trading in the WRONG direction because you've stopped and reversed. Had you only STOPPED at this time: profit would have been locked in and if the trade then continued on in the original direction you would REENTER some time later with 'profit in hand' which comes back to my ORIGINAL thoughts above i.e. it the REENTRY trade goes 'south' on you then at LEAST you have SOME profit at the end of the trade.

I'm really not sure about all of this. Unfortuanately the text in 'the book' does as much to enlighten as it does to confuse in some instances. That said: I REALLY REALLY DO want to do this 'right' from now on.

Now I KNOW that there are those that (may) think that I'm concentrating FAR too much on ADX/DMS. There is a very good reason for this (as I may have stated previously) and that is this: I do HONESTLY believe that the ADX is the 'core' of ALL of these trading systems (and WHO KNOWS maybe of OTHER 'non-Wilder' trading systems as well i.e. it's probably the BEST way of determining NOT ONLY whether a trend DOES INDEED exist but also the direction of such trend).

Anyway (to those of you monitoring my progress):

MURPHY'S LAW OF COURSE!!!

Since my 'new beginning' I'm in TWO trades now and BOTH 'proper' DMS trades and, of course, BOTH are showing losses (EUR/CAD short and EUR/SEK short)!!! GREAT start!!! GREAT FU*KING START!!! THANK YOU!!!

Regards,

Dale. (forexbrokersonline.net).

[fsprea]

Dear friends,
I'm back home after a trip in the cyberspace. Yesterday evening, before starting re-inventing the wheel, I decided to "drill" the web quite deeply, and...

I FOUND IT!

Thanks to a nice guy called mladen, there is the "right" pure Wilder MT4 ADX / ADXR indicator.

I think mladen is a quite serious and careful "follower" of Wilder's methods: read his/her comments about people "not reading the book".

If you have the chance of looking at the algorithm, it is really "like it has to be" with the original book methods, without any approximation or averaging method "simulating" Wilder's procedure. It is what I also planned to do: but of course having found it spared me a couple of good hours!

Demonstration that it is correct:
I have a script, pulling out of the platform, from the last 100 bars, Date, High, Low, Close, and, from the indicator, +DI, -DI, ADX and ADXR, writing all these data in a text file. In the attachment, you find these data in the GBPUSD_Book_Indicator.pdf file, which reports the daily data for GBPUSD till Jan 26 (yesterday), with a ADX period of 14, as they are in the FXDD platform.

The file Wilder_ADX.pdf is the excel worksheet reconstructed from the book, p. 41-42, with the formulas and the data from the book. I have removed part of the "roundings", because I wanted to check the indicators data with the major possible precision. But it is easy to notice the correspondence of these numbers with Wilder's...
...but! I think I also found a mistake (an "erratum" candidate?). Have you noticed that the first ADXR is calculated on day 41? And that this number is actually the half of the sum of day41 ADX + day28 ADX (13 days before, and not 14)? The same is true for the ADX of day 42, which is calculated as 0,5*(29 + 17), so again the ADX of today + ADX of 13 days ago. So: as this is clearly different from what explained in the text, I suppose it was just a mistake in "counting the rows" by the old man. This is also what the author of the indicator (mladen) supposed, and so, for my further calculation, this is the only "correction" or modification that I introduced to the excel worksheet: calculating ADXR really as the half-sum of ADX today and ADX 14 days ago. If anybody thinks that this is incorrect, also the indicator can be very easily adapted to accomodate this unique difference.

Finally: the file GBPUSD_ADX_recalculated.pdf, contains the output of the same excel worksheet, after having pasted the price data of the first file (Date, high, low, close) into the Wilder's worksheet. It is sufficient to compare the +DI, -DI, ADX and ADXR data of the last rows from this file to the ones of the first file (which are calculated not by excel, but by the metatrader indicator) for being convinced of the quality of the algorithm.

I skip further details: feel free to ask!
I hope that this indicator can be useful for all of you using also metatrader for the "Wilder's adventure"!

In the "cybertrip" I also found quite other amazing things: a lot of strange and mostly wrong ADX indicators, the fact that probably MT developers are aware that their indicator if wrong, but did not want to include the correct one, people using strange things like one period for the DI's, another for the ADX and still another for ADXR, and similar... but perhaps we can discuss about these things some other time!

In summary: nice! Now I have the tools for going on with filters for the TBPS, in the first place. Then, I can probably also join the DMS experiments!

Bye

Fabio

[Rekaatz]

Fabio,
I searched last night for several hours looking for an adx indicator, i found about 15 that I downloaded, but didnt get the one you were talking about. Just found that one and other than the one correction you posted it seems pretty legit. I was also shocked to find out how many screwed up adx di indicators are out there that claim to be "wilder"! lol I am going to start testing it as a filter, I know dale has a way that he does it. Have you decided how you are testing it first? Hopefully i can have some results to share before the weekend. So far trading the tbps is going pretty good for me, but i know we have all heard that before about different systems :-). I am usually getting around 10-15 signals a night and i pick the ones that don't have crazy tp, sl and are going in the direction of the trend.

Ryan

One more thing: I know this has already been established but, At one time (last year) i traded the gbpjpy on the hourly charts with tbps... DON'T DO IT. It tested phenomenally but unfortunately i only tested the past 3 weeks...mistake.

Ryan

[fsprea]

Yes, Rekaatz, the "quest" was really hard! And the weird things around really surprising. mladen, in his post said: "Maybe it is time people consider actualy reading that book"! And this really means that probably, the major part of the ADX's around were just coded by "taking inspiration" from some (wrong) summary found around in the web.

I made a big mistake, and apologize with the forum moderators: I added the link to mladen indicator's in my previous post and it was immediately removed.

Now: I'm not sure how to fix it. I think it would not be very kind for mladen that I simply attach here "his" indicator. Nor it will be polite to the babypips moderators that I simply make a text attachment here with the link again (BTW: WHY is it so bad posting links here? The "other" thread has really another focus: i.e. the programming of algorithms for metatrader: and we all are quite "fond" contributors/members of THIS thread and site: I think there is no risk we all "migrate" somewhere else making a bit "damage" to babypips).

Anyway, if nobody suggests me a better solution, we can exchange "friend to friend" this information by email.

BUT, FINALLY: do not despair Rekaatz or anybody else, nor waste more time looking for it. The "thingy" exists, is there, and in few hours somehow you'll get it!

Bye

Fabio

[Rekaatz]

I googled around for a while and found several sites where mladen posts. Eventually after following the cookie trail I was able to find the script that he wrote. It shouldn't be to hard for someone to find since we know his name.

[fsprea]

Perfect! The script, by the way, is called "Wilder's DMI book". I think it would be nice writing two words of thanks to mladen on that thread... at least: I made it.

Bye

F.

[dpaterso]

Good (Wednesday) afternoon.

Fabio:

As I understand it the reason that MOST links are deleted has something or the other to do with 'spam posts' (those ones that pop up from time to time advertising this, that, or the other 'holy grail for sale'). I THINK this to be the case anyway.

If you've found an indicator then just post it here as an attachment and give credit to the author/designer is all (this of course ASSUMES that it's ALREADY in the public domain and is not copyright material).

I've STILL not heard a word from Cody about HOW he managed to 'wipe out' his demo account (HE cannot be 'pis*ed' with me because he's not lost any money so c'mon Cody: give us a 'heads up' if you don't mind).

Anyway: for what it's worth things are going SPLENDIDLY again!!! It's ABSOLUTELY AMAZING you know and it's as predictable as the SUN RISING in the morning i.e. within DAYS of 'going back' to the original systems things just 'turn around' 'as if by magic'!!! I'm not a KAJILLIONAIRE YET nor have I made back the money that I owe BUT I AM GETTING THERE!!!

By the way (for those interested): I've set my ADXR limit to 20 i.e. anything BELOW 20 is NOT a DMS trade. I'm also only trading the top sixteen (yes sixteen instruments / pairs i.e. I've halved my lot sizes because I have a personal NEED to trade more instruments / pairs at one time i.e. 'my trading style') highest on the ADXR scale. I'm also using my 'modified CSI' as was posted on the thread some time ago. Simply put: it's ADXR(14) multiplied by ATR(14) (where the ATR is 'corrected' by a correction factor or multiplier) so that ALL instruments / pairs can be rated against each other for not only directional movement but volatility as well. Using this 'stripped down' version, of course, does NOT factor in margin requirements and commission / spread etc. but I'm not really interested in that at this time for the simple reason that I'm not looking for the 'best bang for buck' but rather the instruments / pairs with the high directional movement as well as volatility. I know that this 'stripped down' version is working correctly for the simple reason that SILVER is a being shown as the 'laggard' that it really is as an instrument to be trading currently and USD/RUB is 'top dog' (although with a spread of 1 500 pips I'm keeping clear for now)!!!

Keep it up 'guys and dolls'!!! It's ALL good and possible!!!

Regards,

Dale. (forexbrokersonline.net).

[fsprea]

Hallo friends!

First of all: Dale! I am so glad that things are getting back to their "right shape". Congratulations, and let's hope this is the "last time" they have to! Really with a lot of friendship!

Second, following your suggestion, I directly contacted the very kind mladen, who authorized me to post the indicator. I made it, because officially all the MT4 scripts start with a standard line containing the "copyright". And mladen directly instructed me to modify this line with "copyleft". I think that he's looking here, and so he is free to contradict me.

So: that said, you find his perfect indicator attached.

Bye

Fabio

[dpaterso]

Nice Fabio. I'm sure many people will be grateful to you (and 'mladen') for this i.e. it really does make a WORLD of difference using the CORRECT Wilder calculations!!!

Maybe if he 'looks in' from time to time over here he can join up and let us know what he thinks of our hard work to date!!!

And yes: THIS WILL be the LAST TIME I assure you!!! It's actually SOUL DESTROYING to see the trouble I've caused for both myself and others by 'straying' from these sytems. No sooner am I following them 'religiously' and things go back to 'normal' making this entire episode TOTALLY unecessary!!!

Regards,

Dale. (forexbrokersonline.net).