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

[dpaterso]

I trust from the silence everyone is frantically reading and calculating away!!!

If not then here's a good reason to start:

It's Sunday morning so I'm going through my 'doings and screwings' from the beginning of the month up until Friday's close and here my good friends are the results from the SI System for me:

Forex/CFD/Commodities ('Main' Account): 262% gain on capital (heavily weighted in favour or Soybeans I must mention though).

Forex/CFD ('Account 1'): 30% gain on capital (only forex traded on this account so far).

Forex/CFD ('Account 2'): -5% loss on capital (main reason for loss is that I did not stop and reverse as indicated by the system on a particular trade i.e. was not concentrating on a particular trade that went bad otherwise % gain on capital would have been similar to Forex/CFD 'Account 1' as detailed above. Loss was a single trade on the Dow. 'Refused' to take such a big initial loss, held on to the position 'hoping', system was telling me to stop and reverse, price went down far enough to cover said loss AND still make a profit).

The profits detailed above were made IN SPITE of the fact that I got 'cold feet' on some of the trades and 'bailed' early. Almost ALL of these trades carried on to 'new heights' or 'new depths' meaning that the profit figures as detailed above would have been even better,

Lessons to learned:

1 -The SI System does work (well).

2 - Concentrate on what you're doing ALWAYS.

3 - Never second guess the system.

4 - Always stop and reverse as indicated by the system EVEN IF it means taking a loss i.e. do not 'simply point blank refuse' to stop and reverse because it would result in a loss and you 'think' the position is going to turn around and the system is wrong. The resulting profit made on the stop and reverse position always exceeds the loss taken at the initial stop and reverse point.

5 - Never close positions early because you're in a profit and 'don't think you could live with yourself if you did not take that amount of profit now'.

All the above will, in time, become very clear and more meaningful to you I promise.

[Bocajunior]

Good results Dale,

Are Soya beans and other commodities available on Delta? I saw only Silver and Gold.

I sent you an email earlier regarding code for discount for Wilder's book. Did you get it?

Thanks and Regards

[dpaterso]

Hello Boca,

No, I'm afraid not, but I've been meaning to ask them (Delta) if they have any intention of adding a few commodities like Soybeans, Coffee, etc. etc. etc. Delta only offers Gold, Silver, and Oil as you have quite rightly noted.

I will check my email right now after posting this message.

[ozzy007]

dpaterso, thanks for all your hard work. When the psar is below the current candles of course you buy and vice versa. This is for daily charts. Lets say you buy and the next candle goes down so much that it touches or even goes below the psar, does the psar then move from a buy to a sell? In other words the psar once it is plotted, it can change position right? I was looking at NZD/JPY for Oct 12, 2007 and this is exactly what happened in this example. I was wondering if the psar could change position at any during current daily chart if it moves so much against the previous trend. What would you do? thanks

[fischerb]

Hi Dale

Waiting for the book now and hope they dont take years to ship it to SA. Difficult trying to "decode" what you guys are talking about when you dont have the darn book!

cheers

[dpaterso]

Hello,

ozzy007:

Parabolic SAR can 'theoretically' change, or rather, give different conflicting signals in the same day. Strictly speaking, if you look at the book, it won't happen until the next day (on the daily charts) i.e. you'll only get a Parabolic SAR dot indicating a stop and reverse the next day (or should I say you would only 'act' the next day). The reason I say 'theoretically' is because, obviously, the original 'work' was done using 'manual handrawn' charts and, from what I gather, Wilder would only have known at the close of the day that it was indeed time to stop and reverse. Nowadays you will find that, with some brokers, if Parabolic SAR is penetrated and you 'refresh' the chart a new Parabolic SAR dot will appear 'as if by magic'. In 'the old thread' I don't think we ever really agreed on this i.e. do you stop and reverse immediately when Parabolic SAR is penetrated or do you wait until the next day i.e. do you wait for a new daily bar to appear for confirmation? As many times as I saw Parabolic SAR get penetrated and then the price retraced I saw Parabolic SAR get pentrated and the price continued on in that direction. No clear answer on this one. What I CAN tell you is that if you have the book (which I am assuming is the case) the systems in the book are FAR better to trade i.e. trade the systems and use Parabolic SAR for confirmation if you must. Like I said in 'the old thread': Parabolic SAR, as great an indicator as I think it is, 'is what it is' and I, and a lot of other good people, spent a lot of time trying to improve it's 'efficiency' and 'accuracy' and I can't honestly tell you that it was worth the time and effort in the long run. Also remember that Parabolic SAR is an 'indicator' whereas the systems detailed in the book are actual 'trading systems'.

And by the way: no offence to anyone but I don't think that this thread should spend too much time on Parabolic SAR or 'The Parabolic Time Price System' as detailed in the book (which is, essentially, the same thing). Like I said: there is nothing more that I, or anyone else, can tell you about Parabolic SAR that has not been covered in the 'Parabolic SAR - that's all!!!' thread. Believe you me: I'm sure we spent more time 'dissecting' Parabolic SAR than Wilder himself did!!!

[dpaterso]

Hi folks,

I've been asked by one or two people (via email) what the difference is between trading commodities, CFD's, metals, etc. etc. etc.

I'm going to quote from John F. Carter's book 'Mastering The Trade' because he gives an answer that I don't think I could possibly improve on (without posting one of my 'manuscripts' that is):

"In the end, all charts and all markets are the same. They always have been and they always will be, because all chart patterns depict the same thing - emotional reactions and decisions made by human beings. Even if it is a mechanical system that is making the trades, it was still written by a human. A trader is always trading other traders, no matter what the market.

Yet each market is made up of different types of traders. What are these traders like? If they are S&P traders, then it's possible they are wired on Starbucks and are super aggressive. If they are trading bonds, it's possible they are busy methodically filling in a crossword puzzle in between trades. If they are trading corn, it is possible that they are napping at their desk. Which type of trader would you rather trade against? Compete against? One of the key differences between most successful traders and unsuccessful traders is this: Successful traders are in markets where their personalities shine".

(I'm sure he does not mind me quoting from his book here as it's giving the book yet another 'punt'. It IS a very good book and another one that I believe should be on every traders bookshelf. There is more in this book about trading psychology, how the different markets work, who is losing money and who is making money, and why, than in any of the other books that I have purchased. Although his trading systems, which I think form a 'smaller' part of the book, look great and I assume are highly profitable, you need to know that, because of 'where he is at', he has certain 'tools of the trade' that give him 'the edge' that I don't think we can afford right now. I know I certainly can't but I'm working toward this goal).

[ozzy007]

Actually i do not have the book but it is on my list to read. Regarding your answer i agree it is a difficult thing to figure. gl in your trading

[dpaterso]

Hello again,

I can only say that if you want to make money then I suggest you move it to the top of your list. No joking. It's probably one of the cheapest books to buy (when compared to others) and, if you ask me, it's worth a 'gazillion' times more to you than it costs.

I must just tell you (everyone) that I still find it hard to believe that this book 'fell out of vogue'. If I'm not mistaken, when it was written, it was THE book on technical trading. I can only surmise that it 'fell out of vogue' because newer, supposedly better, techniques and ideas came out and were well advertised. That, coupled with the fact that the systems themselves can be cumbersome to maintain on a daily basis (and the chances of maintaining them on shorter timeframes would be nigh impossible depending on how many instruments you were going to trade), could be another reason. Put it this way: I can identify with the latter because I had the book for a very long time and when I first got it I really thought that the stuff looked 'old' and 'dated' and the systems just looked too time consuming to use (easy way out???). It was only when I landed up (just about) broke that I really started analysing the systems and programming them into my trading platform(s) and using them and I can tell you that all the late nights and frustration are paying off right now.

Anyway: I'm very keen to see what other people ('technical gurus???') have to say about it (Tony???).

[chirules54]

Hi Dale, how's it been lately? Anyway, I think I am ready to move onto the swing index. The TBP system is still working fairly well, but the past few days have been a little rough with it. I think I am going to concentrate on the volatility system with a few instruments (gold, maybe gbp/jpy) and the swing index. I remember you saying that it had to be tweaked for forex pairs, and something about the "trailing sar" that was giving you some trouble in the past. If you could review this information for me it would be much appreciated...