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

[dpaterso]

Hello,

I suppose there are a lot of ways you could 'play' the VS to get an earlier exit. Once 'in' switch to a shorter timeframe??? Once 'in' instead of waiting for a CLOSE to signal a stop and reverse just put a stop at the current VS SAR??? One could EVEN use the SI Sytem for an entry (because that gets you in FAR FAR earlier than the the VS) and use the VS SAR for an exit??? Reduce the 'constant' for an entry but once 'in' increase the constant for an exit signal (or the other way around)??? I think 'the sky COULD be the limit' as far as creativity is concerned. As far as using +DI and -DI I've always found them to be very slow to react. HOWEVER: I HAVE found that by shortening the period the reaction time is faster (obviously) and seeing that you're not looking at +DI and -DI 'to trade' as such i.e. only for an exit then you may have a very good point.

I don't actually know what to suggest to be honest i.e. I'm 'a bit scared' to mess with any of these systems (other than with the 'obvious' like the 'PIPFACTOR' 'thingy') because we have no way of backtesting the results of our changes other than by following trades through historically on a chart and as we ALL know by now things ALWAYS 'look good' when you 'backtest' like that!!! It's a good point you know: I mean I / we know when the book was published BUT HOW LONG did Wilder trade these systems before publising the book??? Now the answer to THAT question would either make us EXTREMELY nervous or EXTREMELY confident wouldn't you say??? On the other hand I've traded / tested all the systems in the book at one point or another and although you MAY not be MAXIMISING profits they are profitable nevertheless and I have grown to trust them (OK - MOSTLY trust them)!!! All of his systems rely on the 'stop and reverse principal' as you know and by 'design' you will take losses. As I have said before: I have taken many losses with ALL of the systems since I've been trading them (mostly the SI System as you know) BUT I ALWAYS come out 'up' and that's good enough for me. What I find now (I may have mentioned this in some other way, shape, or form previously) is that it has DEFINITELY become EASIER to take losses i.e. no more do I hold on to a position that's in a loss i.e. if it's going to hit the stop and reverse and a loss is going to be realised I am able (now) to ALMOST 'accept the loss with pride' if that makes any sense to you at all. It's because I KNOW that 'at the end of the day' another (SI System???) trade will cover the loss and add some profit to my capital. Does it take longer to attain 'financial freedom' (I actually LOATHE that expression) using Wilder's systems (as opposed to trading with candlesticks)??? Probably??? Maybe??? BUT I can ASSURE you that you will NOT wipe out an account with these systems and his money mangement rules and if it DOES take longer then so be it. It's better than living with the 'regret' of losing thousands of USD because you THOUGHT you had a system that would make $$$ FAR quicker!!! I (obviously) 'scour' this site and 'that other forex site' looking at various 'ideas' and 'systems' that other people have come up with (ESPECIALLY when I'm trading the daily timeframes because I get so bored I could CRY) and I see these 'make 10 000 - 500 000 pips per day' 'systems' all the time. THIS I believe is possible ON A GOOD DAY!!! But what I find 'missing' in the 'system info' is 'WHAT HAPPENS ON A BAD DAY'??? At least with Wilder's systems (up until now anyway) for me a 'bad day' is 'break even' NOT 'the cold shivers'!!!

Edit:

Let me add this:

Let us ALL not forget my 'Parabolic SAR fiasco' of last year!!! I firmly believe that had I 'stuck' with Parabolic SAR from the day I started that thread up until today I would not have landed up where I did and have 'every man and his dog' after me for money now!!! I remember how EXCITED I was when I made my first couple of USD out of 'pure Parabolic SAR' but then, for no good reason, a 'couple of USD' was not good enough so I started 'messing around' and tried to 'optimise' the system and 'played' with 'this and that' until it got to the point where I lost sight of the fact that with 'pure Parabolic SAR' I made AT LEAST SOME USD i.e. it never ocurred to me until it was too late that none of my 'tweaking' and 'optimising' and 'stuff' was actually working and the the system in its 'pure form' was ACTUALLY the only thing that DID work and WOULD HAVE WORKED had I just 'stuck to it' to this day!!! (And strangely enough 'pure Parabolic SAR' is the ONE system in the book that I know CAN be backtested using MT4 and, the people that did this, although saying that there were indeed HUGE drawdowns, also discovered that there was ALWAYS a nice profit 'at the end').

Last edit to this post:

As I was reading this post to check for spelling and grammar mistakes it occurred to me JUST HOW PROFOUND my 'signature' (quote from 'the book') actually is!!!

[randont]

Fist off let me introduce myself. I’m 29 married with two boys. I’ve been a travel agent for about 2 months and have my own booking engine through ytb and have been studying forex for about 3 months. In the mean time I work mornings as a grunt while I wait on the above to take off. I love forex and study about 5-6 hours daily. I don’t do much cause everything I want to do requires money and free time. When I get money I’ll get back into boxing, hunting, collecting more guns, try golfing, travel a ton, and scuba dive. Last year I became debt free thanks to Dave Ramsey’s “The Total Money Makeover” and Rober Kyosaki’s “Rich Dad Poor Dad”, both of which I highly recommend for those that really want to become rich in this life. I made my first ever investment this year buying a decent amount of silver, I’m about break even with the huge drawdown. I’ve got several k to start in forex once I get the hang of things and feel confident about my system.
I just finished your Parabolic SAR-that’s all! thread and this one. It’s been a HUGE inspiration to me. Dale, more people than you realize are rooting for your success. So many times during the thread I just wish I coulda gone back in time to warn you about the risks you were taking. It’s so easy to see clearly when you’re not the one in the situation. Since readying I find myself doing the same damn thing though! I lose, want to get revenge on the market and start trading smaller and smaller time frames till I end up down to the 1 minute time frame and have lost more, then get pissed and up the lot sizes. You know what happens from there. Since reading your threads at least I’m able to see that when I do it. I just stop what I’m doing close everything out and take the night off. Then come back with a clear head the next day. Its so easy to let your emotions get the best of you if you’re not careful.
I took your advice and got John Carters “Mastering The Trade” and J. Welles Wilders “New Concepts In Technical Trading Systems”. Now that I’ve finished your 222 page psar thread I can have more time to finish reading them! I’m working on the SI system calculations now. Still not getting how to get the SAR calculated. I’ll go over it a few more times. Hopefully that will become clear. I’m getting 22.8 for my SI value on Date 4. I’ve got n=1.30 , k=1 , r=.95. I saw that you said 15 was incorrect that the correct value was 24. Don’t see how you’re getting 24 though.
Glad to see things are going so good for you now, you deserve it. Thank you for everything your doing here Dale. I look forward to working with you and everyone else that’s been contributing to these systems. Looks promising. Here’s to many pips in our futures!


P.S. I youtubed Lacuna Coil, Nightwish, After Forever, and Within Temptation. I’ve now got Lacuna Coil and Nightwish and am going to get the other two sometime soon, . Great music!

[dpaterso]

Good Morning All (ESPECIALLY 'randont')!!!

randont:

To wake up and read a post like yours is something let me tell you. (I'll tell you a secret: it ACTUALLY made me a bit emotional). I really do appreciate the very kind words and words of encouragement and the fact that in such a short post you managed to share a whole lot of things with everyone (the way I 'waffle' it probably would have taken me three PAGES to impart the same information)!!! Sometimes (when I read something like your post) I think to myself 'well maybe I WON'T have my own building on Wall Street' i.e. maybe these two threads THEMSELVES are my 'contribution' to this business and maybe my most worthwhile accomplishment in life. Who knows. I don't maintain these threads for praise (or 'strokes') but I'm not gonna lie to you: it's a good feeling when you get some!!! Thank you.

I'm pleased that you bought 'the books'. I don't think you'll be dissapointed. I think I was just plain 'lucky' to have heard about and purchased these two 'gems' when I 'started out'. They have both served me well (and still do). Of the two I'd say that John F. Carters has probably had the most 'impact' (strange as that may sound) i.e. although Wilder's work is the 'nitty gritty' (and the sole reason I'm not 'sweeping the streets' for a living) I don't think that I'd be doing anywhere NEAR as well EVEN WITH fantastic systems like Wilder's without at least TRYING to understand the 'human' side of things and that's where these two compliment each other (for me anyway).

Now for the 'nitty gritty':

I have no idea where you get the 22.8 SI value from. You don't say whether or not you're working this out 'manually' or with Excel or something like that. I've done both and I am 100% sure that 24 is the correct value (and I, like you and many others, also had many 'variations' at first). Most of the time (when I kept getting erroneous values) my mistakes were as a result of incorrectly identifying the maximum values for 'R' (Column 10). Check them again. Feel free to send me an email (dpaterso@forexbrokersonline.net) and I will send you my Excel spreadsheet for the 'original' calculation i.e. the Excel spreadsheet that I used as a 'template' which was 'cross referenced' to the book.

Anyway: 'welcome to the club'!!! I CAN assure you of success with Wilder's work (I'm gonna do something nice for that man one day)!!!

And by the way: thank you to everyone ELSE that contributes here. I must point out that yesterday I had a LONG 'chat' with 'Bocajunior' using Yahoo Messenger. He has come up with something regarding the CSI values that I think I may have 'missed'. I am waiting for him to post his findings here so that we can all 'dive in' and sort this CSI 'thing' out once and for all. The point I'm trying to 'reiterate' here is that I am NOT always right in my thinking and it's BECAUSE of sites and threads like this and the communities that are built up that will contribute to our success and not just me alone.

(Oh, and 'randont': I SINCERELY hope you bought some of the 'old' Nightwish stuff i.e. Nightwish with my beloved Tarja and NOT the new Nightwish with that 'washed out old grandmother' that they now have as a front lady)!!! And I ALSO hope that you don't waste the opportunities that 'come your way' by virtue of where you live i.e. go and see as many concerts as you can (I know for sure that Evanescence has played in Vegas and I THINK the 'new' Nightwish (unfortuanately) has been there as well recently)!!! When I'm 'outta the sh*t', before I buy or erect my Wall Street 'monument to self', and before I buy my 'Alaskan Crab Boat', I'm gonna spend AT LEAST a year going to EVERY SINGLE CONCERT that these bands put on!!! (And I'll be sure to let you make all my travel arrangements)!!!

[Bocajunior]

Randont,

Hello there and welcome to the forum. Very nice post. I also have the two books you mentioned, in fact I just bought "Mastering The Trade" yesterday as Dale and thoroughly recommeded it, so I'm looking forward to reading it.

Hope to see you on here, and happy trading to you.
Best Regards
Boca

[Bocajunior]

Originally Posted by dpaterso

And by the way: thank you to everyone ELSE that contributes here. I must point out that yesterday I had a LONG 'chat' with 'Bocajunior' using Yahoo Messenger. He has come up with something regarding the CSI values that I think I may have 'missed'. I am waiting for him to post his findings here so that we can all 'dive in' and sort this CSI 'thing' out once and for all. The point I'm trying to 'reiterate' here is that I am NOT always right in my thinking and it's BECAUSE of sites and threads like this and the communities that are built up that will contribute to our success and not just me alone.

Morning all, Morning Dale.

A very informative chat we had yesterday on Yahoo. Great!

Ok, lets take a look at the CSI and here are my thoughts on it.

First of all, the section within the bracket of the calculation, or "K" as described by Wilder. I noticed that when I calculate this for mini lots on FOREX pairs I was coming up with the same sort of number ranging from 0.035-0.051 for all pairs. So I believe, to shorten the calcutaltions for calculating the CSI we could just use a mid range value of about 0.045 for K for all pairs to give us a "good enough" CSI. This is an option that can be used if desired. If not, we can use the correct K value.

I have all the K values available for all the pairs and I will post them here for reference. These should all be good enough to help us calculate the CSI.

USD/CHF K = 0.045
EUR/USD K = 0.037
GBP/USD K = 0.036
USD/JPY K = 0.045
USD/CAD K = 0.045
GBP/JPY K = 0.031
EUR/GBP K = 0.047
EUR/CHF K = 0.036
EUR/JPY K = 0.036
GBP/CHF K = 0.032
EUR/AUD K = 0.034
AUD/USD K = 0.047
AUD/JPY K = 0.046
AUD/NZD K = 0.038
CAD/JPY K = 0.045
CHF/JPY K = 0.045
EUR/CAD K = 0.036
NZD/USD K = 0.051

[Bocajunior]

Ok,, now lets look at a CSI calculation.

CSI = ADXR x ATR (14) x K. We all agree on that dont we.

So, here's an example for EUR/USD
CSI = 44.4 x 145 x 0.37 = 240.6

Ok,, now if everybody has being paying attention we can see that the ATR for EUR/USD is actually 0.0145 so to use it for the calculation we need to multiply this by the pipfactor of 10,000 to get 145.

This seems to ring true for all currencies quoted x.xxxx.


Another example here for AUD/USD
CSI = 17.3 x 108 x 0.47 = 88.6.

Again, the ATR is actually 0.0108 but we multiply this by 10,000 to get our usable ATR for the CSI calculation.

[Bocajunior]

Ok,, if you are all still awake,, what about pairs such as GBP/JPY and USD/JPY? Lets take a look.

GBP/JPY
CSI = ADXR x ATR(14) x K
= 27 x 297 x 0.32 = 255.

Now, ATR is actually 2.97 whcih is 297 pips so we need to multiply the ATR by 100 for us to be able to use it.

What about USD/JPY?
CSI = 33.1 x 137 x 0.046 = 208

Again, the ATR is 1.37 but we multiply this by our pip factor of 100 to get 137to use in the CSI equation.

So for pairs quoted xxx.xx we have to multiply the ATR x pipfactor of 100 for us to use it.

[dpaterso]

Ok,, if you are all still awake,,

LOL!!!

Thanks Boca.

Just so that I'm clear on one thing here:

You're saying this (I need to know):

If a pair is quoted as x.xxxx then your 'CSI PIPFACTOR' is 10000 i.e. the number of zeros is the same as the number of decimals in the quoted price. If the pair is quoted as x.xx then your 'CSI PIPFACTOR' is 100 i.e. the number of zeros is the same as the number of decimals in the quoted price. AND if you DO NOT have any decimals then there is no 'CSI PIPFACTOR' or should I say the 'CSI PIPFACTOR' will be '1'. How am I doing here???

[dpaterso]

BUT hold on there:

I just thought of something:

Let's say that we were calculating the CSI values for commodities. Then what?

What I'm saying is this:

Soybeans is ALSO quoted as xxxx.xx and Coffee is quoted as xxx.xx i.e. two decimal places i.e. same as GBP/JPY. I'm pretty sure that in THIS instance you would NOT HAVE to use a 'CSI PIPFACTOR'!!!

I suppose what I'm trying to figure out is WHY there should be a difference between a forex pair and a commodity IF the prices are quoted in the same format!!!

Edit:

Could it not be that two decimal places is supposed to be our 'benchmark' i.e. everything must be brought in line to two decimal places so that the price / ATR is in the same 'format' as the prices quoted for commodities???

I don't have the answer i.e. just 'throwing some ideas' into the 'pot'.

[Bocajunior]

Originally Posted by dpaterso

LOL!!!

Thanks Boca.

Just so that I'm clear on one thing here:

You're saying this (I need to know):

If a pair is quoted as x.xxxx then your 'CSI PIPFACTOR' is 10000 i.e. the number of zeros is the same as the number of decimals in the quoted price. If the pair is quoted as x.xx then your 'CSI PIPFACTOR' is 100 i.e. the number of zeros is the same as the number of decimals in the quoted price. AND if you DO NOT have any decimals then there is no 'CSI PIPFACTOR' or should I say the 'CSI PIPFACTOR' will be '1'. How am I doing here???

That seems to be the case Dale form the currencies tested which are the majors etc. Exotic ones such as CNY and NOK, well I have not tried them out yet.

The other ones that need more work are Gold and Silver.. Lets take a look at them in the next posts.....