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

[dpaterso]

Good (Friday) morning everyone!!!

Good week so far??? (I find that Friday always comes too quickly don't you)??? Good week for me (us) although STILL 'sitting' on AUD/NZD waiting for it do to SOMETHING!!! ANYTHING!!!

Nick:

You've 'read me right' i.e. the MOST succesful RT Trades are the ones where you 'buy the bounce' off LBOP and 'sell the bounce' off HBOP and TP as 'normal' per the RT System. That's exactly what I was saying. This results in BIG profits and because you're setting TP's the temptation is NOT there to just TP when you're emotions tell you to. Remember that you have to adjust your TP's every day as per the RT System itself.

Now even more interesting is the fact that (as I said earlier) HBOP / LBOP are EXTREME Pivot Levels (R3 and S3 respectively) and the LONGER the timeframe the more reliable these levels are i.e. the 'firmer' they 'hold'. What I'm saying is this: if you (for example) 'sell the bounce' off the MONTHLY HBOP believe me you're in the '$$$ seats'. Why? Because I personally have ONLY ONCE seen something trade PAST it's monthly HBOP. On the other hand: very SELDOM does something trade TO it's monthly HBOP / LBOP. The shorter the timeframe the LESS likely something is going to 'hold' at HBOP / LBOP but having said that these are EXTREME levels and therefore there is a 99% chance that HBOP / LBOP will hold on the weekly timeframe. Do you see what I'm saying. Basically (all other things as per the RT System 'being equal') you're ACTUALLY trading Pivot Points / Levels here the difference being the 'BOS' sequencing which makes a HUGE difference AND the fact that the 'guesswork' is taken out of the TP point. LESS 'surer' trades are then obviously the 'bounces' off B1 / S1 and of course they are less profitable if the TP is not hit on the correct 'BOS' day and the price turn against you. Again: more 'sure' trades: instead of using limit orders (as the RT System 'dictates') wait for the price to move THROUGH B1 or S1 by 'a fair bit' and then use stop orders instead. You can do this with HBOP / LBOP too if you like. That way if the price does not 'come back to you' you're not in the trade and no harm done. By the way: you used the word 'hope' in your post i.e. 'hope the price goes back into the range'. There's no 'hoping' about it i.e. as long as ADX/ADXR is below 20 (the lower the better) IT ALWAYS DOES (at least 99.999% of the time anyway but not necessarily on the same day)!!!

Boca and Randon:

WHAT are we going to do with the two of you??? You're BOTH making the 'BOS' sequencing more complicated than it needs to be!!! See the attached chart!!! (Please note that I have not 'labelled' EVERY possible 'B', 'O', or 'S' day on the chart i.e. there are many more but I just picked out the 'obvious' ones for the purposees of a CLEAR explanation)!!! All you're looking for are SIGNFICANT HIGH POINTS and SIGNIFICANT LOW POINTS and what is a SIGNIFICANT POINT??? Go read!!! Now the only thing I do differently is this (and this should clear up your 'hit and miss' 'issue' Boca): I will find two previous points (does not matter whether it's a 'B' and an 'S' day or both 'B' days or both 'S' days) and then start my 'sequencing' FORWARD. If my 'new day' i.e. my 'forthcoming trading day' 'ends up' having the SAME 'label' then I'm good to go. If not i.e. I get a conflicting 'label' for my 'forthcoming trading day' then I ignore a possible trade. I hope that makes sense!!! Let me put it another way just in case it does not: I will find the LAST TWO SIGNIFICANT POINTS (does not matter whether they are HIGH SIGNIFICANT POINTS or LOW SIGNIFICANT POINTS) and start my 'sequencing' from EACH of them TOWARD my 'forthcoming trading day'. Now let's say that 'sequencing' from EACH of these two previous SIGNIFICANT POINTS my 'forthcoming trading day' is designated or 'labelled' as an 'S' day then I'm going to SELL at S1 if hit. BUT: if my 'forthcoming trading day' 'lands up' getting a 'B' label from my first 'sequence' and it 'lands up' getting an 'S' label from my second 'sequence' then I ignore the possible trade. Again in other words: I'm using TWO 'sequences' from different SIGNIFICANT POINTS to 'verify' the 'label' for my 'forthcoming trading day'. I don't know of a way to explain it any clearer than that. Of course you could ignore the sequencing altogether and just buy or sell at B1 or S1 BUT there is NO WAY that this is the more reliable way to do it i.e. the 'BOS' sequence definitely 'fine tunes' the 'accuracy' of the system itself.

I have concluded that with the RT System there are MANY ways to use it / trade it / expand on it i.e. it's 'versatile' and allows you to be 'creative'. The ONLY thing I don't recommend is trading the 'Trend Mode' as I have indicated earlier for the reasons I indicated earlier.

AND the 'good 'ol' SI System Trailing Index SAR!!! To simplify it for you: calculate the ASI EXACTLY as per the work sheet in the book. Once you have the ASI then divide it by the QPF ('Quote Price Factor') to get the ASI 'relative' to the instrument / pair. DO NOT WORRY that it LOOKS too close when plotted!!! Remember: you're working with FOREX PAIRS NOT COMMODITIES!!! The 'pricing' is different. And again: you do not HAVE to use the Trailing Index SAR i.e. you COULD JUST trade the Swing Points. The only problem with that is that if you're 'right' and the trade goes in your favour then 'good for you' BUT if you're 'wrong' and the trade goes against you then you COULD 'land yourself in very hot water' for the simple reason that SOMETIMES the previous HSP and LSP are MILES away from each other so by the time you stop and reverse whatever profit you MAY have made on the previous trade will be gone AND THEN some!!! Another POSSIBLE way to trade the SI System is to use stops. In other words: if you're in a long trade AND IN PROFIT ALREADY you set a stop loss at where your Trailing Index SAR SHOULD be and TP at that point i.e. you don't stop and reverse. Then you just look for a new trade after that. The reason I mention this is because the SI Sytem DOES give many stop and reverse signals and a fair amount of the time a loss will be incurred on the stop and reverse. Again: use your 'creativity' and 'imagination' and see what works FOR YOU!!! Always bear in mind that 'the old man' has 'given' us some very SOUND and ROBUST systems and as long as you don't 'mess' with the 'core' of the systems then there is no reason to not 'tweak' them to find YOUR 'sweet spot'.

[Bocajunior]

Dale,

Thanks for that excellent post. Clear as a bell now.

Cheers
Boca

[randont]

I'm only referring to the system to understand the purpose of BOS. I've traded that system but I'm not currently. To start the labeling I just look at the past 3-7 days usually and find the lowest or highest depending on which is more extreem. The lowest I label B and the highest I label S and I go from there.

[randont]

Thanks for the reply Dale. It's pretty clear now.

[dpaterso]

Hey Randon,

I see what you were trying to do (which is not much different from what I do or what's detailed in the book the way I see it). The purpose, however, of the 'BOS' 'sequence' is detailed in the book i.e. the three-day-up-two-day-down phenomenon (or whatever the exact phrase is that is used in the book i.e. part of the RT System).

Anyway: not a 'stirling' week at all i.e. pretty slow actually (and AUD/NZD is STILL giving me a headache BUT I'm confident of 'my game plan' and in SPITE of AUD/NZD: things are good nevertheless). I sincerely hope that those of you who got trade signals from me are happy (and if not: patience and self-restraint is 'key' so don't 'fret')!!! Next week I DO however believe is going to be a 'winner' for sure!!!

Have a great weekend!!!

[Bocajunior]

Originally Posted by randont

I'm only referring to the system to understand the purpose of BOS. I've traded that system but I'm not currently. To start the labeling I just look at the past 3-7 days usually and find the lowest or highest depending on which is more extreem. The lowest I label B and the highest I label S and I go from there.

Thanks Randont. Between youreself and Dale, it's clear now. Thanks again
Boca

[chirules54]

Thanks for the ideas on the RT system Dale, I will try to take a close look at it soon. Also, you said that another way to trade the SI is to use the sar points as stops, NOT stop and reverses. This is the way I think I am going to trade it. If I'm in a trade for a while and I'm in profit when I hit the sar, unless the adx/adxr value is good (like over 25 or 30) I'll probably stay out and wait to see if the price keeps moving in that direction, if it does maybe I'll jump in after adx gets above 30 or something, or I can watch other pairs for possible entries. With my money management I can have 8 or 9 SI trades open at one time. At the close today, here are my open SI trades.

CHF/JPY +13 pips
EUR/JPY +127 pips
GBP/JPY +311 pips

I also need to place stop orders for several more pairs which went 60 or more points against their ASIs today, I need to update my charts. Overall though, so far so good with the SI, hopefully the three above pairs will continue to go in the right direction, I'm a bit worried about chf/jpy though.

[dpaterso]

Good (Saturday) morning!!!

Nick:

I'm pleased that you appear to be doing well with the SI System and that you also appear to have it 'under your belt'. Good on you!!!

Just to 'throw in' yet ANOTHER idea for you (if you're going to use stops to lock in profits and TP):

Another 'sure fire' way to lock in even greater profits is to place your stops at WHAT THE EQUIVALENT PRICE WOULD BE IF THE ASI MOVED BACK ON ITSELF BY 60 POINTS. In order to do this though you would need to either monitor the ASI in realtime as I can do at Delta OR you need to work out the formula for each pair (it will be different for each pair) i.e. 'what is the equivalent price movement per ASI point movement' if that makes sense. Another way of explaining it: 'what would the price be IF the ASI moved back on itself by 60 points'. This locks in profits far earlier than a stop at the previous HSP or LSP would but then you'd have to come up with a solution to re-enter the trade IF your stop was hit and then the price continued on in the direction it was going in the first place. More and more lately I find myself 'playing' a quote by John F. Carter 'over and over in my head' that goes something along the lines of 'entries are a dime-a-dozen but profits are in the exits' (or something like that). With these systems the part about the entries being 'a dime-a-dozen' is most certainly true i.e. on a daily basis I have too many valid entries from 'the old mans systems' to cope with i.e. more entries than my money management rules will allow. What's more: I find more and more (particularly with the SI System) that the major portion of the profit is made in the period immediately following the initial entry and some profits are lost (and losses sometimes incurred) upon the stop and reverse. While this may not be following the system 'to the letter' (the SI System is a 'true reversal' system) you have to ask yourself sometimes: 'what is more important? 'Locked in profits' or being able to say that 'I'm sticking to the system'??? I have to admit that I do go through 'phases' i.e. sometimes I feel that I should be following the systems 'to the letter' and other times (obviously when I'm showing what I consider to be an 'abnormally large profit' on a position) I find myself being quite proud of myself that I indeed took profit 'when I did'. Make sense??? Would my profits be greater if I followed each and every trade through to it's 'absolute' conclusion??? Who knows. Am I happy to make % gains like I'm doing now??? Definitely yes. The point is that by following some trades through to their 'absolute' conclusion while taking profits early on others is working for me and my % gains are FAR greater than anybody including myself could ever have imagined possible.

Anyway (as I have said before): we have been 'given' some excellent, robust, and reliable trading systems by 'the old man' but the 'creative' possibilities using the trading systems as a base are limited only by your imagination, expereince, and skill. And always remember that 'at the end of the day' it's profit that counts and nothing else matters!!!

Boca:

Are you SURE you've 'got it' now??? (Only kidding)!!!

By the way: you asked me how I 'marked up' that chart. It's part of Delta's charting package i.e. the FAR left icon at the bottom of a chart window is the 'Instruments panel' and the icon third from the left is the 'Property grid'. Both of these are used to add / edit 'markups' on the charts and I tell you you'll be amazed at some of the stuff supplied as standard (take a look at the different types of Fibonacci numbers / lines for instance).

[wajisco]

Originally Posted by dpaterso

Good (Saturday) morning!!!

Nick:

I'm pleased that you appear to be doing well with the SI System and that you also appear to have it 'under your belt'. Good on you!!!

Just to 'throw in' yet ANOTHER idea for you (if you're going to use stops to lock in profits and TP):

Another 'sure fire' way to lock in even greater profits is to place your stops at WHAT THE EQUIVALENT PRICE WOULD BE IF THE ASI MOVED BACK ON ITSELF BY 60 POINTS. In order to do this though you would need to either monitor the ASI in realtime as I can do at Delta OR you need to work out the formula for each pair (it will be different for each pair) i.e. 'what is the equivalent price movement per ASI point movement' if that makes sense. Another way of explaining it: 'what would the price be IF the ASI moved back on itself by 60 points'. This locks in profits far earlier than a stop at the previous HSP or LSP would but then you'd have to come up with a solution to re-enter the trade IF your stop was hit and then the price continued on in the direction it was going in the first place. More and more lately I find myself 'playing' a quote by John F. Carter 'over and over in my head' that goes something along the lines of 'entries are a dime-a-dozen but profits are in the exits' (or something like that). With these systems the part about the entries being 'a dime-a-dozen' is most certainly true i.e. on a daily basis I have too many valid entries from 'the old mans systems' to cope with i.e. more entries than my money management rules will allow. What's more: I find more and more (particularly with the SI System) that the major portion of the profit is made in the period immediately following the initial entry and some profits are lost (and losses sometimes incurred) upon the stop and reverse. While this may not be following the system 'to the letter' (the SI System is a 'true reversal' system) you have to ask yourself sometimes: 'what is more important? 'Locked in profits' or being able to say that 'I'm sticking to the system'??? I have to admit that I do go through 'phases' i.e. sometimes I feel that I should be following the systems 'to the letter' and other times (obviously when I'm showing what I consider to be an 'abnormally large profit' on a position) I find myself being quite proud of myself that I indeed took profit 'when I did'. Make sense??? Would my profits be greater if I followed each and every trade through to it's 'absolute' conclusion??? Who knows. Am I happy to make % gains like I'm doing now??? Definitely yes. The point is that by following some trades through to their 'absolute' conclusion while taking profits early on others is working for me and my % gains are FAR greater than anybody including myself could ever have imagined possible.

Anyway (as I have said before): we have been 'given' some excellent, robust, and reliable trading systems by 'the old man' but the 'creative' possibilities using the trading systems as a base are limited only by your imagination, expereince, and skill. And always remember that 'at the end of the day' it's profit that counts and nothing else matters!!!

Boca:

Are you SURE you've 'got it' now??? (Only kidding)!!!

By the way: you asked me how I 'marked up' that chart. It's part of Delta's charting package i.e. the FAR left icon at the bottom of a chart window is the 'Instruments panel' and the icon third from the left is the 'Property grid'. Both of these are used to add / edit 'markups' on the charts and I tell you you'll be amazed at some of the stuff supplied as standard (take a look at the different types of Fibonacci numbers / lines for instance).

Pls, can direct me to beginning of the the you are analyzing here. am new to this to this thread and to forex. Thanks. wajisco

[wajisco]

Originally Posted by dpaterso

Hey Randon,

I see what you were trying to do (which is not much different from what I do or what's detailed in the book the way I see it). The purpose, however, of the 'BOS' 'sequence' is detailed in the book i.e. the three-day-up-two-day-down phenomenon (or whatever the exact phrase is that is used in the book i.e. part of the RT System).

Anyway: not a 'stirling' week at all i.e. pretty slow actually (and AUD/NZD is STILL giving me a headache BUT I'm confident of 'my game plan' and in SPITE of AUD/NZD: things are good nevertheless). I sincerely hope that those of you who got trade signals from me are happy (and if not: patience and self-restraint is 'key' so don't 'fret')!!! Next week I DO however believe is going to be a 'winner' for sure!!!

Have a great weekend!!!

Pls, what is RT system. Where can i find it. Also which book are you referring to? Sorry for all my newbie questions. Thanks . wajisco