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

[TheRumpledOne]

I wrote and indicator to plot HSTOP and LSTOP.

Then after reading what you wrote a second time, I added a myShift input.

The chart shows one plot with myShift = 0 and one plot with myShift = 3.

You can see price does penetrate the plots with myShift=3.

Is this what you have in mind?


_TRO_HL_dpaterso T4 Indicator attached.

[dpaterso]

Good (Sunday) morning all!!!

Avery:

Are you TRYING to kill me??? Let me make you aware of something: my hangovers tend to last AT LEAST two or three days lately. Why am I telling YOU this? Because when I checked the thread this morning and saw that chart og yours it sent me into 'sensory overdrive' with all those 'dots' and I 'tied one on' on Friday night!!!

OK:

Seriously:

Thanks for posting!!!

I have attached a chart from Deltastock that I 'coded' in VB for their platform. Take a look. THAT is what I had in mind for MT4. (It's just the top lines you're looking at for now). The lines are nothing more than Pivot Points / Levels (Wilder just called them something different for the RTS and I've added a few details of which are contained in my previous posts). My RTS 'sysdicator' (good word hey???) draws the lines for the current day - 1 i.e. I'm showing the pivots for the current trading day is all. There is no need for a 'shift' variable or anything like that i.e. they are 'stock standard' Pivot Points / Levels.

[dpaterso]

Hokay.

I have been 'approached' on more than one occasion via PM's or email to 'rate' the different sections in the book in order of importance so I'm going to give MY opinion below (everyone feel free to add to or disagree with my 'ratings').

I would say that the very FIRST section to read and 'note' would be SECTION I: 'BASICS' because the 'BASIC TOOLS' described here are used throughout.

Next would be SECTION IV: 'THE DIRECTIONAL MOVEMENT CONCEPT' / 'THE DIRECTIONAL MOVEMENT SYSTEM' as the information contained in this section is also used throughout. This section needs to be UNDERSTOOD so read it as many times as you have to!!!

Next would be SECTION X: 'CAPITAL MANAGEMENT' / 'CONCLUSION' and when reading this section be sure to factor in leverage as I have done with my own 'version' of Wilders capital management i.e. MY money management rules.

Next would be SECTION IX: 'THE COMMODITY SELECTION INDEX' (I don't use the CSI as described but rather the ADX/ADXR values for reasons as stated previously on the thread).

At this point I would move on to the actual trading systems.

For me: my results are (at the moment) being generated by trading the systems below (listed in order of 'consecutive successful trades'):

SECTION VII: 'THE REACTION TREND SYSTEM' (and my 'variation' thereof) (to be used MAINLY in ranging markets i.e. where ADX/ADXR < 20 and MAYBE between 20 and 25).

SECTION III: 'THE VOLATILITY INDEX' / 'THE VOLATILITY SYSTEM' (and I don't see the reason to note either the CSI or ADX/ADXR value with this system because it's based mainly on the ATR and will reconfigure itself to the current volatility and directional movement).

SECTION VIII: 'THE SWING INDEX' / 'THE SWING INDEX SYSTEM' (only used in a trending market i.e. where ADX/ADXR > 25 and THE HIGHER THE VALUES THE BETTER).

At this point you should be able to trade with the above systems and make some nice profits.

I WOULD NOT, however, stop here i.e. each of the sections in the book contain additional information 'in general' i.e. information that is NOT 'specific' to a particular trading system and some of this information is INVALUABLE e.g. SECTION V: 'THE MOMENTUM CONCEPT' and SECTION VI: 'THE RELATIVE STRENGTH INDEX'.

This works for me!!! Hope this helps.

Oh and one LAST thing: MY 'sysdicators' ARE SUPPLEMENTAL to the book i.e. if you have not studied the systems and gone through them and 'worked' them then my 'sysdicators' are going to be of very little value to you and to be honest I'm not interested in 'teaching' these systems to anyone who has not done the initial 'legwork' of trying to understand the systems by putting in the effort (and believe me it's obvious when someone has not done this and is trying to 'busk' their way through). There are quite a few people (myself included) that have actually put in the time and the effort and these people grasp the workings of my 'sysdicators' 'in an instant' and that's the way it should be. In addition to that of course my 'sysdicators' are Deltastock and GCI Financial 'specific' so by NOT trying to understand or 'work' the systems you're 'tying' yourself to my two brokers (which for ME of course is not a BAD thing BUT would undermine the purpose of this thread).

[dpaterso]

Well,

It's Sunday night here and getting ready for the week.

After updating my ADX/ADXR worksheet I find that at present there is ONLY ONE pair that has both an ADX < 20 AND ADXR < 20 and would you believe that it's USD/ZAR!!! Would you ALSO believe that AUD/NZD is STILL 'top of the pops' i.e. the highest ADX and ADXR ratings!!!

Anyway: this all got me to thinking. I don't see why you cannot use the RTS (with my extra levels) in a trending market as well. Why do I say this??? Because let's just say that a pair is trending up right??? If you're LUCKY enough to get a retractment to B1, B2, or LBOP (or EVEN LSTOP) you can pretty much 'bet your ar*e' that at at SOME point S1 is going to get hit not so??? In addition to this: if S1 is NOT hit it's going to move UP the next day so your TP target is going to increase i.e. more profit. Anyone agree here???

Also: the 'perfect Wilder storm':

For long trades with the RTS (opposite would obviously apply to short trades):

- +DI is above -DI.
- +DI is moving up and -DI is moving down i.e. they're moving away from each other.
- ADX is moving up i.e. increasing.
- Buy at B1, B2, and LBOP (maybe even LSTOP if you're REALLY lucky) and sell (TP) at S1 (and remember to move S1 every day if not hit).

You could EVEN introduce some EMA's if you like I suppose e.g. 8 EMA and 21 EMA i.e. buy at B1, B2, and LBOP (and again maybe at LSTOP if 'luck' is on your side) and sell (TP) at S1 only when the 8 EMA is above the 21 EMA (again the opposite would apply for short trades). Remember also the significance of the 50 EMA and 200 EMA!!!

You could EVEN use something like Linear Regression Channels (14) (see attached chart of AUD/NZD. In VERY bad taste I know). Using the RTPS 'Reaction Trend Pivot System') and only taking long trades i.e. only buying at B1, B2, LBOP, or LSTOP and selling (TP) at S1 you would have taken profit every single day by the looks of things!!!

(Man oh man: this is no longer 'creative juices' but 'creative nectar' flowing here)!!!

Obviously you're only going to get into a few trades this way i.e. you're 'betting' on a retractment during the trend BUT I would say that these would be 'higher than average probability' trades wouldn't you???

And I suppose the above would really apply to ALL of the systems in 'the book' with the possibly exception of the VS i.e. is there a point to taking short SI System trades (whether it be an entry or a stop and reverse) if the trend is up???

Play around folks. Don't detract from the 'core' of the systems but play around!!!

And for those interested: in SPITE of AUD/NZD and thanks mostly to the RTS I'm up on average around 30% for the month and today is only the 18th!!!

[TheRumpledOne]

Made an attempt at your indicator.

I can't tell from your chart... are the values DAILY VALUES plotted on a higher frequency chart?

[TheRumpledOne]

Since you are using a pivot calculation, I made the assumption that you ARE using daily values so I made another version.

[pseudo straddle]

Originally Posted by TheRumpledOne

Made an attempt at your indicator.

I can't tell from your chart... are the values DAILY VALUES plotted on a higher frequency chart?

* * * * * * *

I'd better see the Doc!!

[dpaterso]

I don't know if I mentioned this on this thread sometime previously but this is the site that I use to check what the opening prices on a Sunday are going to be i.e. what's happened since Friday night's close:

Oz Forex Foreign Exchange | Inter-Bank Spot Rates

(Also useful sometimes to verify the prices you're being quoted by your broker i.e. the rates quoted are the live Inter-bank Spot Rates).

Why is this important to me:

Well: 'for starters' I know that AUD/NZD has moved 'south' over the weekend!!! Also: the USD has gained a bit of ground over the weekend.

[TheRumpledOne]

I think I got it!!

You can use the chart period or specify whichever one you want.

Example shows D1 values plotted on H1 chart.

[dpaterso]

Good (Monday) morning all!!!

(I had another dream)!!! (Well not really but this IS the first thought that 'crossed my mind' when I woke up this morning)!!!

I MAY have found a more 'scientific' method for the RTS 'BOS' sequencing:

Using Linear Channel Regression:

Method 1:

In THIS 'scenario' you would use STOP ORDERS because the price would normally be ABOVE or BELOW the RTS levels.

- Today is 'deemed' to be a 'B' day if the price YESTERDAY traded to the lower or bottom line during the trading day.
- Today is 'deemed' to be an 'S' day if the price YESTERDAY traded to the upper or top line during the trading day.
- Today is 'deemed' to be an 'O' day if the price YESTERDAY did NOT trade to EITHER the lower or bottom line OR the upper or top line during the trading day.

Method 2:

In THIS 'scenario' you would use LIMIT ORDERS as per 'normal' and this would probably be the 'preferred', 'safest', and most profitable method.

- Today is 'deemed' to be a 'B' day if the price YESTERDAY traded to the lower or bottom line during the trading day after 'bouncing off' the middle line the day before.
- Today is 'deemed' to be an 'S' day if the price YESTERDAY traded to the upper or top line during the trading day after 'bouncing off' the middle line the day before.
- Today is 'deemed' to be an 'O' day if the price YESTERDAY did NOT trade to EITHER the lower or bottom line OR the upper or top line during the trading day.

Method 3:

(Geez: been trying to add this third one the whole morning)!!!

In THIS 'scenario' you would use LIMIT ORDERS as per 'normal' and this would also be a 'safe', and profitable method although profits may be smaller.

- Today is 'deemed' to be a 'B' day if the price YESTERDAY CLOSED between the lower or bottom line and the middle line i.e. in the lower channel.
- Today is 'deemed' to be an 'S' day if the price YESTERDAY CLOSED between the upper or top line and the middle line i.e. in the upper channel.
- Today is 'deemed' to be an 'O' day if the price YESTERDAY CLOSED ON OR VERY NEAR TO the middle line.

The 'ideal' scenario for the above methods is that the lines themselves are 'flat' or horizontal i.e. not 'sloping' in EITHER direction and ADX and / or ADXR is below 25 UNLESS you are going to use the RTS in a trending market in which case you would only take long or short entries as I described in a previous post to this one.

Of course your TP is up to you or you can follow the RTS TP / exit rules.

Now none of this follows the RTS rule or 'noted phenomenon' of 'three-days-up-two-days-down' as described in 'the book' BUT the very 'concept' of the channels is that the price WILL trade between the upper and lower lines 'pretty much' on alternate days or periods.

Also: none of the above is detracting from the RTS itself i.e. you're still using exactly the same 'concept' i.e. all you're really doing is (possibly) using a more 'current' or 'accurate' method for the 'sequencing'.

For more information on Linear Regression Channels do a Google search using the phrase: 'trading with linear regression channels' and see what you find.

Oh, by the way: SUCCESSFUL AND CONSISTENT TRADING THIS WEEK EVERYONE!!!

Edit:

As a matter of fact making use of Linear Regression Channels (let's call them 'LRC's' from now on shall we i.e. that's a 'full load' to type everytime) may even be able to 'beef up' the profitability of the TBPS i.e. only take trades as indicated by the MF AND in the direction of the channels!!! Maybe???