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

[dpaterso]

Good (Sunday) morning all!!!

Just so that you know I'm STILL around (I've not drunk myself to death or anything like that): I've been having workstation 'issues' since yesterday morning and have ended up doing a 'clean install' of my main workstation which I'm still in the process of finishing up and of course need to complete such 'clean install' before tonight!!!

One thing that has had me wondering for a while now is if it was my main workstation that was having 'issues' with this site i.e. slow loading of pages from the site and constantly having to 'refresh' pages etc. etc. etc. Well: for what it's worth it's definitely the site not my workstation i.e. this site appears to be 'grinding to a halt' ever so slowly!!!

Craig:

Seems you're doing a great job of 'keeping things afloat' in my 'technical absence'!!! Well done. You're working hard I see!!! You efforts and hard work WILL BE REWARDED THIS WEEK!!!

Well: for 'testing purposes' I decided to just 'throw in' a 'take' on kaalilaatikko's DMS trade.

Unfortuanately my answer to the the question is real simple. I'd not even have BEEN in that trade NOT EVER right up until now!!! Why? Because on 25 June 2008 there was indeed a crossing of +DI below -DI AFTER THE CLOSE. I would have placed my stop order to go short 'a couple of ticks below the low' of the bar of 25 June 2008 valid for a day. That order was NOT hit during the next trading day and therfore would have been cancelled at the close of the next trading day (Delta's current 'technical issues' aside). So: I'd simply just not have been in that trade!!!

As I've 'alluded to' before (and I firmly believe this): market orders are going to get you in trouble!!! This is just ONE of the MANY examples that I see every other day i.e. after having gone long or short at market the price has turned the very next day. At best case you're going to carry a loss with you for a while. At worst case you're going to get stopped out for a nice big loss. I've seen this happen FAR too often with ALL the systems.

OF COURSE: doing it my way is goint to keep you out of MANY MANY trades. One of my FAVOURITE SIGNATURES on this site is this however:

'I'd rather be OUT OF A TRADE WISHING I WAS IN than IN A TRADE WISHING I WAS OUT'!!! (I forget who's signature it is but will look it up later i.e. I need to 'get going' and finish off this workstation).

(By the way craig: I got your emails regarding IndyMac yesterday. Thanks for that. 'Rumour' has it that Freddie and Fanny are also gonna be 'bailed'. Tomorrow's opening is gonna be REAL interesting!!! Put it this way: NEVER IN MY WILDEST DREAMS would I ever have expected to buy Dow at 1 point!!! Who knows??? Maybe my time WILL COME!!!).

[kaalilaatikko]

Craig & Dale, thanks for your DMS analysis! I'd like to add my interpretation about entering DMS. It's true that in my example I wasn't having a position at the time of +DI/-DI crossing. But I don't think that changes this kind of a situation essentially. We could also end in not having an open position before the crossing after TP-ing the previous position earlier. If doing that e.g. with the help of AC, in the example there could have been a TP somewhere around 1.0200 when AC first turned red for the previous trade, and that would have been hit. There was also some analogous discussion about initial SIS entries a few posts ago: should we follow Wilder's rules or could we use TISAR of the previous, virtual trade.

The Extreme Point Rule (let me call it "EPR" here) defines the reverse point which should be used for both entry and exit. Here I can imagine having a virtual long position and not reversing it to a real short position until EPR is completely filled. So Dale's stop rule could also have been applied on Jul. 11th, and it would have got cancelled.

But then there is also the possibility to consider retro DMS trading. If you don't apply EPR when you don't have an earlier position open, and you didn't open the new position right after the signal, then the price would have been in a favourable level for several days. But if you apply EPR in every case, then there is no place for a retro trade here yet.

I'm now inclined to the following principles for the initial (and any other) entry of DMS:
- Wait until EPR is filled, even if you don't have an earlier position.
- Rank the trade as either a "good" or "bad" one based on the indicators on the date of EPR (ADX, AC and possible others). Don't take a "bad" trade.
- Enter by placing a stop 'a couple of ticks' below (on short) / above (on long) EPR
- Use TP once AC turns against the trade.

J.

[chdorry]

Hi all,

Thought I'd share some info on live trading, as I just started Friday of last week (July 11th). For starters, I closed a position out for a profit that day. Ok, so the truth be told I was dorking around with the Delta interface, and accidentally opened up a trade without any system or reason behind it. (Note to self: Don't mess around with the live platform, if unsure test it on the demo). Anyway, that trade went almost instantly in my favor, so I set a stop at 2pip profit in the unlikely event that it would work out better. Almost immediately after setting the stop, the pair dropped like a rock which left me with $3 extra in my hand.

As for starting on a Friday, there's good and bad to it. The good is you setup your positions and LEARN to not touch them for a couple of days. Of course the reason being is that markets are closed, but I feel like it was beneficial in getting the mindset where you don't have to constantly check your positions. Just set them up properly and then let the systems run their course.

I have to say while I've been doing a good job of keeping my emotions in check, there's definitely a world of difference between the demo trading money and your real hard earned cash. I was actually joking with Dale on Friday that I needed to go real quick and close out a position for a $5 gain. While it was a joke, in some ways it was odd as I can equate it to seeing a $5 bill sitting on the ground, and letting it sit there while you hope the wind brings a much larger bill to replace it. Ok, so that's a bit of a stretch, but human nature and conservative side of most people makes it hard to let the positions run their full course. Since Friday, both positions I had tanked and were down as much as $100 (remember that's paper loss as position wasn't closed), but as the Wilder systems seem to do, they are both up about $20 as we speak, and hopefully will hit TP Monday or Tuesday of this week. I also have a 3rd position based on the SIS (EUR/CAD) that is currently bouncing between $15 profit and loss, but have to wait this one out and see if the trade turns my way or not. Will provide additional details on the SIS trade as it continues to develop.

I think people need to heed Buffett when they are going to move to live trading - here are a few of my favorite Buffett quotes:

Risk comes from not knowing what you're doing.

If past history was all there was to the game, the richest people would be librarians.

In the business world, the rearview mirror is always clearer than the windshield.

And this one is spot on regarding investing advice from CNBC or any other tv analysts:

Let blockheads read what blockheads wrote.

Well in any event, I'm currently having fun and gaining additional faith in the systems. I can say that now that I'm beyond demo trading, I can see how people can easily be their own worst enemies by not being able to keep objective and level headed regarding their trades. I can't remember where I heard the quote, but I think it applies to being successful in forex (and in most other areas of live). It goes something like "If you think you can, or you think you can't - you're right."

Edit: Just came across another good one from Vince Lombardi -
It's easy to have faith in yourself and have discipline when you're a winner, when you're number one. What you've got to have is faith and discipline when you're not yet a winner.
Vince Lombardi

Wishing everyone the best on their trades.

Craig

[dpaterso]

Good (Monday) morning all.

Craig:

Edit: Just came across another good one from Vince Lombardi -
It's easy to have faith in yourself and have discipline when you're a winner, when you're number one. What you've got to have is faith and discipline when you're not yet a winner.
Vince Lombardi

Thanks: I needed that this morning (see the AUD/NZD opening gap last night)!!!

To make matters worse: I'm still having 'very expensive Viewsonic monitor issues' this morning. Hope to sort them out today!!!

[chdorry]

Well I'm having some minor issues of my own, but they are "keyboard driver" issues :-) I accidentally transposed two digits so I ended up getting into an RTS trade about 50 pips prior to where I wanted to. Per the system, the trade should go my way, so the net result will be a little less profit than I should get. If it hits the 50 pip differential, I *might* add to my position, but that will be a decision for later today unless it reverses and heads my way earlier than my original entry point *should* have been. The nice thing is I was instantly notified by using the delta alerts to send an SMS/text message to my phone, so once the order hit I could check in at my computer and see what was going on.

So another note to self - check, double check and check your entries again. Just went through all my open orders (day orders) and have verified them against the charts.

Also, I'm looking at some potential ways to modify the SIS. I have an idea I'm vetting out through my own analysis, and when I think I have something that is worth sharing, will put it out to the group at large.


Dale - Have you heard anything more on the day orders not clearing out at Delta? When I logged into my system last night to place my Sunday evening orders, I didn't see any additional day orders still open, so *hopefully* they've resolved the issue.

[randont]

Having computer problems also. When I keep my computer running and it sleeps I can't get it to wake up. I have to reboot and it's having a hard time doing that oo. I usually have to let it sit shut down for a few minutes before I can reboot even then it recycles a few times before it decides to really boot up. My back up computer won't connect to the net, I think its modem might be bad. Kinda sucks knowing nothing about computers.

[chdorry]

Has anyone been trading the DMS system? I've been reading up on it and looking at it through some historical charts and it looks like there's some real merit to it. I'm going to begin looking for some DMS trades starting close of candle Tuesday night (my time - start of trading day Wednesday July 16).

Would be interested in others thoughts, as I might look at some sort of trailing stop approach (I remember Dale using a Williams indicator for something to that effect) just to try to capture more profits, but that will have to be worked out as I get a few trades under my belt.

Would be interested in anyone's feedback on the system so far, and I'll be happy to provide post-trade summaries to anyone who is interested - if you are drop me a PM. Also, I can try to provide some "historical" DMS trades (ie after the fact) on the forum here for everyone to see as they follow along at home.

[dpaterso]

Well.

Good (Tuesday) morning all!!!

It would FINALLY appear that I've got my workstations running 'real smooth' again!!! (It's funny: the last time I had 'computer issues' I seem to remember a few others having 'computer issues' at EXACTLY the same time as well)!!!

Randon: just watch out with rebooting all the time (and make SURE you've got a backup workstation). This is exacty what started my 'computer issues' off on Saturday i.e. I've got two Viewsonic 19" LCD monitors and it turns out that this model has inherent problems with something or the other. One 'packed up' and was sent away to be repaired under warranty and I continued to use the other one until on Saturday it started to do the same thing i.e. would not start up. So: I just continued to reboot (after shutting down 'blind') my 'main' workstation UNTIL I got a display but by the time this happened I'd messed up the registry. I then decided to sort out my ENTIRE network and workstations so things are good now!!!

Now:

You know what folks???

The more I sit and watch and work with these systems the more I'm starting to believe that the VS/VSTOPS and the DMS are 'top of the pops'. They are the only two systems that don't have you sort of 'hanging on every little subtle nuance of price change' all day every day!!! It could be (at this late stage) that maybe I've ALWAYS been wrong in my thinking of 'the more complicated things are the better they should perform'!!! I've spent a good deal of time lately (computer 'nonsense' aside) analysing a whole bunch of VS/VSTOPS/DMS trades. One that REALLY 'sticks out' OF COURSE is AUD/NZD!!! If you take a look at that pair since the very beginning of it's uptrend some weeks ago you'll note that the VS/VSTOPS (with a 'constant' of '3.1') would have gotten you in very near the bottom AND YOU'LL STILL BE IN THAT TRADE LONG (well at VERY worst case you MAY have stopped and reversed ONLY ONCE and THAT would have depended on whether you're following 'my method' of trading the VS/VSTOPS or stopped and reversed at market as per 'the book'). That is a WHOLE PILE of $$$ WHICHEVER way you 'played it'.

Now I DO KNOW that I'm 'guilty' of 'chopping and changing my mind' every so often but I've got to continually re-evaluate what's working (well) and what's not so that's why I post my 'current take' on things. In other words: I don't intend confusing anyone here!!!

At the same time I've also looked at the SIS AGAIN and it is now starting to appear to me that the 'key' to the SIS trades are the 'SIGNIFICANT' HSP's and LSP's not just the 'NORMAL' HSP's and LSP's. The 'NORMAL' HSP's and LSP's are what appear to cause the majority of 'false' SAR's AGAIN no matter whether you're using 'my method' of placing SAR orders or placing orders as per 'the book'. I've mentioned this before and I THINK I'm STILL right though: a 'SIGNIFICANT' HSP or LSP is the highest HSP or LSP formed DURING THE PREVIOUS (VIRTUAL???) TRADE. Being able to recognise or 'pick' the HSP's or LSP's on THIS basis appears to make the world of difference. DO you, however, need the 'aggravation' is the question!!!

Of course (as I'm sure that everyone agrees): the VS/VSTOPS and DMS require 'truckloads' of 'patience and restraint' and lack thereof (I reckon) will be the major 'stumbling block' for many with these systems.

I also have to say that right now my 'mettle' is being tested to the 'nth degree' with just about everything I'm doing. AUD/NZD I just have to 'wait out now' until I get a signal to short it again and 'resell' all the lots I've had to 'dump' and the chances are that means I'm going to wait for a valid VS/VSTOPS signal to go short (or possibly a DMS signal). As for my equities positions (the Dow and some financial stocks) I'm (again) using the VS/VSTOPS or DMS to track the trades. Had I been using the SIS for this I'd be 'taking a bath with my clothes on' as they say in the classics!!!

Anyway: after all said and done I'm 'back on it' and will be back on YM again too. I'll be answering all my emails once I've submitted this post.

Later.

[chdorry]

Hi all,

Here's a quick update. Sunday night I took a couple of RTS based positions, went to bed Monday seeing them down slightly (less than 1% drawdown). When I awoke this morning, I saw a 7% drawdown of my account. (Ok, in retrospect 7% isn't anything to worry about, but this was my first drawdown experience.)

I can tell you my first instinct was to start closing the positions as fast as I could, and cut my losses. After sitting there a couple of minutes the initial shock wore off. At that point I was determined to see things through. So as I waited them out, things slowly started getting better. Long and short, while I didn't make the TP on the RTS system (B1/S1), I was able to close out the three positions that had me down 7% into a 2% gain, and each position closed above BE, although one was just barely above.

Interesting thing is that if you asked me about 4-5 hours ago what I thought of the RTS system, I'd have told you I'd *NEVER* trade it again. Of course, a short memory is a good thing in this business as you can't remember how good or bad your last trade was, and just continue to follow the system. So tonight when the close of candle comes, you know what I'll be looking for - yup, you probably guessed it - more RTS trades :-)

I feel like I'm just learning to crawl in this Forex trading environment, and the market is a world class sprinter. I know that's an exaggeration, but I'm sure that I'll be "up to the speed" of the market in the next few weeks.

Hopefully everyone else has had some positive results with their trades.

Best of luck.

Craig

[dpaterso]

Good (Tuesday) evening everyone.

Craig:

All I can say is: GOOD ON YOU!!! Well done!!!

I just 'popped in' to leave a short note of 'gratitude':

I don't know if anyone has been watching the 'goings on 'on Capital Hill this today??? I'm referring to Fed Chairman Bernanke giving his semiannual monetary policy testimony before the Senate Committee on Banking. Also present were Treasury Secretary Paulson and SEC Chairman Chris Cox. Of particular interest to me is the fact that the SEC is going to implement measures to stop the 'naked selling' i.e. the shorting of stocks without first without either owning the stock or at least 'borrowing' the stock before being able to sell it this done to bring back stability to the market. Also (of COURSE) I'm once again impressed with the fact the the government is prepared to step in and do whatever it takes to save the US economy and the dollar.

The reason for this post:

Aside from all of the above: what struck me many many times today while watching all of this was just how 'lucky' I feel and how fortuanate I am to be around in this business at this time. We're seeing history in the making my friends!!! There are not many traders that can lay claim to this privilege!!!

Again: do not get discouraged when positions go against you and do not 'panic' when they do. They WILL turn and you WILL prevail. Sometimes: it MAY just take a LITTLE longer is all!!!