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

[dpaterso]

Good (Sunday) morning all!!!

akeakamai:

WOW!!! Now THERE is another 'blast from the past'!!! Thanks for the post. I'm glad to see that you've covered your losses from last year and I know that it's a great feeling and a confidence booster. Let me say this: the only reason I know is because I had four different (personal) trading accounts from last year and I have covered losses made on two of the four to date and those two accounts now show nett profits as opposed to nett losses. Mainly: I STILL have to cover the losses on my first trading account (the losses on the other one mentioned are negligable in the bigger picture of things) and show a profit there but the nett loss is slowly but surely being reduced. By my calculations and based on my performance year to date I should cover that loss in the next few months and be showing a nett gain across ALL accounts by February / March next year. NONE of this has come without EXTREME 'pain and sheer hard work though'!!! I must admit: when I read some of my early posts and the very first post on the 'Parabolic SAR!!! - that's all' thread I feel somewhat 'foolish' NOW!!! On the other hand: it's a great way to 'check your progress' I must say!!! It really does go to prove that if you 'put your mind to something (anything)' and perservere you HAVE to succeed!!!

Anyway: stay in touch.


Craig:

Thanks for the input. You make some good and interesting points. I suppose if I / we were all following the systems 'to the letter' i.e. 'purely technically' then we would all be showing the IDENTICAL results i.e. I do forget to 'factor this in'.

You and I are just going to have to 'agree to disagree' on the 'Enron' system I'm afraid.

Let me explain it another way (from MY point of view):

The 'Enron' system is NOT implemented to 'hide losses' or give erroneous gains. I DO understand your way of thinking BUT one thing that you do NOT say is this: what IF your Accounts (A) amount was $10 000 and you were sitting with open postions that were showing a PROFIT of another $10 000 (as opposed to a loss)??? In other words: you Total (p+a) was $20 000??? What would YOU say was your ACTUAL account 'balance' THEN??? While YOU may say that it's STILL only $10 000 I'll 'bet you my bottom ZAR' that MOST would say that their account 'balance' is $20 000!!! To coin on of my favorite phrases: 'It's not over 'til the fat lady sings' in my opinion i.e. neither a profit nor a loss is a profit nor a loss UNTIL REALISED. On the OTHER hand (technically speaking): 'Enronning' a position IS different from closing a position, realising the loss, and then opening that same position later on when you get a signal ESPECIALLY if you're trading with 'logical' orders and positions AT DELTA. I will probably get the opportunity to demonstrate this fact soon enough with EUR/CAD!!! The fact of the matter is that it's NOT the same as either closing a position and realising the loss OR carrying the loss UNTIL price turns in your favor. I've tried to explain this to the best of my ability but before I go and type up PAGES of explanation let me rather use EUR/CAD as an example IF IT HAPPENS!!!

And ONCE AGAIN:

Please DO NOT think that I'm chastising anyone!!! I AM NOT!!! I REALLY WANT this to work for EVERYONE!!! Let me put it another way: it is NOT that difficult to make money in this business. YES: I can say that NOW of course. ALSO: I am NOT saying that it's EASY EITHER!!! What I AM saying is that somehow the 'mystique' of making money in this business no longer exists. I mean to say if I look BACK on the 'Parabolic SAR - that's all!!!' thread and SEE HOW my mind 'worked' back then and my thought processes at the time and how they are SO different from my thought processes TODAY: I can SEE WHY things did NOT work back then and why they DO work now. That's not to say that I'd go back to trading Parabolic SAR because, as YOU have noted, it's not a 'methodolgy' that 'suits my personality'. Having said that: I believe that even if I traded Parabolic SAR NOW I'd STILL make money but I'd probably not enjoy trading as much nor would my results be what they are. Of ONE thing I'm sure: EVEN IF I traded Parabolic SAR NOW I'd NOT 'wipe out' an account as was 'the order of the day' last year.

As far as your 'take' on the Dow, Nasdaq, and S&P is concerned:

I've read those SAME points of view and, THEY MAY EVEN BE CORRECT. The DIFFERENCE for me is the fact that EVEN IF THIS DOES HAPPEN I have a plan in place and if I have to carry a loss for a while (assuming I was long at the time on all of them) it would not concern me. It would not be NICE but it would not concern me. There is a subtle difference there. And to be honest I look at it THIS way: IF this DOES happen i.e. the Dow goes to 1 000 just think of the OTHER trading opportunities that would be presented??? The USD would become worthless and that would only mean that all our long GBP and EUR signals would be valid!!!

By the way: your observations are correct i.e. they ALMOST ALWAYS 'follow each other' ALTHOUGH the Nasdaq LESS SO than the Dow and S&P.

Anyway: I'm here to help as best I can.

I now have to 'tiddle off' to take four sick puppies to the vet (one has ALREADY been there overnight and these four are looking a bit 'green around the gills' this morning). They have contracted 'cat flu' or 'Canine Parvo Virus' which this breed is highly susceptible to so I need to sort them out. I'll tell you THIS much: I'm just REAL glad that this business has 'conditioned' me to think financially in 'USD terms' because the vet bill in 'ZAR terms' would make ME physically sick!!!

[chdorry]

Originally Posted by dpaterso

Craig:

Thanks for the input. You make some good and interesting points. I suppose if I / we were all following the systems 'to the letter' i.e. 'purely technically' then we would all be showing the IDENTICAL results i.e. I do forget to 'factor this in'.

You and I are just going to have to 'agree to disagree' on the 'Enron' system I'm afraid.

Let me explain it another way (from MY point of view):

The 'Enron' system is NOT implemented to 'hide losses' or give erroneous gains. I DO understand your way of thinking BUT one thing that you do NOT say is this: what IF your Accounts (A) amount was $10 000 and you were sitting with open postions that were showing a PROFIT of another $10 000 (as opposed to a loss)??? In other words: you Total (p+a) was $20 000??? What would YOU say was your ACTUAL account 'balance' THEN??? While YOU may say that it's STILL only $10 000 I'll 'bet you my bottom ZAR' that MOST would say that their account 'balance' is $20 000!!! To coin on of my favorite phrases: 'It's not over 'til the fat lady sings' in my opinion i.e. neither a profit nor a loss is a profit nor a loss UNTIL REALISED. On the OTHER hand (technically speaking): 'Enronning' a position IS different from closing a position, realising the loss, and then opening that same position later on when you get a signal ESPECIALLY if you're trading with 'logical' orders and positions AT DELTA. I will probably get the opportunity to demonstrate this fact soon enough with EUR/CAD!!! The fact of the matter is that it's NOT the same as either closing a position and realising the loss OR carrying the loss UNTIL price turns in your favor. I've tried to explain this to the best of my ability but before I go and type up PAGES of explanation let me rather use EUR/CAD as an example IF IT HAPPENS!!!

Well, I guess I will have to wait and see for the EURCAD example, b/c based on Trichet's comments this week, and CAD strength unfortunately it appears you'll get there. Now I guess the flip side is while riding it down to a $-500 position, holding the position open via enron, and then working it off when the reversal comes is valid, I'm more of the mindset that I'd rather cut that loss off early (say -$100 or -$150) and that gives me $350 more to place into other good signals, instead of tying it up on a position that is going to take a lot longer than anticipated to develop.

I guess that's just a difference in our trading styles, and I'm not sure if/when that will ever change. The key is that everyone needs to find what works for them to let them trade, be profitable and sleep at night. I think this is why Wilder doesn't say his book is *IT*, but merely a good starting point to build upon.

I can say I've been reading the book Market Wizards Interviews with Top Traders, and there are successful traders all over the map. There's one guy who tries to predict tops and just holds it as long as the fundamentals don't change. Some live off their charts, some don't even look at them. Some don't use stop losses, many have SL varying from 5-10%, and some will close positions if they don't turn profitable within 1-2 days. So I believe there is *ONE* approach that works for everyone, but that *ONE* approach is also different (slightly or greatly) for everyone, which is the tough part - trying to identify what works and doesn't work both in the markets and for yourself.

[chdorry]

Here's an interesting paraphrase from Market Wizards book which I think is where most folks (myself included) are having problems. I'm all ears if anyone has input/ideas/suggestions to help break through this threshold.

Most traders see gains and losses in terms of monetary implications, and this mindset gets in the way of making objective trading decisions. If you can get to the point where the gains/losses are just a means of "keeping score" you'll be much more level headed.

For example, if you have a $5k account, and then you're down $2k, many people will start saying "well that remaining $3k can pay for XXXX".

The key is (I know I struggle with this and I think its an trading experience related item) - Its one thing to get out b/c you no longer like the position, but its another to liquidate on impulse simple because you have translated the loss into tangible terms.

To me this is *ONE* major difference between myself and Dale which I wasn't fully aware of until I read it in the one interview. I can say as soon as I read it, I was able to fully identify and own that issue, which identifying the problem is the first step to making it "over the hump". So hopefully that tidbit is helpful to some others as well.

If not, skip right over and head to the next post

[dpaterso]

A VERY good (Monday) morning to you all!!!

I just awoke to some very nice surprises:

The Fed has stepped in and taken over Freddie and Fannie, the Dow Futures are up 278 points SINCE 22h00 LAST NIGHT (I've never seen a move THIS big between a Sunday and a Monday morning before), obviously the S&P Futures and the Nasdaq Futures are also rallying, some of my forex positions are in profit, and EUR/CAD has reversed without hitting my 'Enron' order!!!

A BIG PERSONAL 'THANK YOU' to Mr Treasury Secretary Paulson!!!

Only thing I'm NOT sure about: I still have one long position on Fannie. I guess TODAY I'll find out the 'merit' of using a 'zero' stock price as a 'stop loss'!!!

Anyway, the bottom line: if the past couple of hours are a 'portent of what's to come this week' then we're 'good to go'!!!

C'mon folks: let's ALL have a FANTASTIC week!!!

Edit:

LOL!!! And as if the ABOVE was not enough: 'new just in' that Washington Mutual's CEO of 18 years has been ousted and replaced by a new CEO. Investors normally 'salivate' upon hearing this kind of news and, of course, the stock 'rockets'!!! (BY THE WAY: that does NOT mean to just 'jump in' if you're not 'in' ALREADY i.e. chances are the stock price WILL surge but it will retrace as usual).

[Bocajunior]

Originally Posted by chdorry

Hey Boca,

I can say I wouldn't abandon RTS entirely, just be more selective in your positions. One of my personal concerns with the RTS is that no matter how you slice it, you are basically trying to predict a local top/bottom of the market, and that's near impossible to do consistently. Now, the way I typically would look to play RTS would be as you see some support/resistance approaching, I'd look for an RTS trade that is playing the bounce off that support/resistance. I know this isn't an "exact science" but it has proven itself beneficial for me in the recent attempts at it, although I doubt if I do more than 1 RTS trade per week tops, and some weeks none at all.

Hope this helps.

Craig

Hello Craig, and thanks for the reply on this.

I hear what you are saying here but to make the above observation I really think you need to be around during the trading day for this method of trading it to work for you. You can watch how the price behaves as it tests various S and R levels and you can act accordingly. Fair play to anybody who is making it work for them but right now I am applying my energy to other methods and systems.

Hope everyone has a good week ahead.

[dpaterso]

Good (Monday) afternoon!!!

Well: it's been QUITE A DAY so far!!!

OK: so I took a hefty kick in the 'you know what' on Fannie BUT there IS a 'silver lining' here BELIEVE IT OR NOT!!! I've just been able to buy Freddie at $1.55 and Fannie at $1.25!!! The fact of the matter is that they're NOT out of business AND what's more: one or two of the more REPUTABLE investment firms (if there is in fact such a thing as a 'reputable' investment firm) actually rate them as either a 'hold' or a 'buy' and see the stock at around $4.00 or so in the coming months!!!

Now AGAIN:

Today's 'Fannie move' has AGAIN affirmed the fact that GOOD AND SOUND MONEY MANAGEMENT IS NOT AN OPTION IT'S A NECESSITY!!!

Also:

For a very long time I used to believe that the big investment firms have 'inside knowledge' and 'inside connections' and 'better data feeds' and the like than we do. Well I'll tell you this: I'm starting to believe that neither they, nor the banks, know any MORE or any LESS than we do!!! Why do I say this??? Simple: my TOTAL exposure to 'Fannie at ZERO' is around about $2 500 USD BUT there are some big investment firms and banks who were 'loading up' on Freddie and Fannie not too long ago and those funds are 'in' for BILLIONS of USD!!! Now think about this: if they really and truly had better information than us would they have been 'piling in' to Freddie and Fannie??? I mean: EVERYONE knew that this was going to happen BUT there were differences of opinion as to HOW it was going to happen. The fact of the matter is: if they INDEED have better information at their fingertips than we then they would have KNOWN how this was going to be handled by the Fed an I doubt very much they would have been buying BILLIONS of dollars worth of Freddie and Fannie at $5.00 or above per share had they known that Freddie and Fannie would effectively be placed under curatorship!!!

I'll tell you one OTHER thing though: I feel EXTREMELY privileged to be in this business at a time when HISTORY is being made folks!!!

As far as forex trades are going:

I'll bet there are one or two out there who are 'beside themselves' because of EUR/ZAR and GBP/ZAR. Having said THAT though: if you're following GOOD AND SOUND MONEY MANAGEMENT you should be fine (and you just need to 'hang in there')!!! If not: START PRAYING to whichever god you wish (Boondock Saints???)!!!

RIPWWMY. RIPMIDIMY.

[chdorry]

Originally Posted by dpaterso

For a very long time I used to believe that the big investment firms have 'inside knowledge' and 'inside connections' and 'better data feeds' and the like than we do. Well I'll tell you this: I'm starting to believe that neither they, nor the banks, know any MORE or any LESS than we do!!!

Wow, what an interesting reversal from last week. I'm of the belief that the "big boys" get the data/news a bit before we do, but its by no means that much of a difference. They do have a slight advantage as they *should* be able to catch the beginning of the move.

And I can say I'm starting to get some concern over the strength of the USD. I mean its not a good sign when you double your government debt overnight (that's pretty much what happened with the Freddie/Fannie debacle). I see the government intervention as another delay of the inevitable - a US recession. I recall reading something about how Japan did something similar, and that is what ended them up as the "darling of the carry trade - on the other side" with their zero percent (or near so) interest rate. The only difference is the US has a much bigger economy, but with the debt load now double I can see some interest rates needing to be forced down (whether that's through government playing the market or cutting interest rates remains to be seen). I'd definitely make sure you keep your eyes on any USD charts, as the reversal can come at any time now.

The one thing that makes this all difficult is that even the best trade can be derailed *if* the government intervenes, and unfortunately government actions aren't incorporated into the charts. Now if we could figure out how to do that, we'd really have a winning system :-)

[kaalilaatikko]

There are exceptionally long shadows in today's candles of a number of pairs that Dale listed a while ago to follow, and some of the candles may form schoolbook doji. These could be warnings that those long downtrends may be close to end. While waiting for this turn, I have become a bit cautious about the VSC1 signals. I am starting to think that after such heavy trends the factor C=1 may be still a bit too low to signal a good trade. Maybe there should be a consolidation period that is long enough, (whatever time that then is), or then a bigger factor, 1.5 or 2, might be more appropriate. I'm going to watch this if we are starting to get those signals in the coming days.

I've also followed the latest turns in the FNM and FRE saga with keen interest. This resembles more and more the Finnish bank crisis, only in a much bigger scale. The worst bank then was taken in the control of the state. Here is my forecast, following our history: these stocks fall into the penny category where they stay for an undetermined period of time. In the meanwhile, there will be a number of arrangements behind the scenes that sell their healthiest credits to other companies. They will be finally taken out of the stock exchange, but they will remain as some sort of zombies that continue their lives as fiscal entities but have no proper business any more nor any chance to ever recover even some of the losses.

While still being a bit wary about financial stocks, I have tried to find references to those that should await the brighter future to come sooner than the others. WFC has popped up for me as one of the best candidates. I'm not sure if there will be quick profits with any of these, but I'm sure that there will be some financial stocks about which people are going to say, "I wish I had bought them in fall 2008."

It's funny how your feelings can change in a short time. My positions still keep on hitting record lows day by day, but I wouldn't call myself depressed at all. I have opened a couple of new positions today, and now my portfolio is a bit better distributed. I'm pretty confident that most of my positions will turn to profit (and if I weren't, I could throw the towel as well right now). It may take time to get back to BE, but I have my money management in place and working. Patience is a virtue!

[dpaterso]

Oy.

Wow, what an interesting reversal from last week

What can I say??? You live and learn!!!

[chdorry]

Originally Posted by dpaterso

Oy.



What can I say??? You live and learn!!!

Speaking of "Live and learn" - based on my chart, I anticipate AUDNZD *FINALLY* closing outside the VSC1 channels on the SHORT side - keep your eyes on the chart and see where it ends.