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

[mastergunner99]

Which posts went over how your QPF is calculated?

BTW... you are a tremendous help to me. Thank you for that.

[dpaterso]

Good (Friday) evening all!!!

Well: I'm done for the week. It's been a MOST frustrating week I can tell you i.e. nothing's really moved neither up nor down (at least the positions that I've had open since last week anyway). EXTREMELY frustrating. On the other hand: I believe that it's at times like this where being able to do NOTHING is what can make or break you!!! John F. Carter actually does say somewhere in his book 'Mastering The Trade' that sometimes NOT taking a position IS A POSITION in and of itself (not correctly quoted but you'll get the idea I hope)!!! Of course to add to the frustration the USA was on holiday today and NOTHING happens when the NYSE is closed!!! I can't even pass the time by watching the DOW!!!

Anyway: hope you all had a good week. I'm going to be sort of 'popping in' on YM over the weekend from time to time and hopefully I'll be able to 'catch' those that I've been missing on YM that have needed to 'chat' about the indicators and things.

Me: I've made a fire (for a barbeque) (in this cold weather) and I'm gonna kick back with my music and a 'FEW little drinks'!!! It's MY way of 'stepping away' otherwise I'd be sitting here just waiting for the close and have not much to show for it!!!

[dpaterso]

Hey mastergunner99:

Sorry: we we're obviously 'overtyping' each other!!!

How do you mean 'which posts'??? I don't know!!! Did you LOOK??? (I think at the time it was being referred to as a / the 'PIPFACTOR' but this was not an appropriate label for it so I decided to call it a / the 'Quote Price Factor' or 'QPF' instead).

If I INDEED did not give details of the QPF then I apologise and I'll get to it BUT LOOK FIRST because I'm almost sure I covered this MORE than once.

Alas, for now: I'm OUTTA HERE for the night!!!

[kaalilaatikko]

Got one TBPS lesson today. I forgot to reverse the open TBPS position that did not get closed yesterday, the reason being that that pair had sunk enough in the ADXR/CSI ranking, and the final loss was bigger than by promptly following the system. But this opened another question: if TBPS tells to reverse a position, but the ranking is now too low, should I just close that position without opening another one in a reverse direction? Or should I consider the initial ranking and open the reversed position in any case? Personally I think the former alternative is safer.

- I must digest this news issue. Maybe not using TBPS on only major news days and major currencies. Let's see. Good points anyway, Dale, thanks for your view!

J.

[dpaterso]

NOW everybody 'comes to life'!!!

mastergunner99:

Don't bother looking for the QPF on the thread: I just checked myself and from what I can see the explanations have been 'sketchy' at best (and I know I've changed to method determining it as well I think). I'll post details over the weekend.

Now I AM outta here!!!

[Bocajunior]

Originally Posted by mastergunner99

Which posts went over how your QPF is calculated?

BTW... you are a tremendous help to me. Thank you for that.

Hello matergunner99,

From my notes, the quotefactor is on page 26, post number #254. Hope this helps.

Best Regards
Boca

[Bocajunior]

Good afternoon all,

I apologise for not posting or contributing to thread much recently but I have ben quite busy with work these last couple of months so haven't had as much time as I would like to attend to trading. I really dont know who my employer thinks they are assigning me with work that is interfering with my proffesional trading ambitions .

Another reason that I haven't been posting is that I have been spending a lot of time going over J F Carters book which I am finding truely fascinating. A great read with some set-ups as well as how to develop your traders mindset. Great book.

Dale,
Thanks for the latest indictors update and I did eventually manage to remember how to download them. No problems. Thanks so much for that.
I eventualy managed to get my Delta documents sent off last week so I should be live with them soon. A Mr. Georgi there has been most helpful.

All the best for now
Boca

[dpaterso]

Good (Saturday) evening all!!!

The 'Quote Price Factor' or 'QPF'!!!

The QPF is determined as follows using the spread:

GBP/ZAR: spread is 0.0500 so the QPF is 0.0100
EUR/USD: spread is 0.0003 so the QPF is 0.0001
AUD/NZD: spread is 0.0010 so the QPF is 0.0010

In other words: the QPF is always 1 (one) and is placed (for want of a better explanation) in line with the 'first significant digit' of the spread.

Now you may ask WHY this is necessary.

Well the answer is simple: if you do NOT use the QPF with forex pairs the SIS Trailing Index SAR will be SO far 'behind' that it will NEVER be meaningful i.e. if you do NOT use the QPF then you may as well just exclude the Trailing Index SAR altogether and just trade the HSP's and LSP's.

And why do we use the spread to determine the QPF? Again simple. The spread is indicative of the expected volatility of the forex pair. So: if you decided that you were not going to base the QPF on the spread but rather just on the number of decimals in the quoted price then this would OBVIOUSLY work for EUR/USD i.e. it would be 0.0001 (as above) BUT if you used the SAME 'logic' for something like GBP/ZAR (also quoted with four decimal places) then even the very slightest of moves would give you a SIS Trailing Index SAR signal and this would result in just about every signal being 'false' on GBP/ZAR.

So: you calculate your SI EXACTLY as it is in 'the book' BUT you then DIVIDE the SI by the QPF and use the resulting ASI. Simple as that!!!

HOWEVER: as I was typing this post I've just realised that MAYBE I've been wrong all along here!!! Maybe even WITH the QPF based on the spread the Trailing Index SAR's are STILL too 'close'. It just 'dawned' on me now: maybe the BETTER WAY is to NOT use a QPF but rather 'agree' the format of the quoted price to that of a commodity (which as we know is what these systems are based on anyway)!!!

In other words (forgetting about the QPF above):

The ASI calculation for GBP/JPY would be IDENTICAL to 'the book' because GBP/JPY is quoted in the format '999.99' (same as a commodity e.g. Soybeans is quoted in the format '9999.99'). In other words: BOTH have the same number of decimal places.

BUT NOW (maybe THIS is what we should be doing):

In order to calculate the ASI for EUR/USD you would multiply the SI by 100 (in effect what you're doing is 'agreeing' the format of the quoted price to that of a commodity as in the example above) and then calculate the ASI based on the resulting SI.

Now I've had a look at the result of this change. It DEFINTELY does move the Trailing Index SAR much further away from the current ASI value/ What this of course means is that if a trade goes against you it has to go a whole lot further against you before you get the signal to stop and reverse as per the Trailing Index SAR. HOWEVER: MAYBE, JUST MAYBE, this is INDEED the way it's supposed to be i.e. by making this change you're certainly going to get a whole lot less false SAR signals!!!

So let me put it this way:

Take a look and see what you think. Yes: the QPF solution is working for me no doubt BUT maybe it's also the reason why I get many more Trailing Index SAR signals to reverse than I'd like!!!

Hmmm.

Never a dull moment!!!

[dpaterso]

Jeepers Creepers!!!

Yet another 'lightbulb moment'!!!

Forget about the QPF folks!!! (Sorry about that)!!!

I've just had another good hard look at this.

It would seem that 'I got it wrong'!!!

DEFINITELY this is 'the way':

You would calculate the SI for any pair quoted in the format '999.99' i.e. with two decimal places EXACTLY as is done in 'the book'. HOWEVER: for pairs quoted in the format '99.9999' i.e. with four decimal places you multiply the SI by 100 (in effect you're 'moving the decimals' two places up and then calculating the ASI). What this appears to accomplish is this: NO MORE is the Trailing Index SAR ALWAYS the closest to SAR!!! Now THIS makes more sense and is a lot closer to what appears in 'the book'!!!

As I said earlier though: factoring in the QPF has indeed worked well for me. However: I'm going to be trying this new 'method' for a little while and see what happens i.e. to see whether or not I get less Trailing Index SAR signals (that previously would have been false)!!!

(I've already made these changes to the SI and ASI for Delta's platform and will email the same to my 'clients'. I've actually just 'added' a 'Quote Price Multiplier' to the SI and ASI so that you can use either 'method').

[dpaterso]

Hokay,

With regard to the above change in the method used to calculate the SIS Trailing Index SAR:

I've checked this on all instruments available to me now and the change DEFINITELY results in you getting FAR FAR fewer false SAR signals BUT (there is always a 'BUT' isn't there) bear in mind that this ALSO increases your potential drawdowns CONSIDERABLY so just make sure that you take this into account with regard to your money management rules. I'm condifent, however, that this change brings the SIS Trailing Index SAR 'in line' with 'the book'.