Good morning,
Once again: I'm really glad that someone else is seeing the 'wisdom' that I saw in the book.
Before I go on I once again want to state that whatever I 'share' is my own personal 'take' on things and does not necessarily mean that, although the systems are purely technical in nature, that there is not a CERTAIN (albeit) small amount of personal interpretation possible and my interpretation MAY not always be correct. Having said that I do feel confident in saying that I feel that I know all of the systems 'inside out' from a technical perspective for the simple reason that I have studied that book 'inside and out' for the last couple of months. Of course: being so 'besotted' with something such as I am with this book means that there is always the possibility of me not being able to 'see the wood for the 'trees' i.e. when you have read and reread something that many times it's easy to 'overlook' something small or keep interpreting something incorrecty all the time.
ADX:
At first, when I started 'studying' ADX, I did not see it's merits, expecially when used in conjunction with Parabolic SAR i.e. if you were to wait for ADX to be above 20 - 25 before starting to use Parabolic SAR you were pretty much always 'getting in late' and also missing some very 'grand trades' if you 'stuck religiously' to the rules of ADX. This, I'm afraid, is what I think the vast majority of people notice. What they miss though is the relationship between ALL the ADX lines i.e. +DI, -DI, ADX, and ADXR and where these lines are in relation to each other AND THAT IS THE REASON THAT BUYING THE BOOK AND REALLY UNDERSTANDING ADX is what makes all the difference to the indicator.
I can honestly tell you that I do not take much cognisance of the actual VALUE of ADX or ADXR anymore (or should I rather say that their actual values, although noted, do not get taken into account as a deciding factor for a possible trade). I DO however note WHERE these lines are in relation to +DI and -DI and I also note whether these lines are moving up, moving down, about to change direction, etc. etc. etc. and this is where the 'true value' of ADX lies I think. For example: if a trend is about to stall, change direction, or continue, then take a very good hard look at what the ADX line does during these periods. It's ALWAYS 'on the money'.
Regarding the TBP System and the Reaction Trend System:
My 'take' is this: I would agree that the TBP System would work in a ranging market BUT having said that there is no reason to NOT use it in a trending market as well from what I can see i.e. if the market IS trending then only take TBP System signals to enet in the direction of the trend (and here I would 'note' ADX as described above POSSIBLY noting the value of ADX at the time). The Reaction Trend System was designed to initiate a trade in a ranging market but if the instrument started to trend then you'd immediately be put in 'trend mode' and follow the trend until the instrument started to range again. What I'm really saying here is this: my interpretation of his words is that they are 'better suited' to non-trending market but that does not necessarily mean that they CANNOT be used in a trending market.
The Volatility System and a range bound market:
Again: because of it's design I cannot see any reason why it would not work in a range bound market. Yes, the longer the instrument in stuck in a range, the longer you'd be holding on to that position but remember that the Volatility System will 'adjust' itself in relation to the volatility so even if an instrument is stuck in very tight range all it means is that the Volatility System will just remain 'static' until a breakout of the range occurs and it will then start tracking the 'trending price'. Of course you would not make (take) profit in a range bound market with the Volatility System because you would not get a stop and reverse signal BUT let's say that you had been using the Volatility System for a while, the market had been trending, you were now in a profit situtation, and the market then started to range (consolidate???). With the Volatility System all that would happen is that you would just be 'sitting on your profit' for a while and if the trend then continued in the same direction as before then of course your profit would increase but if the break out of the range was in the opposite direction then, of course, you'd realise your profit when you stopped and reversed.
The Commodity Selection Index:
This, strangely enough, I have not even 'messed' with up until now but I think that today I will sit down, calculate it or try and write an indicator for it and see the results. I'm sure it has merit (as does everything else in the book) but I have just not 'gotten into it' for some or the other reason. Actually, as I type this message to you, I've just had a 'flash of inspiration'!!! Would the CSI not be a solution for our 'weighting of the pairs against each other' problem??? I mean: what it's telling you is this: even although one instrument may have a better 'payoff' when it's 'moving', if it's NOT 'moving' BUT an instrument with a lower 'payoff' IS in fact 'moving' then obviously it's better to be trading the instrument with the lower 'payoff' that is 'moving'!!! Now THAT could be something to 'study'!!! The ACTUAL values of ADX / ADXR are important here. Take a look and I'll do the same. Like I said: for some or the other reason I just never 'got into' that chapter but now that I think about it maybe it carries MUCH weight!!!
Later.
Last edited by dpaterso; 02-03-2008 at 03:30 AM.
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. I did plug in the numbers from the example in book and I got the right numbers so I know my spreadsheet is correct. The only thing that was a bit confusing to me was which TBP, target and stop to use, the ones of the day you enter (at the close) or the next day. I now know that you use what it gives you for the TBP, target, and stop on the NEXT day i.e. when your trade is actually going to see action. So for example I entered at the close of 1/30, I use the numbers for 1/31 for the TBP, target and close. This is correct, right? Also, I have been reading about the volatility system, and the only thing that I don't fully understand is how to calculate the SIC point, is it just the extreme high or low of the last 7 days? Does that mean that it can change during a trade?
chop chop!!
Linear Mode
