Hi folks,
Sorry I have not responded for the last two days or so (had computer problems on Thursday and yesterday and, as if that were not bad enough, made some bad trades which I will ‘expound upon’ below):
chirules54:
I guess the important thing is to trust the system and not get caught up in the “hype”, but it is difficult, as I’m sure you know
Funny you should say that: it’s EXACTLY what’s causing (caused) my bad trades this week. See below.
[email protected]:
I have not seen the ASI analysed like that before but it sure looks interesting and promising. Nowhere in the book does Wilder ‘use it’ like that but it would seem that somewhere, someone, has ‘picked up’ on the fact that it CAN be used like that. I’d say that if you used it like that just to identify support and resistance and breakouts in conjunction with some other system you’d be OK but I don’t think you could (should) trade the ASI on it’s own.
This is actually a very important point: remember that the ASI is an INDICATOR which is different from ‘The Swing Index System’ which is a TRADING SYSTEM BASED on the ASI INDICATOR. There is a difference here.
Now for my week:
After a ‘whopping start’ to the month I find myself ‘fu*king up’ AGAIN!!! I don’t know if this is just a ‘psychological reaction’ to what happened last year but I found myself closing trades too early (at a small profit) not for any good reason and certainly not because the SI System was giving me signals to do so and, worse still, I found myself ‘hanging on’ to trades where the SI System was indeed wrong, had given a signal to stop and reverse, which I ignored because the loss at that point in time was ‘psychologically too great’, only to find that had I in fact stopped and reversed as signalled by the SI System not only would I have recovered the aforementioned ‘psychologically too great’ loss but would also have made a nice profit. Also, as ‘strange’ as this may sound: up until Monday, on three out of four accounts, I had had a 100% success rate with this system and did not want to ‘blemish’ my ‘track record’ for the month so far by taking a loss. Watch out for this i.e. sometimes ‘doing too well’ can cause a ‘psychological problem’ believe it or not!!!
The reason I’m mentioning this (in addition to being a ‘note to self’) is that the SI System DOES work BUT if you cannot STICK TO IT’S RULES you will STILL end up losing!!!
I can, however, ‘justify’ to myself the reason for holding on to at least two of the bad trades (which are still currently open). The actual REASONS that I’m going to give you for my ‘justification to self’ open up a ‘whole new can of worms’ though.
Example:
Silver.
On Monday night this week the SI System gave me a signal to place a short order for Silver which I did. The order was executed and the short downtrend (which was probably a slight correction due to profit taking from the week before) then changed direction almost immediately and Silver started it’s ‘march’ upward. The SI System on Tuesday was now giving me a signal to stop and reverse based on the TISAR. Problem: the loss was somewhere around $200 at that point. I then started loading up on other indicators like RSI and Stochastics to ‘confirm’ the stop and reverse and both RSI and Stochastics were showing that Silver was in overbought territory. So, of course, instead of placing an order to stop and reverse as indicated by the SI System I ignored the signal based on what RSI and Stochastics were telling me which, of course, I found a lot ‘easier’ to ‘swallow’ because it suited my purpose i.e. RSI and Stochastics were telling me that the stop and reverse was ‘false’ and that Silver would correct soon and that I would not have to take the $200 loss. At the close yesterday that single position is now is a $1K loss. The point is this: had I stopped and reversed as indicated by the SI System I would not only have covered the $200 loss but would now be showing an $800 profit on the position. Now I do believe that Silver (and Gold) WILL correct shortly but, having said that, I now have a some terrible choices: either close the position at a $1K loss, ‘hedge it’ so that I can wait for the correction without the loss getting any bigger, or leave it to run ‘hoping’ that Silver WILL correct in the near future (before I run out of margin) at which point I can ‘load up’ on some short positions to cover the loss and hopefully turn a nice profit.
OK: all of the above are MY problems I know. The BIG question that they raise in my mind though is this: when following this system is it better to do it ‘blindy’ or to use other indicators as confirmation? Of course, in hindsight, it would appear that trading this system ‘blindly’ is the way to go BUT you then HAVE TO BE PREPARED to take the ‘knocks’ NO MATTER HOW BIG OR SMALL otherwise you’ll land up in the above situation ‘in a heartbeart’.
The above scenario ‘played out’ on GBP/CHF this week as well i.e. the SI System has given me three stop and reverse signals (three ‘chances’) to take a small loss, cover it, and still end up with profit BUT, again ‘second guessing’ the system and ‘justifying’ my choice to ignore the TISAR because it ‘looked like to me’ that GBP/CHF had found very strong resistance as per the daily chart and would not continue on down, held on to the positions (to make matters worse on FOUR different accounts) which, of course, are now in a loss (again: on FOUR different accounts for crying out loud)!!! Again: while GBP/CHF MAY go up from next week just look at the amount of capital that I have not only risked but ‘tied up’ for no good reason.
Aside from the above I have, of course, had some very good trades although these trades, looking at them now this morning, would have been EVEN BETTER trades had I not ‘bailed out’ early for no good reason.
I (you) have to overcome this problem of not trusting the system IMMEDIATELY FROM SUNDAY!!! ACTUALLY FROM NOW!!!
I will tell you something else (probably even more important than the above):
The CSI is probably the ‘keys to the kingdom’ when trading Wilder’s trading systems. I have analysed all my trades and the ones that were ‘not so great’ or where there had been multiple stop and reverse signals were the ones where the CSI values were MUCH lower than the CSI values for other instruments where there were entry signals. As a matter of fact: based on the CSI value of GBP/CHF I SHOULD NOT EVEN HAVE BEEN IN THAT TRADE AT ALL, EVER!!! THIS IS IMPORTANT!!! If calculating the CSI value is too much ‘hassle’ then at least ‘observe’ the value of ADXR (not ADX but ADXR) before getting into a trade. While ADXR on its own won’t take volatility into account (amongst other things) it will at least tell you whether you have directional movement or not AND give you the instruments to trade that have the highest directional movement and thus the highest probability of good trades as compared to instruments with little or no directional movement i.e. ‘rangebound’ where the chances of getting ‘screwed’ are a lot higher!!! This poses yet another ‘dilemma’ (for me anyway at the moment) i.e. what if, when getting into the trade, the ADXR WAS INDEED a high value compared to other instruments where there were signals BUT NOW the ADXR value has dropped to an ‘unaccetable level’? Do you wait for the SI System to give you a signal, book some profit, or close the position because the instrument has now become ‘rangebound’?
Remember, if the ADXR is below 20, trade the TBP System or the RT System.
I’ve probably posed more questions than I have given answers. Sorry for that (but feel free to ‘chirp’ anyway)!!!
Edit:
By the way: isn’t if ‘funny’ how when you are testing a new system it works BUT the minute you start trading it ‘the wheels SEEM to fall off’??? Why is this??? ‘Murphy’??? I mean: take a look at GBP/CHF. Had I been trading this pair a month or more ago with the SI System I would have made a ‘gazillion’ USD but as soon as I started trading the pair live with the system it became ‘rangebound’!!! How about that!!!
