I read Chuck’s post a little differently perhaps because I thought I understood the intent which I assumed was that you have to wait for a candle to close to know what its parameters are and then you look for the LH or HL. Cant be any other way really and as I think I commented before this is a standard 1-bar reversal technique. In any case folks should probably be trying it out for themselves (a better use of time than posting I would think) and see what works best and makes some logical sense. Some people do indeed argue that the OC is more important than the LH. I agree on that for stocks not so convinced on FX although at least one trading approach I use ignores tails. Just my 2c
How difficult can this be???
OK:
[I]Sell:[/I]
[I]1. First candlestick makes Higher High (does not matter where it closed)[/I]
[I]2. Second candlestick makes Lower High (does not matter where it closed)[/I]
[I]3. Third candlestick breaks low (not close) of 2nd candlestick (candlestick that made Lower High)[/I]
[I]4. Sell when 3rd candlestick breaks low (not close) of 2nd candlestick.[/I]
[I]Buy:[/I]
[I]1. First candlestick makes Lower Low (does not matter where it closed)[/I]
[I]2. Second candlestick makes Higher Low (does not matter where it closed)[/I]
[I]3. Third candlestick breaks high (not close) of 2nd candlestick (candlestick that made Higher Low)[/I]
[I]4. Buy when 3rd candlestick breaks high (not close) of 2nd candlestick.[/I]
[I]In all cases: with the exception of the candlestick that is giving you a trade signal you wait for each candlestick to close before entering a trade.[/I]
Clear enough???
Geez, now even I know the system!!!
By the way:
(a better use of time than posting I would think)
Nothing better to do until the brokers open tonight!!!
Does anybody here know how to post a ‘poll’?
Every time I’ve tried it nothing happens (been like this for months now).
Can you post a ‘poll’ to an existing thread or does it have to be posted when the thread is started? Could that be my problem i.e. trying to post a ‘poll’ on this thread now?
Do we need special ‘permissions’ or something like that?
thanks for the replies
Tony and/or Dale (or even Chuck)
Continuing the Higher high discussion…
My 2 cents on this subject equate to the fact that the 1st candlestick to watch for has to be closed. Only then can we determine that the upper shadow of its candlestick has a lower value that its predecessor (assuming an uptrend now turning down). The 2nd candlestick mentioned in the system would also have to be closed to get its upper shadow value too (this is your stop loss).
Therefore the only time you can enter a trade with this system is after the close of the 2nd candlestick ( and, to me, it is assumed before the open of the next period) to no later than the close of this, the 3rd, candlestick.
Maybe you all settled to this but I wasn’t fully sure.
Yes that is what I am saying
How do you treat the “Sunday candle”? Is it given the same weight as any other candle?
Slimjim
Hi SlimJim,
I’d actually like to see some answers on this myself.
I have a problem with one of my brokers (well not a problem exactly) but because they follow New York time I get a candle for Sunday and then another candle for Monday. At my other broker they ‘combine’ the Sunday and Monday candle together i.e. there is only one candle for Monday (which I prefer).
I’d say to ‘combine’ the Sunday with the Monday candle to get a single candle for Monday. I asked this question to J. Welles Wilder Jnr. and he agreed with me that a Sunday candle and a Monday candle should be combined as opposed to being discarded because you have to remember that overnight movements in both Autralia and the Eastern Markets actually make up a large percentage of the information used to ‘produce’ those candles and should not just be discarded I don’t think.
The other (obvious) way to ‘eliminate’ the ‘quandry’ is to NOT trade on Sundays i.e. simply take it out of the equation altogether BUT it depends on what system you are trading.
But I keen to hear of a few more takes on this.
Hi Dale,
Thanks for the answer. I like your idea of “combining” the Sunday candle with the Monday one.
SlimJim
So to combine do you use the highest High and the lowest low from either day? Then, I assume you would take the open on Sunday and the close on Monday?
Yep, you’ve got it!!! (That’s what I do anyway i.e. it’s the only thing that makes ‘sense’ to me).
Have you received your book yet?
Which book? I have “New Concepts” and “Wealth of Ages” but haven’t ordered “Delta Phenomenon” yet.
Hello,
Sorry - I forget ‘who has what books’ nowadays!!!
OK - have you had a look at Wilder’s ‘Swing Index System’? I’ve just noticed something that I think is wrong (or does not ‘fit’ nicely with the prices of forex pairs or I’m not understanding it correctly which I doubt). Just wondering if you’ve had a chance to look at it i.e. if you have maybe we could ‘compare notes’.
I haven’t looked at that yet but I will and then we can compare!
Dale, I am reading over the trend balance point system right now and it looks pretty good. A few pages ago in the thread you said that you were having some success using it, have you been using it on forex pairs or the commodities and indexes? I also have a similar problem with the “sunday candle” except it’s a little different because I’m on the west coast of the U.S. My daily candles close at 8pm local time every day so the candle from friday 8pm to saturday 8pm never has any activity at all, it’s just a little horizontal line so it can be ignored. But, the one covering saturday 8pm to sunday 8pm usually has a little bit of activity, because it captures a bit of the early morning markets during my local sunday night, which I suppose is monday morning in Australia and Tokyo. I guess for now I will just ignore the fri-sat candle totally but do you think I should “combine” the sat-sun candle with the sun-mon candle?
Hello,
I like what I’m seeing!!!
chirules54:
I have been using the Trend Balance Point System on forex pairs only up until now with great success. I have also used it to trade the S&P 500 (not the S&P futures) a few times. Having said that, however, I have taken some ‘pristine’ losses trading the system as well. The problem is the size of the potential loss (because of the big stops) when compared to the potential profit on a trade and even although Wilder actually does recognise this he does not feel that it’s an issue because of the high ‘win rate’ of the sytem. I’m not sure, from my experience, that I agree with him. I’ve had eight or nine good trades in a row but the tenth one has been stopped out and I can tell you it’s ‘gutwrenching’ to say the least i.e. it JUST ABOUT negated my profits on the eight or nine trades. I then went through a period of using my own stops (which were obviously a whole lot smaller than the ones dictated by the sytem) but this did not work too well i.e. turns out he is indeed right when he says that too often a trader will get stopped out too soon and eventually the odd good profit is negated by the cumulative effect of all of these small losses. Having said that though it would (once again) appear that the ‘weighting’ of the pairs being traded needs to somehow be calculated and taken into account IF you’re trading more than one pair with this system. In other words: if you’re trading EUR/USD and GBP/JPY (for example) at the same time with this system you have to remember that being potentially stopped out on GBP/JPY could negate the profit on quite a few successful EUR/USD trades (and this is, in fact, what has happened to me once or twice). I’m not sure how to overcome this problem (other than the ‘obvious’ solution which would be to trade only ‘like’ pairs i.e. pairs where the pip value is the same or very similar OR to ONLY trade GBP/JPY which would solve the problem of course).
As far as the ‘useless’ candles are concerned:
I’m ‘lucky’ in the sense that Delta will ‘remove’ any ‘useless’ bars i.e. bars being displayed for a particular market when that market has been closed and this of course is ideal for trading the Trend Balance Point System (this of course only applies to stocks). Delta combines their Sunday and Monday bar i.e. I ONLY get a Monday bar (which consists of Sunday and Monday) so this too is ideal for trading the Trend Balance Point System. At GCI I have a similar problem to you in the sense that I get a Sunday bar AND a Monday bar. On this issue I contacted Mr Wilder and he ‘agreed’ with my theory that in this case the Sunday and Mondays bars should be combined. Of course your problem is slightly different because you’re talking about a Saturday bar but I would imagine that the same principle applies.
When traing ANY of the sytems in the book you have to always bear in mind that they were designed by someone who only traded commodities at the time and (in those days anyway) commodities were only traded between the opening and closing times of the session of the relevant exchange. That’s why you will always find that he says (for example) to ‘go short on the close’ or ‘go long on the open’. Now, for trading forex pairs, I’ve taken the ‘close’ to be midnight (at whichever broker you’re using) and the ‘open’ to be midnight (at whichever broker you’re using) as well i.e. one second before midnight is ‘deemed’ to be the close and one second after midnight is ‘deemed’ to be the open. Let me say this though: this is the reason I was ‘banging on’ the other day as to ‘which close where’ carries the most ‘weight’. You have to remember that this system (really is) based on momentum. Now is it ‘better’ to calculate the momentum factor using bars that ‘follow’ New York time or does it not matter? I still feel that it matters with this system. In other words: if I’m getting a momentum factor that would indicate to me to go long a pair at 12:00am Bulgarian time (Delta) I could very easily be getting a momentum factor to go short the same pair at 12:00am New York time (GCI) depending on what has happened in the six hours that have elapsed. In other words: when trading this system are you more likely to have enough momentum to ‘carry you to your TP target’ if you’re basing the calculation of the momentum factor on a chart from a broker in the New York timezone or not? The alternative is, of course, to ONLY trade pairs that are ‘closest’ to the timezone (broker) with this system e.g. only trade GBP and EUR majors / crosses at Delta (for example) because the difference between Bulgarian time and UK time is only two hours and only trade USD majors / crosses at GCI (for example) because they are on New York time. Of course, as previously stated, this is only of consequence for the forex market i.e. if you’re trading stocks on the NYSE then it does not matter because whoever is trading those stocks is trading them at the exactly the same time i.e. NYSE opening and closing times are ‘static’ no matter where in the world you might be so everyone is watching the same prices at the same time.
I don’t know if any of the above is helping you but I’m just ‘expounding’ my thoughts and findings. I am in no way saying that my ‘take’ on any of the above is correct but that is the object of us discussing these things.
Now: regarding my problem with the Swing Index System.
It would appear that it is indeed I that did not understand a particular element of the system but in all fairness to me it’s not really explained very well either!!! It relates to the value of the ‘limit move’ and the explanation of a ‘limit move’ is confined to the following paragraph: ‘Now let’s look at a few more examples. Assume the same 3.00 limit as the maximum allowable move in either direction from the previous day’s close’. My problem is / was with the calculation of the ‘TRAILING INDEX SAR’ i.e. it’s calculated by adding or subtracting 60 points from the ASI NOT the actual price of the instrument being traded. What I’ve managed to ‘gather’ is this: the ‘LIMIT’ value varies according to the ‘format’ of the price of the instrument being traded (I think. Please feel free to ‘chime in’ here). In other words: in his example (as with all of the examples in the book) the price of an instrument is $45.00 (for example) which is ‘different’ in ‘presentation’ from a price of $0.7421 (EUR/GBP for example) and is ‘different’ in ‘presentation’ from a price (point) of 12474 (Dow for example). I’m not sure if the word ‘presentation’ is the correct word to be using but let me give you an example of what I’m trying to say. In other words, for an instrument that has a price of $92.18 (Oil) for example the ‘LIMIT’ would be 3.00 as per the book BUT for an instrument that has a price of $0.7422 (EUR/GBP) the ‘LIMIT’ would be (should be?) 0.0300 AND for and instrument quoted in ‘points’ like the Dow at 12474 the ‘LIMIT’ would be 300.00. I THINK what I’m trying to say is that the value of the ‘LIMIT’ is dependant on the number of decimal places in the price. The reason it makes a HUGE difference is this: a 60 point retractment on the ASI on an instrument that has a price of $45.00 (for example) equates to a ‘reasonable’ and ‘workable’ stop and reverse point if the ‘LIMIT’ is 3.00 BUT a 60 point retractment on the ASI on an instrument that is quoted in points like the Dow at 12474, using the same ‘LIMIT’ of 3.00, is ‘minute’ i.e. it really equates to only a few points so you have an almost 100% chance of being stopped out which would cause you stop and reverse prematurely. On the other hand, using the Dow (again) as an example if the ‘LIMIT’ is set to 300.00 then the stop and reverse point ‘makes sense’. Strangely enough it does not matter WHAT the ‘LIMIT’ is when plotting the actual ASI i.e. the ASI takes the same ‘form and shape’ and shows the exact same HSP’s and LSP’s regardless of the ‘LIMIT’ value which is encouraging for the simple reason that it means that the ‘rest’ of my ‘workings’ are correct i.e. it’s only the ‘TRAILING INDEX SAR’ that I’m having ‘issues’ with!!!
Edit:
OK, I’ve just finished my ‘testing’ and I think (know???) I’m ‘on the right track’ as it were. The ‘quick and easy way’ to see if you’re using the correct ‘LIMIT’ value: if your ‘SI’ value exceeds 100 or is less than -100 then you’re using the incorrect ‘LIMIT’ value. I also seem to have ‘proved’ my above ‘theory’ correct i.e. you would use a ‘LIMIT’ value of 3.00 for Oil or CHF/JPY (for example) but you would use a ‘LIMIT’ value of 0.0300 for EUR/GBP (for example) and you would use a ‘LIMIT’ value of 300.00 for the Dow (for example). Once again: if (when doing your calculations of the SI) you find the the SI either exceeds 100 or is less than -100 then you know you’re using the incorrect ‘LIMIT’ value in the calculation.
I’m ‘fast’ starting to form the opinion that the only reason that systems in the book are not more widely used is because THEY’RE SO COMPLICATED TO FIGURE OUT (if you’re going to use them CORRECTLY that is i.e. the ‘basics’ are no problem but it’s those little ‘nuances’ that make all the difference and this is where you could very easily get ‘bogged down’)!!! I’ll wager that most people that have relegated ‘New Concepts In Technical Trading Systems’ to the ‘back shelf’ have done so because, after having to go through the ‘slog’ of performing the calculations for the systems in the book, they’ve ‘given up’ and ‘moved on’ to something ‘nice and simple’ (but hopefully ‘effective’)!!!
I’ll tell you something though: this book never ‘ceases to amaze me’. Every time I read it I see something that I missed and just yesterday I found this: ‘The accumulative index may be either minus or plus. If the long-term trend in up, the accumulative index will be a plus. If the long-term trend is down the accumulative index will be a minus. If the long-term trend is non-directional, the ASI will fluctuate from plus to minus’. I had a look at JUST THIS PORTION of the ASI yesterday and ‘man oh man’ the ‘power’ of this calculation!!! I devised a ‘quick little indicator’ yesterday that basically just plotted a point at +1 if the ASI was positive and at -1 if the ASI was negative and I can tell you that (on the daily chart anyway) if you bought the moment the ASI turned from negative to positive or sold the moment the ASI turned from positive to negative you’d ‘be in’ for some ‘absolutely fantastically fantasmagorical’ LONG TERM trades (trends).
Thanks for the reply Dale. It’s good to see that you have had success with forex pairs so far, because that’s all I can trade at the moment, I don’t have enough capital to open up a commodity/stocks account yet. As for the closing time to use, while it might be better to use the exact close at one of the major markets (like as you said, midnight) isn’t the forex market open 24/7 during the week? I know there are periods where the trading volume is heavier, but as rhodytrader said earlier, as long as you use the same closing time every day, no matter what it is, your values should average out to relatively close, right? I guess I will just use my 8pm local close because that’s the time a candle closes and a new one starts with my oanda account, and as long as I follow this pattern and use the same close every day I have faith that it will all average out in the end… On another note, when you discussed the problem of “weighting” the forex pairs because 9 good trades in eur/usd were wiped out by one bad trade of gbp/jpy because of the higher volatily of gbp/jpy it gave me an idea. Suppose you adjust your trade size to the volatility of the pair. For example, a pair like eur/usd moves less than gbp/jpy, so you would make your trade size bigger for eur/usd and smaller for gbp/jpy, meaning you would buy less lots to make up for the higher volatility. In other words, the pip value of a trade for eur/usd could be $1/pip while gbp/jpy is only $0.25/pip. A good way to measure the volatility could be to just find the average daily range of the pair (open to close) for every day of the last year or something. You could then find a forex pair with average movement and make that your “default” pip value and base all the others off of that one. Hopefully that made sense… :o Anyway, I wasn’t sure if you have programmed the trend balance point system into any of your brokers software yet, but I am currently working on an excel spreadsheet for it, if it would be of use I can upload it when I am done. I’m still working on it, so far I have it set up to calculate the momentum factor, TBP and X-bar. It’s 12:30 am local time here so I will be going to sleep soon but I will have time to work on it tomorrow, hopefully I can finish and test it in the next day or two…
Hello,
Glad to see someone else who is ‘burning the midnight oil’!!!
It seems like this ‘which timezone if the greatest’ issue of mine is going to be something that we’re all going to have to ‘agree to disagree’ on (although I still think I’m right)!!!
Let me put it this way: the Trend Balance Point System (as you now) has a very specific TP target and the ‘trick’ is to make sure that you have enough ‘momentum’ to ‘get you there’. I can understand John’s ‘logic’ when he says that it does not matter which timezone you’re trading in as long as you are using the same timeframe every day BUT ONLY IF you’re following a trend or something like that!!! THIS system has a very specific TP target and you need ‘momentum’ to get there. Another way of explaining myself is this: at 9:30am New York time EVERYTHING STARTS HAPPENING with stocks traded on the NYSE and at 4:00pm New York time EVERYTHING STOPS HAPPENING with stocks traded on the NYSE and it does not matter where in the world you are sitting you’re going to be seeing the same bars and prices so, if the momentum at 2:23pm New York time is ‘deemed’ to be down then it’s down NO MATTER WHERE IN THE WORLD YOU ARE. Like you said: the forex market is OPEN 24/7 BUT that does not necessarily mean that it’s being TRADED 24/7. See what I mean. Like I also did say previously though: this ‘issue’ of mine only affects the daily and four hour timeframes i.e. it does not matter on the shorter timeframes but having said that I would still say it’s better to trade like USD/??? or ???/USD during ‘US working hours’ EVEN IF you’re trading the shorter timeframes. ‘Momentum baby’ is the ‘key’ here.
With regard to the ‘weighting’ of the pairs: I’m not sure that you can ‘equate’ volatility to price but you have ‘got the picture’ and made some good suggestions. By varying the lot sizes of EUR/USD for example you are ‘weighting’ the ‘value per pip movement’ of EUR/USD BUT the question is this: ‘by how much do you weight the value per pip movement’ so that it’s 'roughly equal ’ to the ‘value per pip movement’ of GBP/JPY (for example)??? It’s not the volatility of the pair that causes the ‘grief’ it’s the ‘value per pip movement’ that’s an issue. The volatility SHOULD already have been ‘taken into account’ by the Trend Balance Point System i.e. the higher the current volatility of the pair the further your TP target, stop, and TBP should be away from each other.
One thing I have ‘added to the mix’ with the TBP system (you should know me by now i.e. ‘indicators baby’ - that’s my ‘thing’) is RSI and Stochastics (and sometimes ADX and sometimes a momentum indicator) and this seems to work pretty well (on the daily timeframe I must just add) i.e. ‘the same old rules’: if RSI is above 70 and Stochastics is above 80 I am only taking short trades if indicated by the TBP system i.e. if RSI is above 70 (and has been for a day or two or three) and Stochs is above 80 then the probability of a short trade being ‘on the mark’ is a lot higher than that of a long trade wouldn’t you say??? This works well. I reckon if you are going to use the TBP system, couple it with these indicator, AND WEIGHT THE PAIRS, the ‘accuracy’ of the system should be almost 100%!!! Again: this brings to TO MY POINT ABOUT TIMEZONES!!! RSI and Stochastics COULD be overbought in one timezone but not necessarily overbought in another timezone ACCORDING TO WHICH CHART YOU’RE LOOKING AT (OK, I know, this is an EXTREME example and would not happen on the daily timeframe but you know what I mean I hope). The point is this: WHICH OVERBOUGHT CONDITION is being monitored BUT THE MOST TRADERS??? Again: it’s not a problem if you’re following a trend and are trading long term but the TBP system is giving you short intraday trades AND THAT’S WHERE THE ISSUE COMES IN all you ‘non-believers’ in my ‘theory’!!!
I have ‘programmed’ ALL the systems in the book into my Delta platform and my next ‘task’ is to ‘brush up’ on Pascal (so that I can ‘repeat the process’ on my GCI platform and my ‘task’ after that is to code them into Metatrader as I am thinking of giving ‘Alpari’ a ‘bash’ as well just for ‘fun’). I also created Excel spreadsheets last year but, as I mentioned, soon got to the point where I was getting no sleep because I was trying to update them on a daily basis, first at 12:00pm at night (Bulgarian time), 44 pairs worth of data, and then again at 6:00am in the morning (New York time) on my other platform. Needless to say this ‘action’ did not continue for very long BUT, having said that, even for the short while that I did in fact manage to ‘keep this up’ it was profitable but the ‘tiredness’ eventually got the better of me, I stopped my ‘nightly ritual’ and then wiped a few accounts out after that!!! Again: another lesson learned the hard way: ‘stick’ to only a few profitable instruments, 'get to know them, ‘love them’, ‘nurture them’, ‘listen to them’, and you’ll be ‘good to go’ I reckon!!!
I’ve been thinking about the whole “closing time dilemma” a little more and what you just said makes a lot of sense, it made me think about it more. I’m still writing my excel file and I’m going to test out what happens using my 8pm close. As Wilder intended, it seems this system is better suited to the stock market, what about commodities nowdays? Are the markets open at fixed times or is it 24/7 like forex?