Thanks Randont. Its certainly overwhelming at first!
Dale, I believe I read correctly that you had created the indicators for GCI as well?
Regards,
M.
EDIT
Now on post 221, and figured I would retract my question. LOL…
Good (Tuesday) morning all!!!
As you can see: I’ve ‘deemed’ this a ‘very important post’!!!
Something in ‘the book’ has bee confusing me and concerning me deeply for the past couple of months and I’ve not quite been able to ‘put my finger on it’ until now (I think). Read on and tell me if you agree with me!!!
It’s regarding the use of ADX and / or ADXR.
The question that’s always been at the back of my mind has been: ‘WHY is there an ADX AND an ADXR’??? (I KNOW what the difference is betwee the CALCULATIONS themselves BUT WHY TWO indexes)??? What I’ve been doing up until now is finding instruments or pairs with the highest ADXR value (‘highest ADXR value’ meaning > 25) AS WELL as an ADX value > 25 to trade using the trend following systems and I’ve been looking for instruments or pairs with the lowest ADX value (‘lowest ADX value’ meaning < 25) AS WELL as an ADXR value < 25 to trade using the RTS and TBP.
Now it’s been bothering me that, doing it the way I described above, very often I’d get a valid SIS entry signal (for example) BUT would NOT take the trade because EITHER or BOTH the ADX and / or the ADXR had a value of < 25. SO: I AGAIN ‘studied’ Section IV (‘DIRECTIONAL MOVEMENT’) and it’s sort of ‘dawned’ on me that EITHER I’ve been reading things wrong here OR there are certain ‘typos’ in this section i.e. where references to ADX / ADXR have been ‘mixed up’. If this is NOT the case then at very BEST case references to ADX and / or ADXR are sort of ‘not in logical order’ if that makes ANY sense at all!!!
Let me explain:
Take a look at Page 46 (the paragraph that begins ‘In Fig 4.12, the ADX …’. Note that ADX is being referred to here. Now keep reading. In the very LAST paragraph on Page 46 we all of a sudden have a reference to ADXR!!! Can this be right??? Also: between Pages 47 and 48 there are numerous references to BOTH ADX AND ADXR which APPEAR to be contradictory (or at VERY least by following the text literally you’ll be kept out of some good trades). The whole point of what I’m saying is that EVEN IF I’m WRONG about what I’m saying above here then this section is REAL difficult to ‘decipher’ i.e. WHEN do you use ADX and WHEN do you use ADXR???
THEN:
‘Light bulb moment’!!!
Take a look at Page 44 now. Have a read of the paragraph that starts with ‘This is all the information we need …’ and MORE IMPORTANTLY the next paragraph that starts with ‘These three entities pertain to …’!!!
Now take a look at Page 40. Have a read of the last paragraph that starts with ‘At this point you have probably …’ and pay particular attention to the fact that the words ‘ADX Scale’ are in bold!!!
Now take a lok at Page 111. Have a read of the paragraph that starts with ‘For this reason, the most important index to use …’.
Now what I’ve ‘got’ from ALL of this is the following:
The ADX is used ON IT’S OWN to determine which pairs to trade with which systems IF you’re NOT going to use the CSI!!! If you ARE going to use the CSI then it’s the ADXR that gets factored in and ADX has nothing at all to do with it!!!
[B][U](Important edit:[/U][/B]
[B][/B]
[B][U]I now believe the above statement to be inaccurate and incorrect!!! I’m leaving the statement here for continuity however. Please read my later posts for more on the above).[/U][/B]
DO YOU AGREE WITH ME???
The point is this:
EITHER references to ADX / ADXR have been ‘mixed up’ or ‘interchanged’ erroneously OR because of the constant ‘jumping around’ between references to them a brain like mine can be SO EASILY be confused!!! I’m not sure whether this qualifies as ‘errata’ to be posted at the beginning of the thread OR if it’s just my brain that can’t cope with the ‘jumping around’ but suffice to say I think I’ve FINALLY ‘got it right’ (at least in MY head)!!!
Hey ‘Sirkeen’ (I did not want to ‘mix’ or ‘jumble up’ my response to you with the above post. I couldn’t ‘handle it’)!!!
I have indeed created most of the indicators for the systems for GCI’s platform. HOWEVER: you cannot even begin to compare GCI’s charting module with Delta’s i.e. (and don’t get me wrong here i.e. I LOVE GCI’s platform because it’s ‘polished’ and ‘uncluttered’ and ‘quick’ and ‘logical’) and although GCI’s charts are great to look at and ‘crystal clear’ their scripting language is FAR less ‘capable’ than Delta’s. There is NO way to even get the actual VALUES of the indicators to be displayed e.g. if you want to know what the ASI value is you would have to zoom in FULL on the (my) ASI indicator and position your cursor at the point where you would like to get the value from and then read the value off of the scale at the right of the indicator. This is inaccurate at best. I find also that the indicators are extremely difficult to read i.e. even zooming in FULL only expands them horizontally and not vertically so again: to ‘get your bearings’ really is impossible. I’ve thought of using Delta’s charts and trading at GCI that way but there is a potential flaw with that scenario because of the difference in timezones. At GCI I use a combination of Excel and my indicators (but probably Excel more so than my indicators) to trade. Also: bear in mind that because you live in Canada you may or may not even be able to open an account at GCI yourself (I know that residents of many countries are excluded from opening accounts at GCI due to various restrictions and / or minimum requirements that have to be met e.g. the USA is one of them). Now I know you’re LOATHE to open an account with a broker that is SO far away from you. All I can say to you is this: I’ve NEVER had a problem with Delta AT ALL EVER!!! Their customer support is fantastic (GCI’s is practicallly non-existent BUT I STILL LOVE THEM) and Delta abides VERY strictly to the EU’s rules and regulations when it comes to the trading of securities and things so I really don’t think you need to be concerned that you’re not going to be able to go and ‘bash their door down’ if you’ve got a problem of one sort or another!!! Put it this way: even if you opened an account in CANADA the chances of that making ANY difference in the case of a dispute is ‘slim’ at best!!! The only other thing I can say is that Delta has VERY good reports no matter WHERE on the Internet you look (the same cannot be said for GCI BUT I really DO believe that ALL of the bad reports about GCI have been posted or written by people who have lost money and really don’t ‘know the game’ e.g. I’ve seen a post where GCI was given a ‘scam’ rating because their order ON EUR/USD MIND YOU was ‘slipped’ by THREE PIPS!!! That’s TOTALLY unfair. Believe me: if you’re trading commodities the chances of you order getting filled at YOUR EXACT price is almost NIL i.e. that’s just the way it works)!!!
By the way:
I don’t normally do this BUT here are some orders (hope you don’t miss them).
Don’t use the number of lots indicated (I just pulled this from a clients account) i.e. it is YOUR responsiblity to ENSURE that you’re not violating our money management rules!!!
The attached orders are all as per the RTS with my ‘latest’ ‘B’, ‘O’, and ‘S’ sequencing ‘offering’.
Also:
GO LONG AT MARKET USD/RUB (RTS but order already executed at the time of posting)
and
GO LONG AT MARKET GBP/JPY (VSTOP System).
Note: TP’s will only be set on the RTS positions (if the orders are executed) on Thursday BECAUSE today SHOULD BE a ‘B’ day for these pairs (well again according to my ‘latest’ ‘B’, ‘O’, and ‘S’ sequencing ‘offering’). With all of these entries the AO and AC are ‘right on’ (green) and ADX is ‘spot on’ (< 25)!!!
I am not sure that I 100% agree,
On Page 47, in the paragraph that starts, “As a rule of thumb…” I believe Wilder is fairly clear stating that he DOES use the ADXR by itself to determine which system he should use.
Furthermore to that… On Page 111 in the paragraph starting with “For this reason…” he is clear that the ADXR index is primary for trend-following systems.
My understanding is that using the CSI index to rate pairs/commodities to trade will provide the best profit scenario where as the ADXR index provides trading the systems at reduced risk…
Anyone agree…?
Here is something interesting to note…
On Page 48, in the paragraph starting with “Another interesting thing is…” IF we should stop trading when the ADX is below DI+/- why is Wilder opening a position on DMI Chart (page 49) between June 20th, and July 13th, even though the ADX is below the DI+/- lines… Does that make sense?
Regards,
M.
Hello,
Thanks for the input. We’re going to have to agree to disagree here OR get some more input from others.
This is MY logic:
Page 40 (last paragraph): ‘… and that you only trade the top five or six commodities that are high on the [B]ADX Scale[/B]. …’.
Page 44 (bottom half of the page): ‘This is all the information we need to follow the Directional Movement Index.’. The NEXT paragraph states (after mentioning the ADXR in this chapter FOR THE VERY FIRST TIME): ‘These three entities pertain to the COMMODITY SELECTION INDEX (CS) …’.
Having noted the above, however, the point you make about the paragraph on Page 48 that starts: ‘Another interesting thing is …’ is EXACTLY WHY this section has been bothering me i.e. there have been MANY times in the past couple of months when ADX has been BELOW both +DI AND -DI AND YET the ADXR has been above (sometimes WELL above 25). Now you COULD say to yourself: ‘Well OK I’m in a trade and ADX has now dropped below both +DI and -DI so I’d better take profit or exit’. THAT I COULD understand. However: what if (and this HAS happened in the past) you’ve just been given a valid entry signal by let’s say the SIS AND ADXR is greater than 25 so you ‘go for it’ BUT the ADX is below both +DI and -DI!!! See my problem with this??? And it these tiny ‘contradictions’ (well I believe them to be contradictions anyway) that make understanding this section more difficult than necessary.
Also (as I mentioned previously)L on Page 46 we’re talking about ADX for most of the time then all of a sudden we’re talking about ADXR and then on the next page we’re back to ADX until JUST before the details of the ‘DIRECTIONAL MOVEMENT SYSTEM’ are given i.e. we’re then back to talking about ADXR and the CSI etc. etc. etc.
One other reason I started to question whether or not I was on the ‘right track’ was this: take a look at a chart where you can cleary see that the pair is trading in a range. AUD/NZD funnily enough is a ‘primo’ example of a pair that has been, and is, trading in a range. Now take a look at the value of ADX and then take a look at the value of ADXR. At NO POINT has the value of ADXR dropped below 25 (and has been quite high at some points while this pair has been trading in this range) whereas ADX has been below 25 (even below 20 on occasion) pretty much since the pair started trading in this range. Now this of course begs the question: do I use ADX and / or ADXR to determine whether or not I should be looking to use the SIS or VS or DMS or the RTS or TBPS??? Right now I’d be inclined to use either the RTS or the TBPS on this pair and NOT something like the SIS. That’s MY logic (now)!!!
Now just to ‘throw a spanner in the works’: CONVERSLY if you look at AUD/JPY right now I’d say it’s ALSO pretty much trading in a tight range at the moment BUT take a look at ADX and ADXR on THIS pair right now i.e. ADX is ABOVE 25 and ADXR is BELOW 25!!!
I just know this: in constructing my ADX ADXR Daily Work Sheet countless times I’ve often noticed that I’ve missed LOADS of trades because I was trying to be ‘sure’ and use BOTH ADX AND ADXR together ‘just in case I was wrong’ and you can’t do this (obviously). If you wait for BOTH ADX AND ADXR to have values of less than 25 then you’re certainly going to miss some ‘stellar’ RTS or TBPS trades and sometimes you will find that if you’re waiting for BOTH ADX AND ADXR to have values greater than 25 then you’re also going to miss some ‘stellar’ SIS, VS (although I’m not sure that any of this has an effect on the VS), or DMS trades.
So: which is it??? THAT is ‘the question’ my friends!!!
From what I can see NOW and after reading this section AGAIN for the one thousandth time (probably) MY money is on ADX ALONE UNLESS I’m going to incorporate the CSI into my trading to get the ‘best bang for buck’!!!
Good evening Dale! Hopefully you get this before you head off to sleep.
I do not consider my self even half as qualified as yourself when it comes to Wilder’s systems. After reading your post a few more times and the book, I would have to agree with you. I do still believe there is some validity to using the ADXR values by themselves as they’re values are indicative of strength, however if we are missing massive opportunities, something else needs to be considered.
I took a look at 14 period ADX and ADXR values on a few pairs and noticed that rarely do they both make it above 25 except in strong trends. However, looking at 7 period ADX and ADXR values, there are many opportunities when both are above 25. When you referred to ADXR values rarely making it above 25 along with the ADX, what time period are you looking at? (pretty sure you have switched completely to 7 period)
I do remember a previous post regarding 7 period vs 14 period ADX values, but can’t remember if the same concept was applied to the ADXR. I would assume it must have been, as you would want to compare apples to apples.
If the ADXR is an average of the ADX which is an Average of the DX, are we not just smoothing out the values depending on the indicator used? If so, I would like to think that an ADXR over 25 IN ADDITION to an ADX value over 25 would indicate a strong trend. Therefore, using trend-following strategies when both of these indicators are over 25 is correct. If the ADXR falls below 25 but the ADX remains above 25, I believe you are still correct to use a trend-following strategy, however the weaker trend may affect the outcome of the strategy. This is not saying it won’t be profitable, but maybe not AS profitable as one where both indicators are above 25.
I am not 100% confident in my analysis… Nevertheless, I can’t wait to hear your response!
Regards,
M.
EDIT…
Maybe today’s markets are better suited to 7 period cycles… Certainly things have changed since the days the book was written!
Hello again,
Hey: I’d HARDLY say I’m more qualified than anyone else on these systems!!! The only thing I’m sure of is that I’ve probably read the book cover to cover more times than most!!! It does not necessarily mean I’m right!!!
You are correct: at one stage I DID switch to ADX(7) AND ADXR(7) but then switched back to ADX(14) AND ADXR(14). I cannot remember now WHY I switched back but there SHOULD have been a ‘reasonable reason’ AT THE TIME anyway!!! Having said that: still today (as I draw up my Daily Work Sheet) do I find myself wondering if using seven days instead of fourteen days ‘applies more’ to todays markets!!! To be honest: I never did do the comparison of ADX(7) AND ADXR(7) as you have just done i.e. at THAT time I’m pretty sure I was using ONLY ADX(7). (I’m confusing myself here)!!!
It’s too late for me to have a look now i.e. I need some ‘shuteye’ but I’ll look at this again tomorrow (later today). Put it this way: IF checking BOTH ADX(7) AND ADXR(7) for values above or below 25 occurs more frequently and there is LESS of this ‘one being greater than 25 and the other being less than 25’ then maybe we’re on ‘the right track’ again here. I’m CERTAIN that ADX(7) ‘reacts’ MUCH quicker to a change in trend direction (but I think this was the reason I ‘switched back’ to ADX(14) i.e. I was getting ‘whipsawed’ by the SIS if I remember correctly!!! Certainly worth a ‘re-look’ though!!!
I haven’t had a RTS target hit yet this week. Anyone have any clue as to why the market is so quiet? Is it like this very often?
Good morning,
This discussion about ADX/ADXR has come into a perfect time slot for me. I have just completed the first reading of that chapter and started thinking how I could integrate this into use. The remarks in the posts have been most interesting.
Wilder states (p. 45) that ADXR must have a minimum fluctuation even when directional movement changes direction. As it is an average of values that span quite a long period, I suppose that it might also smooth out such shorter-term ranging behaviour that ADX would notice and would be essential for some other system.
ADX, on the other hand (still on p. 45), measures movement around the equilibrium points, and its trend should also reflect changes of direction. I would conclude from this that from ADX and +/-DI it should be much easier to see or forecast when a trend changes direction, whereas ADXR might keep you in a trade too long.
Personally I would be biasing towards using ADX, not ADXR. What comes to Dale’s “VIP” “Light Bulb” conclusion, I would be one to agree. I might extend that by the following: If you use CSI, use ADXR for ranking the instruments to trade with. But when then applying the other systems, you could apply ADX there to get the best out of them.
My initial speculation here is not based on proper experience about ADX/ADXR. But this is boosting me to integrate these indicators into my small program and do some analysis together with VS. I’m starting to believe in a hypothesis that ADX and +/-DI might be a good filter for entering VS trades. I must also study it with respect to the exit and Dale’s ideas about VSTOP. I would also like to see the impact of the used period length and whether the pairs behave differently with respect to it.
J.
Good (Wednesday) morning all,
Hey Randon:
I’m with you this week!!! Not a lot of movement at all by the looks of things!!!
sirkeen:
I’ve sort of ‘played around’ this morning with ADX and ADXR i.e. I’ve tried shortening the period and lengthening the period but I’m not seeing where EITHER is beneficial to us. AGAIN: using AUD/NZD as a ‘primo’ example go and shorten the period to 7 and then lengthen it to say 28 and look at the ADX and ADXR values AS THEY RELATE to what’s happening on the chart. Shortening the period to 7 does indeed ‘get’ both ADX AND ADXR below 20 - 25 more often when the pair is trading in a range BUT (and this is an IMPORTANT ‘BUT’) both values fluctuate FAR too much i.e. they easily jump to above 25 EVEN ALTHOUGH the pair is STILL trading in a range (and now that I think about it this WAS the reason that I ‘switched’ back to the default of 14). In other words (from what I can see): shortening the period makes them too sensitive to price changes and short rallies up or down when the pair is STILL REALLY trading in a range. Using a higher value i.e. 28 for example: by the time ADX and / or ADXR are indicating that the pair is trading in a range and you should be using the RTS or TBPS the pair has started trending already!!! Take another look and see if you agree me with or not.
kaalilaatikko:
Hello and thanks of the post and insight.
My money is on ONLY ADX (unless I’m going to factor in the CSI for choosing trades which unfortuanately is a REAL pain to set up for forex pairs because most of the time we’re working with fractions of USD or whatever your base currency is).
Actually: WHILE I was typing the above I had another thought!!! Could it be possible that he is saying something along THESE lines:
If you’re going to factor in the CSI to your trading THEN trade ONLY the instruments or pairs that have a HIGH CSI rating (which of course incorporates ADXR) BUT choose the trading system to be used based on ADX??? OR: if you’re NOT going to use the CSI then again trade ONLY the instruments or pairs that have a HIGH ADXR rating BUT choose the trading systems to be used based on the ADX??? There is a very subtle difference here. In other words: let’s say you were drawing up a spreadsheet like mine i.e. my Daily ADX ADXR Work Sheet. So NOW: you find the TOP 9 or 10 or 11 or 12 (as much as you mm rules will allow) CSI OR ADXR RATED INSTRUMENTS OR PAIRS AND THEN choose the trading system to be used ON THOSE TOP CSI OR ADXR RATED INSTRUMENTS OR PAIRS based on the value of ADX??? Could THIS be the ‘ADX/ADXR magic bullet’??? Let me know what you all think. For some or the other reason this DOES make sense (well to me anyway)!!! In other words (and quite rightly so): CSI and / or ADXR will determine which are the TOP RATED INSTRUMENTS OR PAIRS to be trading and ADX will determine which system to be using!!!
Actually:
You know what???
The more I think about the post above the more this makes sense (AGAIN to ME anyway) and MAY just go toward answering Randon’s question about the current state of the markets and why none of his (and MY) TP’s have been hit this week!!!
Think about this for a moment:
By attempting to choose trades based on whether or not BOTH ADX AND ADXR are above or below 20 - 25 what are you ACTUALLY doing??? Yes: ADX is indicating that you should be following a trend following system if it’s above 25 and yes if ADXR is ALSO above 25 then you have good directional movement. BUT: if ADX is indicating that you should be following either the RTS or TBPS because it is below 25 AND ADXR is ALSO below 25 then what you are in FACT doing is opening RTS or TBPS trades on instruments or pairs which have the LOWEST OF ALL directional movement AND ‘the book’ quite CLEARLY states that ‘Good directional movement is not simply straight up or straight down movement. It is also good up and down movement…’ (Page 45 last paragraph)!!!
In short (I have a BAD habit of typing ‘novels’ to get my point across):
What do you think of trading ONLY the 9 (for example)ADXR TOP RATED instruments or pairs BUT USING ADX to select the trading system FOR THOSE ADXR TOP RATED instruments or pairs???
(A last note on this before I leave it for your input: the above would CERTAINLY explain TO ME why whenever I place a SIS order it normally ALWAYS gets executed for better or for worse BUT a lot of the time an RTS order does NOT get executed)!!!
Edit:
(Yes I could not help myself BUT I’m feeling REAL excited about my ‘light bulb moment’)!!!
ADXR (or the CSI if you’re going to go to the trouble of setting it up properley) will tell you WHICH INSTRUMENTS OR PAIRS YOU SHOULD BE TRADING. ADX will tell you WHICH TRADING SYSTEM IS TO BE USED TO TRADE THOSE INSTRUMENTS OR PAIRS!!! YES!!!
The point is this: it does not matter WHAT trading system you’re using (be it Wilder’s or anyone elses for that matter). If there is NO (directional) movement then you’re not going to make any money and you’re just going to land up with positions that go nowhere forever and a day!!!
AS A MATTER OF FACT (YES another edit):
EVEN my CSIADXADXR will have ‘credence’ here now!!!
Looks like I’m gonna have to REDO my spreasheet from last night BUT I believe the results are going to be ASTOUNDINGLY different from what I’ve based my current trades on right now!!!
OK LAST EDIT (REALLY):
This is REALLY what makes this book so ‘special’ to me i.e. it’s ‘the gift that keeps on giving’ man!!! No matter HOW many times I read it (and believe me it’s been MORE than a few times) there is ALWAYS something new!!! (Maybe I’ve just forgotten how to read and comprehend what I’m reading BUT I DO believe that the text is written in a sort of ‘freight train fashion’ i.e. there is ABSOLUTELY NO ‘BS’ in this book i.e. you just go from one concept to the next one to the next one sort of like ‘bang bang bang’)!!!
OK: a last post from me so that I can let y’all give some input!!!
For what it’s worth: here are (most) of the orders I’ve placed (last night and this morning).
I say ‘for what it’s worth’ because these orders were placed BEFORE I had the (what I consider to be) ‘light bulb moment’ above so use your discretion!!!
Well well well!!!
I finally think ‘the penny has dropped’!!!
Take a look at the .pdf copy of my Daily ADX ADXR CSIADXADXR Work Sheet!!!
(Forget about the CSIADXADXR for a minute here i.e. that’s a whole other explanation).
BUT:
From what I can NOW see:
Within the TOP ADXR RATED instruments or pairs (sixteen of them i.e. sixteen is the ABSOLUTE MAXIMUM number of positions I can have open at any one given time without violating my money management rules) I’m seeing fifteen SIS, VS, Parabolic SAR, or DMS trades and only one RTS or TBPS trade!!!
Now take a look at the corresponding charts and tell me what you think!!!
Now JUST BECAUSE these particular instruments or pairs are ‘top of the ADXR pops’ it does NOT mean that there are VALID entry signals of course BUT if the relevant trading system (as designated by the value of ADX) is INDEED giving you a valid entry signal then THAT is the instrument or pair to be trading at the moment!!!
Could all of this INDEED be the reason why I’ve not had a single RTS order executed in the past two days??? Look at the pairs on which I have (had) orders (above). Some of those instruments or pairs do not even FEATURE on the attached copy of my worksheet!!!
Also: I’ve left my order list post (above) intact for you to compare what my CURRENT orders are (were) with what I NOW believe they are SUPPOSED to be.
Edit:
OK well: I thought I’d just go the ‘whole hog’ here and post my NEW list of orders for today based on the attached Daily ADX ADXR CSIADXADXR Work Sheet for comparison to what my orders WERE earlier this morning.
You WILL notice of course that some orders have not been placed or rather do not appear on the order list for the simple reason that I’ve either elected to NOT take positions on a particular instrument or pair (like Silver for example) and / or I already HAVE and open position on a particular instrument or pair (GBP/JPY for example). Also: I’ve highlighted the ‘funnies’ (mostly ‘exotics’) in grey on the work sheet SO if you’re NOT ‘in the mood’ to trade the ‘funnies’ (the ‘exotics’) then of course you’d just eliminate them from the list and add the ‘normal’ pairs to the list until you’ve arrived at YOUR list of the 16 TOP RATED ADXR instruments or pairs.
Something tells me this is now FINALLY correct!!!
Daily ADX ADXR CSIADXR 18062008 1128.pdf (12.8 KB)
As nobody has commented Dale’s posts, let me throw in a short comment.
Me: “If you use CSI, use ADXR for ranking the instruments to trade with. But when then applying the other systems, you could apply ADX there to get the best out of them.” (Sorry, if it is too narsistic to quote yourself … :o )
Dale:
“Could it be possible that he is saying something along THESE lines:
If you’re going to factor in the CSI to your trading THEN trade ONLY the instruments or pairs that have a HIGH CSI rating (which of course incorporates ADXR) BUT choose the trading system to be used based on ADX??? OR: if you’re NOT going to use the CSI then again trade ONLY the instruments or pairs that have a HIGH ADXR rating BUT choose the trading systems to be used based on the ADX??? There is a very subtle difference here.”
Exactly! I, too, felt some excitement when writing the lines down, but even more when reading your response! You see, I’m just beginning to sort these things out for myself, and now they seem to be going into a straight line right ahead! I don’t have any idea how much correlation CSI and ADXR have, but that might be another good idea here to use ADXR instead of CSI.
J.
I find that ADX indicator to be a pretty powerful helper indicator. Now when any system I’m trying gives a signal, I check the ADX first and if it’s above 30ish and rising (and either the +DI or -DI is following suit), then almost all of my trades have worked out. Conversely, if the ADX and the DIs are lazing around below 25, I pass.
Now I’m using ADX(21) on a 4HR t/f but I feel that perhaps the adx period can be altered to fit the t/f and pair and so still experimenting with that.
Gentlemen,
I’ve been doing my homework with ADX, trying to program its calculations and then debug the reason why my results do not match with Delta’s.
I also browsed through this thread (to see that I won’t repost anything after initially skipping some portions with lighter reading when I didn’t yet have the book), and found vivid discussion 2 months ago about why different brokers provide rather different values for ADX. The most proposed explanation was in the time zone differences.
I finally found an explanation that may have some importance here. Our holy book says on page 37 that an accumulation technique shall be used for determining +DM14 and -DM14. The 2nd argumentation is notable:
“It incorporates a smoothing effect on the DM.”
The same technique is in use in calculating all x14 values.
Then I looked at the formula used by Delta. It appeared that they do not use Wilder’s accumulation technique at all. Rather they just calculate the sums directly from 14 raw values, i.e. no smoothing there.
It’s too late now for me to modify my program to see how much impact this has on the ADX values, but I’ll do that in the coming days.
I’m a bit afraid that there are more brokers out there that are not using Wilder’s accumulation technique. The reason I suspect is that it is much more compact to express the formula this way in an indicator language like Delta is using, and nobody has really bothered to evaluate the difference in the calculations. But on the other hand it might be quite well that the non-smoothing formula yields a “better ADX” than the lazy man’s calculation technique Wilder is advocating.
Any comments?
J.
I’ve been going over in my mind how to make money in this kind of market. And the thought occured to me that maybe we could base which level we set our entries at depending on the ADX/ADXR. For example if they’re above 15 set the entry at B2/S2 but if they’re below 15 set the entry at B1/S1.
Hello,
Randon:
Interesting theory indeed!!! Very interesting thought!!! Just remember though: look at my posts of yesterday. I truly believe I’ve found the issue. In other words: you should not even HAVE the problem of RTS orders not getting executed if you’re trading an instrument or pair that has a high ADXR but a low ADX. Think about it. On the other hand your idea may have much merit for those who ONLY want to trade using the RTS. Good thinking. Keep working on it.
kaalilaatikko:
This ‘Wilder smoothing effect’ has indeed been the subject of many debates (not on the forums on this site but on the forums on one or two other sites). There seems to be no agreement as to which is the ‘better’ or ‘more accurate’ of the two. Many people are of the opinion that the only reason that Wilder did it that way was to save time (and the ‘smoothing effect’ was just a ‘byproduct’).
Also: check Delta very carefully. There are two moving average functions (and I forget now which one does which): they are the ‘SMA()’ function and the ‘MA()’ function. One of them does indeed perform ‘smoothing’ exactly as per Wilder’s calculations and the other does not i.e. the other only uses the last ‘n’ periods for the moving average. I know this from coding my indicators and comparing them to my Excel Work Sheets back then. Also (I’m sure I don’t have to tell you this but just in case you forget): when checking Delta and using whichever moving average function performs ‘smoothing’ you have to take into account the fact that the ‘smoothing’ has started WAY WAY back on the chart so it’s not possible to check the moving average accurately by simply choosing a point on the chart and working from there. Of course there is no problem checking whichever of the moving average functions does NOT perform ‘smoothing’.
I also saw you noted that you were unsure of the relationship between the ADXR and the CSI. The ADXR will show you which instruments or pairs have good strong directional movement. The CSI will show you which instruments or pairs have good strong directional movement AS WELL AS volatility (and of course volatility equals ‘Average True Range’).
By the way: there’s nothing wrong at ALL with quoting yourself AS LONG AS YOU ARE RIGHT!!! 
!!!
kaalilaatikko,
I have the same concerns over the ADX calculations.
I have yet to find an indicator on ANY platform that seems to be calculate the same way that it is done in the book.
I made up an ADX worksheet in Excel that I believe replicates the calculations in the book, ie gives the same answers when I type in the example data. But when I put in some back data from my Alpari Metatrader into the Excel sheet it shows significantly different results from the Metatrader and Delta ADX indicators (which dont agree with each other either). And I don’t just mean some rounding differences - it completely changes the signals you would be acting on. One indicator is saying a pair is trending while another indicator which is supposed to be carrying out the same calculation is says that same pair is ranging. Apologies and please feel free to slap me down if I’m bringing up a conversation that has been more that covered in the past but I dont see how time differences can account for that, maybe I’m missing something here but if for example the EURUSD happens to be strongly trending for traders in Europe how can it be ranging in the States?
I really admire the lighbulbs that Dale and yourself have been switching on for the rest of us and I worry that even if we come to a perfect understanding of what ‘the man’ intended for the use of ADX/ADXR we’ll still be shooting through the fog if we dont have an accurate, consistent, reliable indicator for ADX/ADXR.
Now I usually find its best to start from the assumption that I’m wrong unless there is overwhelming evidence that I might be right, so I would like to ask a favour. You appear to have seriously good analytical and IT skills and I would be very grateful if I could send you my ADX spreadsheet to verify that it is or is not calculating ADX and ADXR in the same way as the book.
Thanks
Derek