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

[dpaterso]

Hey Derek,

I have Alpari’s demo (MT4) installed (I didn’t realise this was the broker who you were trading with). I checked their ‘standard’ ADX with my ADX at both Delta and GCI. Alpari and GCI are ‘closer’ to each other I’ll admit (but there is a big timing difference between them so they will be slightly different). What I find interesting when comparing Delta’s to the others is that the ADX peaks appear to occur at roughly the same time BUT are far less pronounced and I have a very sneaky suspicion that it’s because Delta does INDEED ‘smooth’ the moving averages and the others do not (GCI I’m SURE does NOT make use of ‘smoothing’ as per Wilder i.e. the function is just not available).

Just one other thing though (that I believe is worth mentioning): while I do agree with you wholeheartedly that it’s imperative to have the correct calculations and agree the results with the results in ‘the book’ there are many variables that may affect the end result of the calculations (we’ve mentioned three already i.e. the different timezones, whether or not the moving averages are ‘smoothed’ as per ‘the old man’ or not, and the different price quotes). Off hand I can even think of one more i.e. SOME brokers show the ‘gaps’ (like Delta) and other do not (like GCI). ALL of this can make a difference to the end result of your calculations. Don’t get too ‘hung up’ on this though. If you can make sense of the actual script being used for the calculation then just put it to the test on a demo account or something like that. The point I’m trying to make is that my % gains are being made using ADX/ADXR (used correctly or incorrectly as per my posts of yesterday) so even if Delta’s is incorrect (which I’m confident it’s not) then it’s certainly working for me anyway. If your ADX/ADXR is indeed wrong at Alpari you’ll very quickly find out by using it to to pick your systems and instruments or pairs to trade i.e. if it’s right then you have to get roughly the same results as another trader using another broker. I know that’s not the ‘definitive’ answer that you’d like to hear but there have been times where I’ve struggled to get the same or similar results as Wilder in the book and only with time have I figured out the reason(s) why but it’d not simply let it keep me away from trading the systems. Also: you should be able to see from the chart whether or not an instrument or pair is trading in a range or trending and compare that to your ADX indicator. You should also be able to see the correlation between the +DI and -DI crossings as well. I mean: I’ve just looked at GBP/JPY (daily) at Alpari and even although the actual values differ from mine the ADX quite correctly signals the end and / or the change in direction of the trend and I can also see that where +DI has crossed above -DI I would have / could have gone long (and visa versa for short trades of course).

Edit:

ON THE OTHER HAND (I really could have been a ‘Chief Analyst’ or ‘Chief Economist’ don’t you think???):

I’ve taken some more time now to compare Alpari’s ADX with Delta’s (and GCI’s) and I have to say that sometimes the values are very close BUT OTHER TIMES they really ARE miles apart and I can see how / why this could / would be frustrating. I suppose it’s time for me to reconstruct my original DMI Work Sheet and do some manual testing!!! Put this ‘to bed’ (which is where I’m going now) once and for all!!!

[randont]

Dale,

I’ve been putting entries at S2/B2 or higher/lower. On 3/4ths of all the pairs this week and nothing’s been hit. This market is very non volatile. The ADX/ADXR’s are very low on almost every pair or very high. Not much in the middle ground.

[chdorry]

Hi all,

Just recently stumbled across this thread and am halfway through it. I have my book on order and hoping to receive it next week at the latest. Was wondering if anyone had some input/advice on where to start and what system to study first. Was planning to do a read through of the entire book, then return to study and (hopefully) master the trading systems one at a time. I’m looking forward to some of the mathematical equations and the challenge of learning the new systems.

Any input to where to start would be appreciated, and if its covered already in the thread I’m sure I’ll come across it sooner or later as I try to review the thread while waiting for the book to arrive.

Would be interested in some folks take on the following question - as I’m reasonably new to Forex and as such haven’t really studied/mastered any systems, etc - is that an advantage or disadvantage in this case?

I could argue both sides - no experience with other systems so I shouldn’t have any preconceived notions of how things should turn, etc which could work for me. At the same time, not having that experience can also work against me. Would be interested in others ideas/thoughts on this matter.

Thanks in advance.

Craig

[sirkeen]

Chdorry,

Read the book, get a feel for the systems and see which system fits with your personality and trading style best. You may decide a system you originally discarded becomes more suited to your style the more you further your knowledge (and the more you read of this thread…)

Wilder’s systems are fantastic, but there are many other profitable systems out there. If Wilder’s work does not ‘spark your fire’ keep searching till you find a system you believe in. You certainly need to trust the system(s) you use, and if their concepts keep you mentally motivated, it is so much easier to keep to the rules and maintain the system!

My two cents…
Regards,
M.

[randont]

Craig-

Welcome the the thread. I promise you you will not be disappointed with these systems.

I gathered from your post that you’re relatively new here. First off make sure you go through babypips school. Then open up a practice account at deltastock and find a basic system to start with unless of course by that time your book has arrived. Then just start with the book and find a system in their to start with. I’ve found the RTS to be my favorite and 95% of my trades are RTS.

In my opinion you’ll want to get to trading very small but real amounts of cash as soon as you can ie after you’ve learned the platform and the systems. Demo trading just does not prepare you for Live. Just do not think after some great successes that you can throw your life savings in there. They systems are good enough but you won’t be emotionally ready for that for awhile.

[chdorry]

Thanks Randon,

I’ve been through the babypips school, and have been doing some practice trading via ODL. To date I’ve been using some strategies I’ve found utilizing the Awesome Oscillator and Stochastics, but there’s not much history behind the system (see about 6 months worth on babypips forum and then they went to “fee only” for actually seeing the trades to confirm (although to date this week I’m up ~$1500). I’m well aware this is much different as its not my $$ on the line, so emotions don’t really factor in nearly as much.

One other noteworthy item, I recently read some of a book (was browsing at B&N) that was talking about the Turtles traders in Chicago. Long and short, they brought people in, taught them a complete trading system (everyone had the same training/system to work with) and were pointing out how some folks excelled, others were mediocre and some lost money trading on the exact same system. It is just more proof that believing in and following the system is paramount to your success (coupled with good money management). Of course that is easy to say, but I’m sure I’ll struggle with the rest of the folks when it comes time to put my money on the table.

Will be filling out my trading paperwork to get an account funded in the near future and hoping to begin trading (small lot sizes) in the next couple of weeks. Want to get some time to study Wilder and a system that appeals to me, and then at least trade it for a short time in a demo account just to get comfortable with the signals, entries, etc.

Appreciate the support and guidance in this thread, and look forward to joining in the future discussions.

[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’).

I started to feel the same way. Doing the calculations manually is a lot of faster if you use accumulation, but then Wilder just throws that this also adds some smoothing without any speculation why that would make good for us. I think I am the last person to argue which way is the best. If you say that you have been successfully following Delta’s ADX, that’s a strong criterion for me.

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’m not at my brightest at midnight, so I had another look on Delta’s formulas. And indeed:

TR14, +DM14, -DM14 are plain sums, no smoothing. (I doubt that there isn’t any smoothed sum available anyway, didn’t check that, please correct me if I’m wrong. If there isn’t any, it might actually quite difficult, if not impossible to do this in Wilder’s way with Delta’s language.)

ADX uses MA, not SMA, so again no 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’).

Nothing to argue. But sorry for confusion, I did not mean relationship but correlation. I know that ADXR is one factor in CSI, but I have no idea how closely CSI follows ADXR. In other words, if the correlation would be perfect (=1), ADXR would put everything always in the same order than CSI, and there would be no difference which one to use. And the complete opposite for -1 correlation. I was just wondering if ADXR could be a good-enough replacement for CSI, i.e. whether it could select almost the same set of instrumets as CSI or not.

Derek: I’m interested in making comparisons between our calculations. I’ll try to PM you soon.

J.

[dpaterso]

Good (Thursday) (late) afternoon,

It seems that we’ve finally got some ‘action’ today!!!

Now:

ONCE AGAIN I find myself ‘hanging my head in shame’ and having to apologize on the thread!!!

Why???

Because I’ve been looking over what everyone has been saying about the ADX/ADXR indicator being ‘wrong’ at ALL the brokers and GUESS WHAT: YOU’RE ALL RIGHT!!!

I could have SWORN that I checked this indicator last year but obviously I did not (I remember now that I had ‘issues’ with Parabolic SAR and the ASI last year but also thought I’d checked this indicator).

Anyway: I’ve spent the better part of today rewriting Delta’s ADX/ADXR indicator and I’m FAR from finished and my brain is ‘fried’ from the concentration!!!

What I’ve indeed found is that the ADX/ADXR indicator distributed with the platform (Delta’s and GCI’s and MT4’s) does NOT incorporate Wilder’s ‘smoothing’ BUT EVEN SO (let’s forget about ‘smoothing’ for now because it’s open to debate as to whether or not ‘smoothing’ enhances the indicators performance or not but we’ll get to that) the values are WAY out if compared to ‘the book’ i.e. with or without Wilder’s ‘smoothing’ and I NOW do believe that the differences are ‘material’!!!

I’ll complete the indicator (for Delta initially) and ‘ship’ it to you (well my ‘clients’ anyway) as soon as I’m done.

Like I said: in it’s current (erroneous) form it IS working for me (us) but I now find myself wondering if it’s at all possible to be EVEN MORE profitable once the darn thing is giving the CORRECT information as Wilder intended!!!

[dpaterso]

Good (Friday) morning ladies and gentlemen, boys and girls!!!

Well: it’s official!!! I’ve completed my ‘recode’ of the ADX indicator for Delta’s platform.

On the attached chart of GBP/JPY (daily) you’ll see the ‘standard’ ADX indicator (as supplied with the platform) (top) and my ‘NewAverageDirectionalIndex’ indicator (bottom).

Now here are my findings:

After completing the ‘recode’ and comparing my ADX indicator with Delta’s ‘standard’ ADX indicator I find that Delta’s ‘standard’ ADX indicator is not THAT far ‘out’ from mine (mine of course I agreed to ‘the book’). There are INDEED some differences though which I believe ARE ‘material’. The most NOTEABLE difference is the fact that in most cases the crossing of the +DI and -DI is being signalled by Delta’s ‘standard’ ADX indicator a day late (sometimes even two days late). This of course is HUGE if you’re trading the DMS i.e. using Delta’s ‘standard’ ADX indicator you are in effect getting into the trade a day (sometimes two days) late and getting out a day (sometime two days) late. NOT good for the DMS!!! There are also differences between the values of ADX and ADXR although these differences will only be ‘material’ in a ‘borderline’ case i.e. when ADX is at / on or around 25 i.e. many times Delta’s ‘standard’ ADX indicator will be indicating that you should be trading the trend following systems and my ADX indicator will be indicating that you should be trading the RTS or TBPS and visa versa.

The (my) conclusion after this excercise is that Delta’s ‘standard’ ADX indicator is ‘useable’ although not 100% correct. For me of course this is good news as I was really worried that Delta would be WAY out which of course would have begged the answers to some more questions!!! But: Delta pretty muc ‘came through’ as always. HOWEVER: where this leaves those of you trading at other brokers I do not know!!! I again compared both Delta’s ‘standard’ ADX indicator and now my ADX indicator with Alpari’s for example and Alpari’s is WAY different and therefore NOT EVEN CLOSE to the way the ADX is supposed to be calculated as per ‘the book’. What’s more (in the case of Alpari anyway) is the fact that there is perhaps one hour difference between Alpari and Delta so the differences cannot be attributed to the different timezones i.e. the differences are FAR too great given the small difference in time. Whether or not this applies to other MT4 brokers I do not know (although I suppose given the fact that MT4’s ‘standard’ indicators as supplied with the software are developed by the same company I should imagine that they are ALL wrong and I know that’s a HUGE statement to be making but I assure you that there is NO WAY that MT4’s ‘standard’ ADX indicator is correct when compared to ‘the book’).

I’m going to start using my ‘recoded’ ADX indicator from today and once I’m satisfied that it’s working ‘error free’ I will of course distribute it to my ‘clients’. Please note that neither Delta’s ‘standard’ ADX indicator nor my ‘recoded’ ADX indicator incorporate Wilder’s ‘smoothing’. To be honest: it’s a WHOLE lot of work to ‘get it right’ and I don’t believe it makes that much of a difference i.e. I experimented with Delta’s ‘standard’ ADX indicator and ‘smoothed’ the ADX and then removed the ‘smoothing’ and the differences in the values and the shape of the curve really are negligable and as a matter of fact I’m of the opion that NOT using ‘smoothing’ the reaction times and accuracy of the indicator are greater.

(By the way: for those of you who are ‘playing around’ with Delta’s scripting language: the MA() function is a ‘simple moving average’ and the SMA() function is a ‘simple smoothed moving average’ i.e. the names of these two functions are deceiving at best).

[dpaterso]

OK,

I’ve attached my Daily ADX ADXR AO AC Work Sheet. This ‘new’ worksheet was constructed using the ‘recoded’ ADX indicator. Feel free to compare it to MT4 and see what you get. I think you’re gonna be in for a surprise (don’t forget to name me as the IB when you open your account at Deltastock)!!!

I’ve also attached an order sheet detailing the orders that I’ve placed based on the work sheet (some orders have not been placed because I’ve probably already got positions on them).

(I’ve mailed ‘you lot’ as well with the indicator updates)!!!

Daily ADX ADXR AO AC 20062008 1520.pdf (13.9 KB)

[dpaterso]

Oh and another ‘by the way’:

Something else I’ve noticed (been noticing for a while actually):

I’ve seen a few posts on ‘why the markets are so quiet’. Well I don’t have the reason BUT I’ve noticed that in doing my Daily ADX ADXR AO AC Work Sheet that when the markets get ‘quiet’ the ADXR values are lower than ‘usual’ e.g. on my current work sheet the highest ADXR value is 55 odd whereas ‘normally’ there are (many) readings WAY about 60, even 70, sometimes over 80 or 90. Could this be???

[midulster]

Hi Dale,

Here are the values I’m getting from my Excel spreadsheet and the custom indicator for Metatrader (not the standard ADX indicator which I agree is totally bonkers and bares no relation to the real calculation), both on Alpari data.

As you can see the pairs are in (rough) agreement in terms of order by ADX though mine don’t seem to reach the highs and lows yours do. Perhaps that is the result of the smoothing effect in the calculation?

Derek

[dpaterso]

Hi Derek,

Thanks for posting that information.

I had a look at YOUR MT4 indicator (and somebody else also emailed me another one some time earlier today which I looked at). Granted: YOUR MT4 indicator is a LOT closer than MT4’s ‘standard’ indicator but I still don’t see why the huge discrepancies AT ALL. As I said earlier: the ‘smoothing’ certainly does not make THAT big a difference (I tested it with Delta’s ‘standard’ indicator as well as with some ‘smoothed’ moving averages and the differences really are negligable). The value of ADXR does not worry so much i.e. it’s just an attempt to ‘level the playing fields’ as it were between the different instruments or pairs and I’m assuming that even if the calculation is incorrect you’re still comparing ‘apples with apples’ as it were. Of MAJOR concern of course is the fact that there are such vast differences in the ADX values. Those differences could very well cause you to be trading the wrong system for the present market conditions and that is obvioulsy a problem. In my opinion this is ‘pure mathematics’ so WHY the obvious HUGE differences??? Anwyay: all I can say is I was ELATED to find out that Delta’s ‘standard’ indicator was not THAT ‘far out’ from the book but I do feel more comfortable knowing that mine is now ‘spot on’ (and thanks to you to be honest i.e. I would probably just have gone on thinking that this was one of the indicators I checked last year and that it was ‘spot on’ with ‘the book’. On the other hand of course I’m pleased that Delta’s was not that ‘far out’ otherwise I’d probably not have made the $$$ I’ve made so far)!!! I don’t know what to suggest. As I explained to somebody else earlier: I cannot honestly tell you that I have the time nor the inclination to code these systems for MT4. Although it’s a GREAT package (no question) it’s the broker that’s BEHIND the platform that is important to me and I’ve never had ANY problems at all with either Delta or GCI so unless something ‘untoward’ happens I’ll just be ‘plodding along’ with my current brokers.

[midulster]

On the other hand of course I’m pleased that Delta’s was not that ‘far out’ otherwise I’d probably not have made the $$$ I’ve made so far)!!! I don’t know what to suggest. … so unless something ‘untoward’ happens I’ll just be ‘plodding along’ with my current brokers.

Hi Dale,

It probably would be best to suggest to me that I stop being so a**l about these things when the indicator is close enough to be used as a filter with systems that are robust enough to take the odd knock. Its time for me to stop analysing to the nth degree and do some ‘plodding’ of my own. If I can get half the results you have I’ll be a happy man, so for now I’ll just shut and trade.

Thanks again

Derek

[randont]

takes a deep breath

Another week over and done. And boy has this trading week been crazy. So here’s the good the bad and the ugly.

Sunday,
I started out good then through it away due to impatience and eagerness to enter the market. Closed out my USD positions for mediocre profits, all went on to nice profits after I closed them, isn’t that the way of it though. Made some stupid trades trying to enter SIS trades early and lost my gains I closed out on USD pairs.
Monday,
Not much to say. None of my RTS entries hit.
Tuesday/Wednesday,
Finally got the SIS signals and did some scalping on them. Set small profit targets and reentered once it had retraced. No RTS trades again! Since the market was so quiet I figured that I’d narrow my RTS entries. Also I was up for the huge GBP rally and got in short a little early, still entered at the S1/B1 or S2/B2.

Thursday/friday,
Here’s where it got intresting. Alot of my RTS trades got hit and unlike I expected GBP had continued the rally. I got up at 4am to check my trades. I was sitting at a 15% drawdown from the 105% so a net -10%, I had 10 trades open at 1.5-2% margin each, a little more than expected. Unlike last week though I hadn’t violated my MM rules and didn’t panic. I continued to monitor closely my trades throughout the day and finally during the asian session things started to reverse. I stayed up till 5am and closed out a 13% gain, slept, and woke up to close out another 2%.

A pretty stressful week but very rewarding. I did alot better following the system and mm rules. Dale, is it normal to have 10% drawdowns each week or is that more of a once everyother week to once a month thing? I also was wondering what the ADX was on AUD/NZD , about 10 pages back you were sitting at a lose on it, when you took it.

One things been kinda bothering me. I don’t have a set rule for exiting a trade that’s gone against me and that isn’t going to reverse. When do you finally say thats it and close out at a huge loss. I know it’s rare but sometimes fundamentals just can’t be overcome for a reverse.

I’ll probably get tired of doing this but here’s my trades for the week:
USD/JPY +12 pips
EUR/JPY -87 pips impulse, entered SIS early
CHF/JPY -45 pips impulse, entered SIS early
NZD/CAD +20 pips
GBP/JPY +28 pips
EUR/JPY +28 pips
USD/JPY -7 pips mistake, so exited quick
EUR/JPY +21 pips
GBP/JPY +25 pips
GBP/NZD +8 pips went against me for a few days so took profit quick on the reverse.
EUR/AUD +16 pips
EUR/CHF +10 pips
GBP/JPY +76 pips
GBP/BGN -60 pips
GBP/AUD +50 pips
CAD/JPY +20 pips
CAD/CHF +22 pips
GBP/CHF +110 pips
EUR/USD +87 pips
USD/CHF +65 pips
EUR/CAD +107 pips

Net pip gain +513(this week) didn’t keep track of last weeks pips
15% gain on the week
17% gain since I started last week
Real money too

As you can see as the week progressed and we got some volatility I started letting my trades run. Hope everyone else had a great week. Any advice or questions are appreciated.

Just wanted to add one more thing. I don’t think I’ve had a more stressfull two weeks in my life. I never understood just how much psychology played a roll in trading. It has taken LOADS of self restraint, constant vigilance, and major self scrutany to follow the systems and mm rules to a T. I would be nowhere without self correction whenever I’ve started to vary from my trading strategy. On a more positive note though It’s getting easier. This week wasn’t nearly as stressful as last.

[Sweet_Pip]

One things been kinda bothering me. I don’t have a set rule for exiting a trade that’s gone against me and that isn’t going to reverse. When do you finally say thats it and close out at a huge loss. I know it’s rare but sometimes fundamentals just can’t be overcome for a reverse.

Net pip gain +513
15% gain on the week
17% gain since I started last week.
Real money too

That’s awesome (to me anyways) Randont…good gains!

Now that I’ve had my Friday evening ****tail(s) and feeling smarter than the average beer…I mean bear… and since the RSI is a “Wilder” indicator, I just wanted to throw out an idea that might be a consideration for the stoploss dilema.

I’ve been experimenting with drawing trendlines on the RSI and the [B]only[/B] exit rule is to close when the rsi breaks it’s own trendline. In theory it should prevent any major losses if it’s a true reversal, and a minor inconvenience, which you can reenter on, if it was only a mild retrace (i.e. let profits run, cut the losses short :rolleyes: )

[randont]

Thank you for the reply Sweet Pip. I’m definately going to check it out.

One thing I’d like to point out though. RTS will inevitably have drawdowns that in other systems would hit s/l’s, if I’d used them I’d be sitting at a big fat loss right now. Following the RTS system I’ve had several trades go against me 100-200+ pips and still turn around for a profit. I haven’t had any of those trades not come back to the entry point, knock on wood, so I don’t think cutting your losses short would work in this system. I’m counting on having to take a pretty big loss if I don’t think the trade will reverse in my favor. I just want a better way to recognize when It won’t come back to me.

Maybe that will clarify what I’m looking for. I’ve also been considering a fundamental answer to the problem. Like if the trade goes against you 200+ pips and then news keeps coming in to strengthen the move.

[dpaterso]

Good (Saturday) morning everyone!!!

WOW. It’s great to ‘wake up’ to some positive posts!!! Well done Randon. Well done and I’m really pleased for you. It’s worth a mention that not even once has Randon contacted me or anything like that for ‘support’ i.e. he’s done this purely on his own.

Derek: don’t beat yourself up TOO much about wanting the values to be ‘exact’ i.e. I’m like that too and to be honest I’m glad that you brought the subject matter up because I now am feeling really good that I have ‘exact’ figures too.

Now to some ‘subject matter’:

Randon: I assume that you’re talking about exits on the RTS??? The RTS DOES give you clear exits in ‘the book’ BUT it’s assuming that you’re following the ‘BOS’ sequencing of course (which as we all know none of us, for the most part, are following ‘to the letter’). One idea that I came up with (although I’ve never actually had the heart to ‘enforce it’ i.e. to ACTUALLY realise a loss on a position) was to place your stops at ‘LSTOP’ level closest to your opening opening level. The problem with that is that I find myself buying or selling at those ‘LSTOP’ levels and not using them for stop losses as I intended i.e. sometimes the ‘LSTOP’ level is the first level inside the LRC. Maybe THAT is a better option i.e. use whatever RTS level (which normally would be one of the ‘LSTOP’ levels) is the first ‘LSTOP’ level OUTSIDE of the LRC. Just a thought.

As far as AUD/NZD is concerned: ‘you don’t wanna know’!!! I’ve attached a chart for you to look at (the orange line is my BE point by the way). Believe it or not I’m still not too concerned about this trade. The MAIN reason for my saying this is that is you look closely you’ll see that the VS SAR is ‘creeping up’ very nicely and steadily to the current price and I’m figuring that once I get a close contrary the SAR I’m gonna ‘hammer it’ to get to BE or maybe even a VERY tidy profit given the amount of lots I have on this postiion!!! For now I’m just riding it out. FORTUANATELY for me I’m earning interest on the position (at first I thought I was PAYING interest but it turns out it’s the only AUD/??? position where you are earning interest on a short position) and it’s ‘quite a bit’ on a daily basis given my position size and it’s DOUBLE on Wednesdays!!!

I’ve also attached a chart of my current GBP/JPY VSTOPS trade for those interested. I’m also long GBP/NOK now based on the same system and both positions are in ‘tidy’ profits right now.

I’ve also come up with a ‘neat’ little system based on what I started noticing yesterday after completing my ADX ‘recode’. It’s based solely on the DMS (for an entry) and Bill Williams’ AC for an exit. It’s REAL simple to follow and it APPEARS to have ‘profitable merit’. The idea is this (I’m going to use a long trade as an example): when +DI crosses (up) over -DI you go long by placing a stop order ‘a couple of ticks above the high’ of the bar on the day of the crossing (after the close as always) IF AC is BELOW the zero line and green at that time. You then stay in the trade until AC turns red (again: after the close as always) and you then place a stop order ‘a couple of ticks below the low’ of the bar on the day that AC turned red (obviously again: after the close). This is now your TP and / or stop loss order which you DO NOT move until executed OR (if you’re lucky) you’re still in the trade and AC turns green again in which case you wait for AC to turn red again and move your TP or stop loss order using the same procedure detailed above. Needless to say the instrument or pair MUST have an ADX value above 25 and a high ADXR rating as this will not work too well (if at all) on an instrument or pair that is trading in a range. While this is not ‘pure Wilder’ it certainly does seem to have some merit. Take a look and tell me what you think. The reason it ‘appears’ to work to me is because I’m NOW getting my ADX signals ON TIME and AC is denotes when a movement is ‘running out of steam’ and as we all know ‘no steam, no movement, no money’!!! AC is one of the best indicators around to denote increases or decreases in ‘steam’!!! Please note that it is not my intention to detract from what we’re doing here BUT it MAY just be another ‘Wilder based bombshell’ to add to your trading arsenal. The reason why I believe it may be an ‘improvement’ of the ‘proper’ DMS is because a lot of profit is lost when using the DMS while waiting for a +DI/-DI cross in the opposite direction to TP and / or SAR. This allow you to ‘get out’ with profit (most times from what I can see) and also gives you the option to ‘get in again’ at a better price on the same trade. It also afford those of you who are waiting for ‘the book’ to arrive to trade a ‘part Wilder’ system (but don’t go rushing off to cancel your orders i.e. the ‘pure’ systems in the book are FAR more robust and profitable I assure you)!!!

I’ve also been ‘rethinking my stance’ as to whether or not to trade using logical orders (‘hedges’) at Delta when trading the SIS. My own ‘jury’ is still out on this BUT using AUD/NZD as a ‘primo’ example: had my initial position been opened using logical orders I could have stopped and reversed when the position went against me as signalled by the SIS WITHOUT realising the loss while at the same time freeing up margin. Then: when signalled to stop and reverse AGAIN by the SIS I could have taken profit on the ‘hedge’ and this would have had the effect of moving the average price of my position closer to the current price and so on and so forth. I have used logical orders / positions before with some success but not ‘based’ on any ‘concrete or solid system’. As I said: ‘my jury’ (‘my mind’) is still out on this one but I’ll obviously post my final conclusion when it’s been ‘arrived at’ (feel free to post YOUR input here).

Anway: I sincerely hope everyone had a good trading week. I’m going to see what I can do about adding ‘smoothing’ to my ADX at Delta (I’m ‘on a roll’ again) although this will be attempted only ‘to prove that I can do it’ i.e. I don’t believe it makes that much difference. I’ve attached a chart with two moving averages: one ‘normal’ and one ‘smoothed’ just so that you can see the almost ‘minute’ difference it makes. At the very bottom of the chart (USD/ZAR) I have two 14 period moving averages: the one in blue is the ‘smoothed’ moving average and the one in brown is the ‘normal’ moving average and ‘from where I sit’ I don’t see any ‘material’ difference (or at VERY least I don’t see how the lack of ‘smoothing’ could be the ‘root cause’ of such VAST discrepancies between MT4’s ADX / ADXR and mine).

[thegeek]

In my last post I stated

“I�m sitting on over 1,100 in losses based on 1.875% money management rules. Even with large losses showing, I�m still up on the week, and up over 2k on a 5179.00 balance 3 weeks ago.”

Well during the ensuing week and a half the losses accumulated to over $3900.00 in 3 heavy positions, some positions were multiplied by reinforcing orders as they tanked (I was not paying attention to the trades I had on the table as I was entering system orders for the day). The good thing about these trades was I was earning around 30.00 a day in interest (14 days @30.00 a day came out to 420.00 in interest).

All was going poorly and I thought I would not be able to trade for a while longer simply because 20% of my account was tied up in my current open positions, talk about boring… well Thursday 6/19/08 came along and the major trades that were tying me down suddenly turned!!! I ended up closing out 3 positions that were heavy, 1 that used 7.5% of my account, 2 that used 3.75% of my account each (15% in 3 trades) at $1,679.00 Profit on those three positions.

All said and done, the last 3 weeks of trading has me at a 39.687% gain on the month which is counting current red positions (if I did not have them in place I would be at 55.998% Gain). Either way the systems are performing.

Account Balance ending 5/31/08 $7,179.39
Account Balance ending 6/21/08 $11,199.16
Account Balance beginning 6/22/08 $10,027.46 (counting open trades)

I do not count pips simply because no pips are created equal, I count $ gains. And yes this is a real money account.

I reiterate my stance, proper money management and time, willingness to wait out a trade that has gone south and not bailing when things look bleak seems to be 40% of the answer, 60% is getting into the trade in the right direction so you do not have to wait!

Brian

[Bocajunior]

Hello Folks,
Wow, some greta debate and discussion regarding the ADX/ADXR indicators. After reading here on babypips I then went back and re-read the Directional Movement Chapter in the book and to be honets couldn’t reallt shed any new light on the subject.

On the thing that I thought was worth considering was that Wilders method of computing the ADX after 14 days was done surely to ease his workload and not have to keep up with the last 14 days of data. Nowadays with modern computers etc, is it not possible that ADX(14) is just a staright average of the last 14 days? I dont know, just a thought. Anyone?

Another thing considering ADX and ADXR. If ADXR is low, then to me that is just saying that the instrument has been rangebound for a longer period of time than one that just has a low ADX.

i.e Low ADXR = the ADX is low today, and it was low 14 days ago, so has been rangebound for a good while.

But as Dale mentioned, It is no good to just be rangebound, we need a little bit of up and down movement (ATR) so we can make a bit of money. So surely the ATR comes in to play here… Low ADX/ADXR and a healthy bit of ATR , would be ideal (in theory) for a system such as the RTS. Thoughts??

Dale,
Thanks again for the updated indicators. Yet again, totally appreciate your hard work on this. Cheers