My credits to midulster/Derek, with whom I have had an interesting discussion about the intrinsics of ADX calculations.
The latest thing that we have been able to spot concerns ADXR. On page 44 Wilder gives a formula for it and tells to use ADX 14 days ago in the calculation. But in the worksheet on p. 42 and the corresponding explanation on p. 47 he is calculating the first ADXR by using a value (16)that is only 13 days behind.
The difference in value is not that much if you read the value 13 or 14 days ago, but I would like to interpret that there is a bug in the worksheet. OR the formula should rather use ADX 13 days ago. What do you think, which one is correct?
Maybe this should go to the errata in the beginning of the thread as well.
J.
Good (Tuesday) morning all!!!
I see ‘the two of you’ are intent on ‘busting my bal*s’ with this ADX calculation!!!
OK: I WILL check my ‘smoothed’ calculations today (admittedly I just ‘recoded’ the darn thing yesterday and did not check it against a ‘smoothed’ Excel spreadheet)!!! I’ll OBVIOUSLY post my results AGAIN today!!! (I’m still not convinced that there can be THAT much difference EVEN IF I’M WRONG this being based on my moving averages example)!!!
BUT I MUST hasten to add: ‘smoothed’ or ‘unsmoothed’ I’m trading and making money!!! (There IS a ‘hidden message’ in that statement for ‘the two of you’)!!!
Hello again (Tuesday night)!!!
OK: well ‘the two of you’ have got me going now!!!I’ve spent the entire day now trying to get the ADX ‘smoothed’ and I’ve come across a ‘startling’ revelation i.e. ‘Wilder’s smoothing’ is a FAR cry from what I (we) would NORMALLY consider ‘smoothing’ i.e. ‘Wilder’s smoothing’ is NOT the same as simply applying ‘normal smoothing’ as we would in a ‘smoothed moving average’ for example.
Needless to say: ‘the two of you’ are quite right AGAIN i.e. I checked my ‘NewSmoothedAverageDirectionalIndex’ against a ‘smoothed’ Excel spreadsheet and the differences ARE INDEED NOT negligible. The funny thing is that on the spreadsheet: while moving from bar to bar on the chart (I’m using GBP/JPY for this purpose) sometimes the results are WAY different but then somehow the differences become smaller and then the differences become bigger again and so on and so forth.Anyway: I’ll SHALL get this right one way or another so please just bear with me.
On the other hand: right now I’m trading using my ‘NewAverageDirectionalIndex’ (‘unsmoothed’) with ‘stellar’ results BUT having said that I TOO would now like to see what the difference is between a ‘Wilder smoothed’ ADX and an (my) ‘unsmoothed’ ‘NewAverageDirectionalIndex’!!!
Hey Dale, I think I am finally comfortable with the SI system after the little chat we had on YM last night. I had one final question though. At the close today I went through all of the pairs and set some SI orders. Now, the “long stop order” and “short stop order” are valid for the following day, correct? Meaning I don’t use the values on the new bar that just popped up at 1h 00m today, I use the values on the bar that just closed, right? Because since the new “open” bar’s values still change when the price changes. Anyway, I just wanted to confirm that.
Also, correct me if I’m wrong, but isn’t the easiest thing to do just to go through the pairs, make sure the adx and adxr are both higher than 25, and then just place stop orders at “long/short stop order” for all of the pairs? Because if the order does get hit, that means that the ASI went/will go against itself 60+ points. In other words, the price required for the order to get hit is far enough away from the current price that if the order does get hit, the ASI will end up being 60+ against itself at the close of the candle. Or, do I have to wait for the ASI to go against itself 60+ points, THEN at the close of that candle where the asi crosses the pink line, THEN I set the stop order? Sorry if this is hard to follow. Basically I’m just asking if you set the stop order to get hit during the day where the asi hits the sar, or do you have to wait until the asi crosses the line, the day closes, and THEN place the stop order. I’m leaning toward the latter, I think that’s how I used to do it when I used the ASI indicator through MT4 and traded on Oanda.
I plan on TPing with the SI at the first RT level that results in profit. However, I thought it would be worthwhile to watch the action, and if it looks like the price will “break through” the RT level to cancel the TP order and wait to see if it closes above it. If so, then I can set that level as the new stop, and move the TP to the next RT level, if that makes sense.
I also plan on following the new “DMS with bill williams exits” system and seeing how that works.
-Nick
Good (Wednesday) afternoon all!!!
Hey Nick,
Order placement:
You are quite right about only placing orders using the TrailingIndexSAROrder indicator using the values for the previous CLOSED bar i.e. NOT the current (new) bar.
ASI and Trailing Index SAR:
You have to WAIT for the close and the reason for this is detailed on page 100 in the 2nd last paragraph. Basically the ‘logic’ is that even although the ASI has reversed on itself by 60 points or more during the day the high or low made on that day will not be reached the next day and the price will turn again and continue going in the ‘right’ (your) direction the next day. This does in fact happen most of the time. If you placed your orders at where you THINK or rather have calculated where they would be IF the ASI reversed on itself by 60 points or more the chances are EXTREMELY great that you will get either falsely stopped out or perform a false stop and reverse.
RT TP’s:
No problem there although I must admit that now that I am now trying to follow each system through as per it’s design (again) with what I’d call ‘stellar’ results at this stage anyway. Yes: I’m going to end up realising some losses on SIS SAR’s but so be it i.e. this ‘mindset’ of not realising a loss simply because I have not had to realise a single loss in the past seven weeks and therefore don’t want to ‘tarnish’ my ‘perfect seven week track record’ is going to be a recipe for disaster. On the other hand what you intend doing is slightly different from just taking profit at the first closest profitable RTS level i.e. you’re going to wait for the price to penetrate the level and then set a stop at the level and if not hit then you’re going to move the stop to the next level which really is just a trailing stop based on the RTS levels. Nothing wrong there!!!
To everyone else:
This ‘smoothing’ of the ADX / ADXR is REALLY starting to become troublesome and I would have just left it alone had it not been for some STARTLING information I’ve found on the Internet. Do yourself a favour and do a Google search using the keywords ‘wilders smoothing’ and see what you find!!! The differences between ‘Wilders’s smoothing’ and what we would all recognise or ‘code’ as ‘normal smoothing’ are WAY different from each other. Essentially with ‘Wilder’s smoothing’ the indicator(s) will be much slower to react to price changes. Whether this is a good thing or a bad thing I do not know at this stage. My MAIN concern right now is not really the ADX /ADXR (would you believe) but after my ‘research’ I was reminded of course that it’s not only the ADX / ADXR that is affected by this i.e. it’s RSI and ATR (ATR which in turn affects the VS / VSTOPS) etc. etc. etc. Now of course there are two schools of thought on this I would imagine. The first one being that using ‘unsmoothed’ values in the calculations will result in a decrease in reaction time to price changes. Good or bad? The most obvious advantage to this would be the reduction in ‘whipsaws’. The most obvious disadvantage to this would be greater possible drawdowns or losses. Now given the fact that there is this tradeoff: which of the two carry the most weight!!! The other school of thought of course COULD be that without ‘smoothing’ I’m doing well (and I’m assuming the same for everyone else following the systems or getting my signals or both). Of course: would I (we) / COULD I (we) be doing even BETTER???
Anyway: I’m still working on this so again just please bear with me. Unfortuantely it’s become troublesome because there are just no functions built in to the trading platforms (not mine anyway) to accomplish ‘Wilder’s smoothing’ i.e. it’s not due to a lack of ‘brainpower’ or trying on my part that I’ve not yet ‘cracked it’ I assure you!!! (At the moment the ‘closest’ I’ve come is to use a suggestion from the Internet i.e. Wilder’s smoothing is apparantely ‘roughly’ the equivalent of using a much longer EMA i.e. (Period * 2) - 1 instead of trying to ‘recode’ EXACTLY the same way as Wilder has detailed in ‘the book’ (which as I said is a problem because of the limited functionality of the scripting languages). The operative word here though is ‘closest’ i.e. it’s by NO means exact and I’m not entirely sure just how big the differeces can or will be. Yes: I am now talking of differences mostly measured in decimals as opposed to whole numbers but I’d like to get to the bottom of this once and for all to compare the results.
Dale, I was wondering about the rules for the “modified” DM system. Using a long trade as an example, do you wait for di+ to cross over di- and then only enter if the acceleration/deceleration oscillator is green AND negative? If so, I can’t see where you would find a trade because from my work whenever di+ crosses above di- the AC is green, but already positive except for very few circumstances where it appears to cross from negative to positive, but it’s hard to tell when the di+/di- crossover was confirmed and whether or not the AO was still negative at that point.
To me, it appears that the system would work well by waiting for di+ to cross above di- and then entering long if AC is simply green, and short if di- crosses above di+ and AC is simply red and not worrying about if it is negative or positive, because like I said unless I am using the wrong indicator or something AC is never green and negative at the time of a di+ cross above di-. Then when the AC turns red you could use the same TP rule of setting a stop order a few ticks below the low of the day where AC turned red, and if AC turns green again to wait for another red and set the order again and so forth.
OR: am I an idiot and instead of using the acceleration/deceleration indicator I am supposed to use the awesome oscillator where I do see some times where there is a di+ cross above di- AND the indicator is green AND negative.
Good (Thursday) morning all!!!
Nick:
No you’re not an idiot I assure you!!! LOL!!!
I just gave you the ‘99.999% risk free scenario’ but as you have gathered those trades are few and far between!! Yes you could enter as long as the color of the AC is ‘correct’ for the direction in which you’re entering. And you are right: it’s the AC not the AO (although take a look i.e. you COULD use the AO instead but the only reason I assume the AC is better, well for exits anyway, is because it reacts much faster to a ‘change in interest’ as it were).
Put it yet another way: take a look at that link that I posted to Bill Williams’ ‘Trading Chaos’ trading system at Alpari and at the CORRECT use of both the AO and AC. If you can get both in the ‘correct’ alignment as well as a +DI/-DI cross then of course the trade should be ‘almost guaranteed’ but I suppose then you may as well just be trading the AO and AC signals!!!
Hi all,
Amazing amount of stuff out there on Wilder’s Smoothing method.
One that caught my eye was from a fan of ADX who says it can be ‘fooled’ by quick changes in direction and so is most reliable when coming from a low base of below 15 - consolidation. From a quick look one way to use this could be wait for both ADX and ADXR to fall below both the +DI and -DI and the 15 level. Then when a move starts ie DIs cross wait for the falling line, -DI for example, to fall below ADX and ADXR and then enter long. Possible exit point when +DI falls below ADX. Not perfect but does filter out a lot of the whipsaw entries.
By the way Dale, downloaded some Nightwish, a bit of operatic goes well as the soundtrack for the rollercoaster of pip hunting. The drama made me think of Queensryche and Operation Mindcrime - this is turning into a real trip down memory lane.
Derek
Dale - I just noticed on your last post you reached another significant milestone 1500 posts! Do you get some kind of medal or something for Services to Forex?
By the way do I have to make a certain number of posts before I can create a signature?
Hey Derek,
Well done (Nightwish)!!! And of course I OBVIOUSLY have Queensryche (Operation Mindcrime ‘cee dee’ and live ‘dee vee dee’ which is AWESOME although ‘the wheels seem to have fallen off’ since then i.e. the later stuff just does not quite ‘cut it’ for me). (I had to spell those words out by the way because this site searches for those abbreviations FOR SOME OBSCURE REASON OR ANOTHER and then blocks the post)!!! By the way: did I also mention Rammstein (Randon tells me they have a new ‘cee dee’ out which I’m waiting for)??? MAN are WE gonna have a ball when we all ‘meet and greet’ (I’m the ‘skinhead’ with the Nightwish hoody!!!
Back to the land of dreams:
ADX:
As I’ve said: trying to get the platforms to ‘smooth’ the ADX as per Wilder is proving nigh impossible at the moment!!! What I’ve currently done NOW is to REMOVE any and all ‘smoothing’ (Wilder or otherwise) that I may or may not have had working correctly from all the Wilder systems I’ve coded for the simple reason that it makes no sense to me to ‘smooth’ one thing and have no ‘smoothing’ on another. I’ve tried that ‘longer EMA’ suggestion that I found on the Internet and although I have got it working it does NOT emulate ‘Wilder’s smoothing’ over a period of time not in ANY way shape or form i.e. only the first few bars appear to be ‘similar’ but thereafter things go ‘pearshaped’. Somehow I’ll get it right i.e. it’s just a matter of time although I’m sure hoping that it’s gonna be worth it!!!
Nick:
Just some extra info for you to ‘mull over’: it may be of interest to note that in Bill Williams’ ‘Trading Chaos’ (Second Edition) Bill Williams actually says that ONLY USING the AO ON IT’S OWN ‘should be worth six figures per annum to you’ (well the quote is SOMETHING like that but I do recall the ‘six figures’ expresssion for sure)!!! I mean one other idea would be to enter when AO is giving a confirmation signal for the +DI/-DI crossing BUT TP when AC changes color. Remember that all the AC is indicating is a change in momentum (acceleration). If I remember correctly Bill Williams likens it to a car freewheeling down a hill and then up the other side. AC will change color as the car starts slowing down on the other side just before it starts freewheeling backwards again!!!
Edit:
By the way Derek: take a look at the attached chart. I think your ‘Wilder fan’ MAY have been talking about this ADX ‘action’!!! I’m not sure about the ADX or ADXR BUT +DI and -DI look ‘pretty fooled’ to me!!! Now of course I find myself asking: would ‘Wilder smoothing’ alleviate this problem???
Oh and no: no medals or anything like that just a ‘thank you’ from the administrators now and then ALTHOUGH I AM dying to see if anything happens when I get to 2000!!!
Also: as far as I know you should be able to create a signature ‘from the get go’. The only thing you cannot do is send PM’s until your post count has reached 50 or over.
Actually: I’ve been meaning to ask you if that’s ‘Father Ted’???
Hi dp, excuse for butting in -
it’s Father Ted’s mad sidekick - Father Dougal McGuire played by Ardal O’Hanlon -
Hello again,
Hey pseudo straddle, thanks: you’re right. (Is that also not the guy who plays an alien or something in one of the BBC series??? I forget what it’s called now. I think the wife is called Janet or something and they have a baby who is also an alien???).
Anyway:
Nick:
I thought I’d post my current (one and only) ‘DMSAC’ trade just so that you can see how I’M ‘playing this’. Essentially I placed a stop order to go long on the day of the crossing (after the close as always). The order was executed the next day. At that point my intial stop and reverse would have been a close below the price as per the extreme point rule (which would have been another stop order i.e. I would NOT have stopped and reversed at market). On the day of entry AC was green so ‘all things go’ at that point. The next day, however, the price dropped down and AC turned red for the first time. At that point I placed a stop below the low of that bar after the close. The next day the price turned and started to go in my favour again and has been doing so for three days now BUT you’ll notice that AC is STILL red so I’m moving the stop loss to below the low of each successive bar where AC is still red. At this point profit is already locked in. Now let’s say that tomorrow AC turns green again. I will leave my last stop loss intact and only move it once AC turns red again. Make sense? It’s not the only way to ‘play this’ i.e. use your imagination and creativity. It just so happens that this has (so far) been a good trade and no matter what happens from this point onward profit is locked in and therefore guaranteed!!!
I wold like to ask if ther is more den 1 addition to this book I have from 1978 is this the only one ? or is newer additions in the morcat
You’ve got the right book. Don’t underestimate it because of its age.
Hi all,
This is an example of the ADX ‘basing’ that I found while searching for Wilder smoothing. It seems the longer it bases for the more reliable the signal when it does come.
In the best tradition of the books and e-books out there I’ve cherry picked a great example.
Derek
Fr Dougal Maguire: Well, Ted, as I said last time, it won’t happen again.
PS for some reasons my image attachments are going haywire so I’ve had to PDF it
Hey Dale… I have another idea for you. Is it possible to add some sort of visual symbol, like an arrow or something to the adx/adxr that shows every time di+ and di- cross? Sometimes it’s hard to see if/when they do cross because they get all mixed up with the adx and adxr lines. It might make backtesting the DM/AO/AC system easier. Another idea would be to just make a separate indicator that only shows di+ and di-.
Also, I have my first order for the DMS/AC system, NZD/CHF short. Let’s see if it hits. Also just got into AUD/USD long with the VSTOP system. Currently in profit but it’s hard to tell how high the AUD can get against the USD, 1.0000 would be quite remarkable but lots of psychological resistance at that area I imagine.
Good (Friday) afternoon all!!!
Nick:
A good suggestion (about placing some sort of ‘visual symbol’ on the indicator when +DI and -DI cross). Problem is: there IS a way to do it in Delta BUT the ‘visual symbols’ are INCREDIBLY difficult to see (I’ve actually tried to set this up before with little success). Creating an ADX indicator which shows ONLY +DI and -DI is no problem at all though i.e. I’ll do this and email the update to everyone this weekend.
About your DMSAC trade on NZD/CHF:
I for one hope that your order does NOT get hit i.e. if I look at the ADX and at the +DI and -DI I don’t see a cross as yet i.e. just remember they ‘must have actually crossed’. In addition to that I’m watching that pair as well for a potential long trade on it not a short trade!!! From what I can see there is a POTENTIAL +DI cross ABOVE -DI (POSSIBLY after the close tonight) which would signal a long trade not a short trade.
As far as AUD/USD and VSTOPS is concerned: I don’t see a problem there i.e. the AUD is ‘earmarked’ for parity against the USD by the end of the year (who knows: you MAY be in the trade for THAT LONG with the VSTOPS)!!! Of course: you have to watch out for those ‘pesky’ corrections that will come along but the VSTOPS SHOULD keep you out of those depending of course on the magnitude of the correction.
Well I’ve been rereading the thread for a second time, and finding some good lively discussion (both past and present). Some of its still a bit cryptic, but that will change as I’ll begin digging into the Wilder book this weekend (finally got it).
Also, I have my Delta account in process, they are sending a courier for the forms early next week, and I’m hoping to be ready to go “live” mid-late July. Will keep folks updated when the trading starts with what systems I’m using and how things are progressing.
Keep the discussions going, as I’m sure this will be a gold mine of information for me and things will really start to “click” as I study Wilder’s book and systems.
Hello,
Moved to the next chapter in the book, about the TBP system. I added it to my program and have been doing some, eh, analysis. Cool! Lots of trades on daily charts, and seems to accumulate pretty nice profits on a number of pairs. This is something that I have been looking after: a big number of rather short-term trades that work fine on the daily chart.
If I have got it correctly, it has been suggested in this thread that TBPS should be used when ADX is in the lower area. I did comparison and found that for some pairs it worked better in the lower area, for some in the higher area, but for the best pairs I had originally placed high in my list both seemed to work. I developed the following rules to continue work with TBPS:
- I rank all the 44 Delta pairs with my simplified CSI, while I am interested to trade only about 14 of them.
- A pair of interest must either have ADX > 40 and be ranked among the top 14/44 pairs OR it can have ADX < 20 and the rank can be considerably lower.
- Additionally, -DI and +DI must be in correct order with respect to the trade direction.
Another interesting thing was to notice that for some pairs unsmoothed ADX yielded considerably better results, while for other Wilder-smoothing worked greatly (e.g. USD/NOK smoothed did 3* more pips per trade than unsmoothed, while GBP/ZAR unsmoothed did 3* more pips per trade than smoothed).
J.
I came up with a trading plan. Let me know what you think.
KISS Trading Plan
Rules:
- Absolutely no intraday trades.
- Do not EVER exceed $20 margin per 1000 dollars
per trade.
- Keep a 10% cushion that is not to be used
for trading margin. For example: $20 margin per
1000 dollars +100 dollars.
- ONLY enter trades on the line closest to the
outer linear regression channel line!
- Take profit at support1 or resistance1.
- Take loss at support or resistance level above
or below the previous ADX cross or this weeks
high or low.
- Be patient!!! Let the trade come to you.
