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

Trading Systems Free Forex Trading Systems
627

Now when we do not have explicit trading limits on pairs, we should use some virtual limits instead, assuming that fluctuations in price would not exceed these limits with very high probability. And if this would happen, you would just get an occasional value that is > 100, but the situation should restore to normal quite soon.

If I’m correct, this limit value is indeed not a pip value nor a value in a certain fixed currency (like USD), but a price difference in the quote currency of a pair.

What would you think about the following to calculate that limit: calculate the maximum for each plus/minus factor for a period that is representative enough to determine a virtual absolute maximum, e.g. half a year. Then take the maximum of those maximums and use that value as such as L.

You would need to check the validity of that L every now and then, as it might have risen or dropped.

J.

628

EUREKA!!!

‘I’ve found it’!!! I HOPE!!!

I’ve attached a .zip file that contains two charts (both of EUR/USD daily). One chart shows the SI WITH the ‘limit’ as per ‘the book’ and MY SI with the ‘limit’ simply removed (accomplished by just leaving out the last portion of the equation i.e. the ‘K/L’ portion). The second chart shows the resulting ASI of both of the SI calculations mentioned above.

Now (and this is where I’d REALLY like some more opinions on the matter): I would imagine that JUST AS LONG AS ANY CHANGES do not affect the ‘shape’ of the ‘plot’ of both the SI and ASI then they are still ‘valid’??? Would you agree with that???

Now in my attached examples what is interesting to note is this:

The ‘shape’ of the ‘plot’ of both the SI and the ASI are for the most part identical. The ONLY TIME when I can see a difference in the ‘shape’ of the ‘plot’ is when there has been an extreme move in price during the course of a day (and maybe over consecutive days). What this is telling me is that by simply removing the ‘limit’ from the equation my SI and ASI are no longer ‘smoothed’ (for want of a better word) on those days which, in MY mind, should be quite correct i.e. MY SI and ASI will now reflect the ENTIRE move in a day as opposed to only the allowable ‘limit’ move. DO YOU AGREE WITH ME???

Also (as I noted above): the ‘shape’ and the ‘plot’ of both the SI and the ASI are for the most part identical BUT they are EXACT at all HSP’s and LSP’s so the ‘swing’ of the SIS is ‘preserved’ and is intact!!! DO YOU AGREE WITH ME???

Even MORE interesting to note is the fact that by simply removing the ‘limit’ the SI appears to be ‘correct’ and ‘standard arcoss the board’ WITHOUT having to use QPF’s or QPM’s or PIPFACTORS or currency conversions or anything else!!! DO YOU AGREE WITH ME???

And BEST OF ALL: no matter WHAT instrument or pair you use MY SI and ASI on NOW the 60 point Trailing Index SAR ‘appears’ to ‘appear’ at a ‘faesable’ point i.e. it’s no longer MILES AND MILES away on one instrument or pair and as close as makes no difference on another instrument or pair!!! DO YOU AGREE WITH ME???

(OK: well I’m going to modify the code and email all my ‘clients’ with THIS update AGAIN. Please take a look and see what I’m getting at).

comparesiandasi.zip (116 KB)

629

NO NO!!!

kaalilaatikko:

Good idea BUT see my previous post!!!

630

Hokay!!!

Well: it’s ‘official’ (again)!!!

I’ve just added the ‘new’ SIS i.e. with the ‘limit’ moves removed to a wide variety of instruments or pairs. If does not matter whether I’m looking at the Dow, GBP/JPY, Gold, or EUR/USD: the SIS Trailing Index SAR appears to be ‘in touch and in tune’ the with the ASI WITHOUT any ‘manipulation’ of the price formats etc. etc. etc. Also: the HSP’s and LSP’s are in exactly the same places as they were WITH the ‘limit’ being included so I’m confident that these are correct as well and that the ‘operation’ and / or ‘design’ of the SIS has not been compromised in any way whatsoever.

I think that THIS time: it’s DONE!!!

Sorry for all the ‘blips on the radar’ BUT I reckon the SIS should ‘fly’ now!!!

(We’ll get there boys and girls. SOON ENOUGH)!!!

631

An excellent and elegant “engineer’s” solution! I.e. it follows the original formula closely enough and is much more easier to calculate than what I tried to suggest. Just being curious, I looked at EURUSD with the original formula but used L = 0.02, taking the value by a quick look at the highest daily changes in the recent months. The form of this trend is of course exactly the same as with K = 3, but the scaling was quite close to that not using K/L at all. Some peaks are admittedly a bit “smoothed”, but I have no doubt this last solution would not work, and look forward to getting the deep understanding of SI in full.

J.

632

Good (Tuesday) morning all!!!

kaalilaatikko:

I’m assuming you meant to say that you have no doubt that this last solution WILL work???

Yes: I checked the ‘plot’ of the ASI to ensure that the ‘integrity’ of the system was still intact and the HSP’s and LSP’s and closes above or below them are in the identical placed as they would WITH the ‘limit’ included. The only thing that ‘appears’ to be different is that the Trailing Index SAR now has ‘meaning’ to it and works ‘across the board’ with no manipulation of price formats etc. being necessary.

I’ve started using it today (last night) so let’s see where we go with this.

Oh and by the way: thank you to those that gave input on this subject i.e. without those little ‘tidbits of thought and ideas’ I may not have been able to sort this out!!! Thank you.

633

Yes, sure, the double negation just was too tough for me :slight_smile:

634

This is the 4th time I’ve scanned through this thread. 1st for VS, 2nd for ADX/ADXR, 3rd for TBPS and now for RTS and SIS. And this has been perhaps the most rewarding round. Now the posts I’ve earlier skipped make better sense. It’s also a bit embarrassing to notice that I’ve brought up some issues that have already been discussed in the thread. I collected some remarks that have either been left unanswered or then I just wanted to have an opinion on the matter.

Dale 02-25-2008, 03:37 PM Post #50

[I]If you’re using the CSI to evaluate the different instruments and let’s say that you find 10 instruments that are high on the CSI scale and you are being given entry signals. What then happens if a couple of days later those same 10 instruments are NO LONGER high on the CSI scale. Is THAT a signal to ‘get out’ OR do you just continue to stop and reverse as per the ‘Trailing Index SAR’ which (I think) is dangerous for the simple reason that should the CSI rating drop the instruments is then in effect becoming ‘rangebound’ so to just keep stopping and reversing if the instrument is now trading in a range is just looking to ‘feed your broker’ as they say in the ‘classics’. Agree with me on this one? Ideas? Thoughts? Solutions? Try as I might I don’t seem to come up with answers to the above that satisfy my logic so I’m ‘throwing this open’ to debate (which, after all, is the reason for this thread in the first place).[/I]

There have been some later posts about this as well. RTS is the first system right now for which I haven’t done bactesting for most of the pairs, just looking at a short time period for some of the pairs that are the best ranging ones on the ADXR scale. I believe that this is the set where the system works best, and new pairs move into the set and old pairs move out of it, and you must be prepared to change pairs when needed. So at least I am in favour of doing this. For TBPS and DMS I selected the sets based on my backtesting. I then enter a trade only if a pair in my set has an adequate ADXR and is ranked high among the other pairs. For VS I don’t use ADXR as has been adviced.

Dale 04-04-2008, 12:02 PM Post #172

[I]On page 97: ‘Fig. 806’ and ‘Fig. 807’:[/I]

[I]He shows the labels ‘Significant High Swing Point’ and ‘Significant Low Swing Point’ on those diagrams. What I don’t ‘get’ is WHY are THOSE points ‘Significant’ and the other ‘little swings’ on those diagrams NOT [/I]
[I]‘Significant’???[/I]

Dale 04-07-2008, 11:59 AM #188

[I]Referring to my post #172 (wherein I noted that I could not figure out WHY some points were ‘Significant High Swing Points’ or ‘Significant Low Swing Points’ while others were not designated as ‘Significant’):[/I]

[I]Well I THINK I’ve ‘fathomed it out’. Right at the beginning of the book ‘the man’ says that a ‘SIGNIFICANT HIGH POINT’ is ‘the highest price reached while in a Long trade’ while a ‘SIGNIFICANT LOW POINT’ is ‘the lowest price reached while in a Short trade’ SO I’ve taken this to mean (as it relates to the SI System) that a ‘SIGNIFICANT HSP’ is the highest ASI value reached while in a Long trade and a ‘SIGNIFICANT LSP’ is the lowest ASI value reached while in a Short trade. Make sense???[/I]

chirules54 03-23-2008, 01:19 PM Post #121

[I]1. When you enter initially (after above/below a significant swing point) the INITIAL SAR is the MOST RECENT [/I]
[I]swing point in the other direction, so if you are going short then the SAR is the most recent high swing point, [/I]
[I]correct?[/I]

[I]2. After this, the SAR doesn’t change until a new low swing point is made, which then makes the most recent high [/I]
[I]swing point the new SAR. This repeats itself every time a new low swing point is made, correct?[/I]

Dale: [I]As far as the SI System goes you’ve ‘got it down 1000%’.[/I]

Am I getting this now completely correct? I’m not sure if the “new low swing point” is just an ordinary “low swing point” or should it actually be the “new significant low swing point?” Wilder uses the former term on p.
98, first paragraph, as well, and tells us: “Then keep the index sar at this point [the 1st lsp after a new hsp] until the ASI makes a new high.” The following example and fig. 8.8 show how the index sar is set to point F as
told, but then it stays there even if there are LSPs G and H and HSPs in between. Only K changes the index sar, and that’s because J is a significant HSP.

So, is the following wording of chirules54’s question #2 correct: “After this, the SAR doesn’t change until a new [B]significant[/B] low swing point is made, which then makes the [B]first[/B] high swing point [B]after it[/B] as the new SAR. This repeats itself every time a new [B]significant[/B] low swing point is made, correct?”

Dale 04-04-2008, 10:55 AM Post #170

[I]I think that the Reaction Trend System is probably the most UNDERSTATED system in the book. The only thing that concerns me about the system is that ‘B’, ‘O’, and ‘S’ ‘day labelling’ i.e. you’ll see in the book that it’s based on the premise that we get three days up and two days down and I’m not ENTIRELY sure that this still applies. I promised myself that I would write some sort of indicator or calculator or something that will go through the data for a particular instrument and work out the ‘average ratio’ of up days to down days but I have not got around to it yet.[/I]

Wilder developed his systems originally for commodities where there always is just one sort to trade at a time. But in forex you have two in a pair, which made me to think this. The order of the currencies in a pair is fixed, but that order is just based on some agreement. Now if the order would have been opposite, the charts would have been vertically flipped as well. Let’s assume that the 3 up/2 down rule works for a pair. Let’s then assume that the International Forex Pair Naming Association decides to change the order of the currencies in that pair. This would mean that now the rule would read 3 down/2 up. Well, the example is ridiculous, but I’m trying to prove that maybe there is no reasoning why the 3/2 rule would work in forex as it might work for commodities. And therefore I’m questioning the basis for the BOSBOSBOS sequence. Why couldn’t we use SOBSOBSOB as well? Or would BOSOBOSOBOSO be the best one? I have no further proof to take this further, but what do you, folks, think about
this?

And then…

Dale 05-19-2008, 08:25 AM Post # 410

[I]I MAY have found a more ‘scientific’ method for the RTS ‘BOS’ sequencing:[/I]
[I]Using Linear Channel Regression:[/I]
[I]Method 1: … [etc.][/I]

Is this some sort of telepathy in the past tense or what? Complemented my pondering in such a brilliant way that I had to print it out right ahead for further examination.

balaji3003 05-03-2008, 03:31 PM #311

[I]Just one question. Since “THE BOOK” has trading system that are completely technical, it is possible to completely automate the trading. …right? Have you developed programs to fully automate trading strategies in the book?[/I]

Dale: [I]As far as ‘automation’ is concerned: you are quite correct AND what’s more I believe they would be EVEN MORE profitable if ‘automated’ …[/I]

Personally I don’t believe in a fully automated system where the computer would even open and close the positions. But I’m trying to develop myself a tool which I can configure to give me relevant signals on the pairs
I’m interested, and then it is my job to do the final evaluation on the signals and open and close the positions. I’ve read with interest about the posts where people have commented how much time they use on the systems daily. I hope to reach a point where the number of systems or pairs is not a limit and I could do my part in a quite short time. I’ve just made another idea that I haven’t implemented yet: I am now able to reconstruct the daily candles so that the day closes on the hour I want. Now I could divide the pairs and systems in e.g. two and do the first half of the job at 6 AM and the second half at 7 AM, working all the time consistently on legitime daily candles. I believe that I should be able to handle quite a large amount of signals with a relatively little amount of effort, once I learn the internals of all of the systems well enough.

Dale 05-11-2008, 10:42 AM #374

[I]I propose to add two new levels to the RT System i.e. S2 and B2.[/I]

Dale 05-17-2008, 11:34 AM #400

[I]The new levels I am calling HSTOP and LSTOP and here are their respective formulae:[/I]

[I]HSTOP = ( 3 * ( ( H + L + C ) / 3 ) ) - ( 3 * L ) + H[/I]
[I]LSTOP = ( 3 * ( ( H + L + C ) / 3 ) ) - ( 3 * H ) + L[/I]

Sounds like yet another excellent idea! RTS seems to have started working for me, and I need to try this idea as well. Doing a little mathematics you can simplify the latter ones to:

HSTOP = ( H + L + C ) - ( 3 * L ) + H
LSTOP = ( H + L + C ) - ( 3 * H ) + L

Edit: maybe it’s more elegant to beautify this a bit more:
HSTOP = ( 2 * H ) - ( 2 * L ) + C
LSTOP = ( 2 * L ) - ( 2 * H ) + C

A bit long post, but luckily I’m on vacation right now, more time to study these systems… there sure are no shortcuts for mastering this all.

J.

635

Good (Wednesday) morning!!!

kaalilaatikko:

WOW!!!

It’s bee a LONG time since I’ve had to actually print out a post before answering it!!! Good on you!!!

I’m going to answer you this way:

Where I’m in agreement with you I’m not going to comment. I’m just going to comment on things where yours and my understanding or opinion differ otherwise I’ll just be repeating what’s already on the thread and what you’ve already posted.

CSI:

Remember that using the CSI to choose which pairs to trade (I’m going to post my responses ONLY as they pertain to forex pairs here) is ‘first prize’ BUT extremely difficult to set up and maintain on a daily basis i.e. you’ve constantly got to compensate for exchange rate differentials etc. etc. etc. and because you’re working with up to four decimal places this makes it even more difficult. As I said: using the CSI is ‘first prize’ BUT as Wilder ALSO says: using ADXR is pretty much the same as using the CSI. The only difference is that the CSI is giving you and indication of the pairs with ‘the best bang for buck’ AND with good strong directional movement whereas ADXR on its own is giving you and indication of good strong directional movement ONLY. I don’t use the CSI for forex trading but only ADXR. Look: sometimes you also have to take into account the ‘reward/effort’ ratio. In other words: if I’m netting a MINIMUM of 11% per month (which is my WORST performance to date as you know) WITHOUT spending hour upon hour maintaining the CSI ‘proper’ then I’m happy. This does not mean I’m lazy to do it BUT there just are time constraints and that’s all there is to it. EVEN I have to sleep SOMETIME!!

Also (no matter whether you’re using the CSI or ADXR only): remember that the CSI / ADXR indicates either which pairs will give you ‘the best bang for buck with good strong directional movement’ or just ‘good strong directional movement’ and it is these ‘top rated’ pairs that should be being traded at any one time. The ADX determines WHICH SYSTEM you should be trading FOR THOSE PAIRS!!! Don’t get the two confused.

I would exit a PROFITABLE trade entered using a trend following system if ADX dropped below 20 -25 (or at WORST case if ADX dropped below +DI/-DI as per ‘the book’).

As you and I BOTH say: I’m not too concerned WHERE ADX is when entering a VS trade. It IS, however, interesting to note that when ADX is below 20 - 25 your VS trade tends to ‘go nowhere’ for a while (which although frustrating at least tells me that we’re ‘on track’ with the ADX i.e. it’s behaving EXACTLY as it should)!!!. I suppose that taking the ADX value into account when using the VS would make the difference between tying up margin for no good reason for long periods of time. It’s a ‘tradoff’ though i.e. VS entry signals are very few and far between so you MAY get a VS entry signal when ADX is below 20 - 25 BUT by waiting for ADX to climb ABOVE 25 you could have missed the VS entry signal!!!

‘Significant’ points:

I’m no longer worried about whether a HSP or a LSP is ‘significant’ or not. If you look at the ‘SIS red pages’ you’ll note the description of a HSP and a LSP and NOWHERE on the ‘SIS red pages’ is reference made to a ‘significant’ point. While my explanation or understanding of what the difference is between a HSP or a LSP or a ‘significant’ HSP or a ‘significant’ LSP MAY be correct JUST trading the HSP or LSP is working for me (and well now).

Index SAR and Trailing Index SAR:

This does indeed seem to be causing some confusion.

The INDEX SAR stays where it is UNTIL a new HSP or LSP has been formed. The TRAILING INDEX SAR ‘tracks’ the price on a daily basis.

For the purposes of explanation I’ve attached a chart of Fannie May because it’s a ‘textbook example’ of WHY we need a Trailing Index SAR in the first place AND that it has to be CORRECTLY calculated.

If you take a nice look at the chart you’ll see that WITHOUT the Trailing Index SAR (the pink line) which moves DOWN every day i.e. ‘tracks’ the price you’d only stop and reverse IF a new HSP was formed and that may not happen!!! On this chart: the INDEX SAR is indicated by the GREEN LINE at the moment.

RTS:

I no longer even attempt to use the ‘BOS’ sequencing. While other MAY disagree with me I’m convinced that’s it’s there and does exist. However: using the RTS with my additional levels and LRC’s works fantastically well for me so again: if it’s working THIS well WITHOUT the ‘BOS’ sequencing then why bother is the question. Remember also: ‘pure’ RTS will have to close at a loss sometimes whereas to date MY RTS/LRC ‘system’ has not had be realise a loss now for going on nine weeks.

Yes: there are other ‘methods’ that I’ve ‘come up with’ to try to make the ‘BOS’ sequencing ‘easier’ to find or more ‘true’ BUT I’m not convinced of the merits. For me: if price hits an RTS level OUTSIDE of the LRC I’ll go long or short and then TP at either B1 or S1. Simple as that. Of course: you need to CONSTANTLY watch ADX!!! This is ‘key’ to this ‘system’.

As far as the additional RTS levels: it, combined with the LRC’s, is a ‘winner’ no question.

Automation:

I no longer believe that automating these systems will work AS well as maintaining them on a daily basis will. Nor do I any longer believe that they are to be traded ‘blindly’ and ‘mechanically’. Over the past couple of months I’ve learned that a certain amount of ‘common sense’ is needed regardless of what system you’re using. As an example: you’d not find me going short ANY of the USD/??? pairs right now for the simple reason that you can very easily and clearly see that there is strong resistance ‘visible’ on all of them. The only time I’d go short a USD/??? pair at present if IF the price closed BELOW those lines of resistance. Now this does NOT make me a ‘technical guru’ nor do I look at fundamentals BUT to me this is just ‘common sense’.

As far as your ‘manipulation’ of the candles are concerned:

For a long time I had questions about ‘which timezone presented the most important candles’ and I was sure that the ‘New York timezone close’ was the most important to be looking at i.e. 00h00 New York time. Since those days though I’m of the opinion that the ‘close’ at the same time that the NYSE closes is the ‘imporant’ one and guess what: Delta falls ‘smack bang’ into this category!!! All I’m saying is this: I do understand your reasons for wanting to do this BUT I’m NOT convinced of the ‘merit’.

One last thing:

O’ve been going through the TBPS again just looking at past trades. It’s funny: normally a person tends to see ‘only the good trades’ but with the TBPS I find myself finding more BAD trades WITHOUT even looking for them. Personally: I don’t think I can justify the ‘risk/reward/effort’ ration on that system. Also: I believe that it WILL work better on stocks and commodities because THEY DO move differently no question. For me: the VS/DMS/SIS/RTS are doing JUST FINE.

One last thing;

While I’m ALL FOR backtesting and analysing, just a word of advice: don’t get TOO carried away with it i.e. just because (within reason) backtesting does not give you the desired results just remember that it’s normally not indicative of future performance. What I’m saying is to NOT get ‘fearful’ of ‘pulling the trigger’ because your analsysis ‘scares you’ is all.

I hope that’s covered everything!!!

fnmsisasi.zip (71.7 KB)

636

Reading Dale’s post regarding the BOS sequencing led me to a thought as to why BOS might not apply to FX pairs. As BOS sequencing in commodities is specific to a SINGLE commodity. So for example if I take a long position on EUR/USD, I am buying EUR and selling USD. So I’m expecting the value of a EUR relative to the value of a USD to increase.

This can happen with an increase in the value of a EUR OR the decrease in the value of the USD. So as we are buying and selling on the same day (each individual currency) one could argue that for forex we’d have “dual BOS sequences” unless there was some way to identify if the position was expecting the EUR to increase (ie long the EUR) or the USD to decrease (short the USD). Since they are paired and the price is one relative to the other, I don’t think there’s any system that will differentiate which one is moving in your favor out of the pair.

What I mean is this:
Buying EUR gives this sequence:
B O S B O S B O S B O S

Selling USD gives this sequence:
S B O S B O S B O S B O

So looking at the above we are going to have days that are either B/S, O/B, or S/O depending on which currency in the pair you are actually looking at.

I’m going to have to look at this dual BOS sequence a little further this evening when I get home from work and see if this helps with the BOS sequencing applied to the RTS.

As of now I’m in agreement that while its there (but I’m not seeing it crystal clear) it doesn’t really seem to have a great deal of impact on the profitability/tradeability of the RTS system.

Craig

637

This market is so damn annoying. Still long on my USD positions and the market is doing nothing. Been waiting 3 weeks on these things. When I should be cashing in each week.:mad::mad::mad:

638

Good (absolutely freezing at 04h15) morning here!!!

The Red Bull I left on my desk last night is colder than the one I just took out of THE FRIDGE!!! MAN I hate this!!! Next year I’m moving to ANYWHERE that lies on the equator!!!

Anyway:

Listen up:

I’m NOW trying out of ‘new’ SIS on the Dow. Needless to say I got a signal to go long yesterday and the order was executed.

NOW: the trade has gone against me somewhat (thanks to those darn ‘rating agencies’) but this has as least got me to analyze the SIS AGAIN and what’s become apparent to me is another (possible) contradiction in ‘the book’ that relates to the question: ‘WHEN do you SAR’??? Do you SAR by placing your SAR order AFTER THE CLOSE or do you place your SAR order IMMEDIATELY ON THE DAY you get the signal???

NOW (and this is where it becomes interesting):

When reading the text you’ll find that you MAY be led to believe that you only place or SAR order AFTER THE CLOSE (well at least that’s been MY understanding of the text). HOWEVER: if you work through the associated work sheet you will see that for the INDEX SAR’s (don’t get confused between the INDEX SAR’s and the Trailing Index SAR’s) are calculated AND PLACED on the DAY that the SAR signal is given!!! (As I said: DO NOT get confused between the INDEX SAR’s and the Trailing Index SAR’s i.e. Wilder is VERY CLEAR that the Trailing Index SAR orders ONLY GET PLACED the next day i.e. AFTER THE CLOSE). In other words: the way I understand THE WORK SHEET now is that if a HSP or LSP is formed then at THAT POINT you ALREADY know what the INDEX SAR value is GOING TO BE and your order is placed THERE AND THEN i.e. you DO NOT wait for the close of the bar that has resulted in the ASI closing above or below the previous HSP or LSP and only THEN place your SAR order ‘a couple of ticks above the high or below the low’ of THIS bar but RATHER you place your SAR order ‘a couple of ticks above the high or below the low’ of the bar where the HSP or LSP WAS FORMED previously!!!

IF I’M RIGHT about this NOW: then that would explain one ‘teeny weeny little doubt’ I’ve had in mind about one aspect of the SIS i.e. I’ve see a price go up and up for days on end BUT THEN all of a sudden ‘drop like a stone’ to PAST your original entry level and this has always concerned me i.e. in a case like this if you waited for the close of the bar that’s just ‘fallen through the floor’ before placing your SAR order then all your profits made for DAYS gone by will have been ‘eaten alive’ AND if the price CONTINUED to go down and the SAR order WAS ONLY THEN executed you’d not only have lost all your profits but realised a ‘nice fat loss’ ‘to boot’!!! This IS of course IF I’M RIGHT!!!

Someone: PLEASE go through this again!!! I’ve read this thing SOOO many times that I’m sure my mind ‘shuts off’ now i.e. it thinks ‘OH NO - NOT AGAIN’!!!

P.S.

Craig and I have just discussed this. It would seem that I’m ‘not quite as bright as I would have myself believe’!!! He ‘got this’ RIGHT FROM THE BEGINNING!!!

639

Good (much later but not much warmer) Thursday afternoon all.

Well:

In light of the above post:

It answers another question that was asked of me some time ago i.e. if you’ve place a SIS order to SAR do you then cancel the order the next day if not executed or what???

Well: the answer NOW is a definite NO!!!

In other words:

Once you’ve placed an order at either the last HSP or LSP then you LEAVE that order there (obviously then has to be a GTC order) UNTIL you get another HSP or LSP and ONLY THEN would you change the order price.

640

Good (Thursday) evening all.

This is just a ‘cautionary’ note about all the posts above relating to the SIS and the recent changes and discussions.

As some of you may or may not know I’m wanting to sort of ‘diversify’ (bacK) into stocks again so for starters I’m long the Dow since yesterday as per the SIS.

HOWEVER: today I watched the HSP’s and LSP’s and Index SAR’s and Trailing Index SAR’s VERY carefully AND AGAIN I find ‘contradictions’ in ‘the book’ with regard to the SIS. Put it another way: they’re either ‘contradictions’ OR a bit of your own ‘creativity’ is required here.

For example: I placed an order to go long the Dow yesterday because the ASI had closed above it’s previous HSP. This done exactly per ‘the book’. The order was executed and the Dow then turned down. A previous LSP had been formed the day before and ‘the book’ (as I understand it) would have had you place your Index SAR order the next day after the LSP had formed. I’ve never traded the SIS like this i.e. I’ve always waited for the close before placing any orders. The point is this: HAD I placed my Index SAR order as per ‘the book’ I would have been stopped and reversed today, realised a loss, and the trade would NOW be in the wrong direction. But I did not place the order as per ‘the book’ (or my understanding thereof) as this is how I have been trading the SIS up until now. So: there WAS no order to get executed, the Dow turned in late trading, and I’m now still in the right direction.

What I’m saying is this: the SIS is BY FAR the most difficult system in ‘the book’ to master I reckon. I for one am going to read it through and study it again (for the ‘gazillionth’ time) and I strongly suggest you do the same before trading it.

The ‘contradiction’ that is concerning me is this:

For ENTRY: you wait for the ASI close above or below a previous HSP or LSP respectively. BUT per ‘the book’ (or more accurately per the SIS Work Sheet and example): your Index SAR order is placed AND LEFT THERE the day after the HSP or LSP has formed. The ‘apparent contradiction’ is this: WHY for ENTRY do you wait for a close but for the Index SAR you IMMEDIATELY place the order after the HSP or LSP has formed??? Note: this is NOT the Trailing Index SAR which Wilder is VERY clear about i.e. he is VERY clear as to WHEN to place the order for the Trailing Index SAR (and strangely enough this is ALSO done after the close). So again: WHY is the Index SAR the only order placed upon the formation of the HSP or LSP and then left alone. To me: it makes no sense unless (once again) after all these months I’m not ‘getting this’ AGAIN!!! All I know is this: had I been trading the SIS as per my understanding of it’s ‘pure form’ then I’d have been stopped and reversed today, realised a loss, and now be in a trade which I’m pretty sure would now be in the wrong direction (which I am not).

Go through it AGAIN and let’s compare notes. I’d HATE to have to ‘exclude’ the SIS from my trading because so far it’s worked for me (although it IS true that I’ve never followed a SIS trade all the way through i.e. mostly all of the time I’ve used the SIS for entry but taken profit early i.e. mostly always before I’ve had to stop and reverse).

Personally: I DO believe that the SIS has merit BUT these ‘little things’ seriously need to be ‘ironed out’.

641

Hello!

I’ve been staring at RTS, DMS and VS signals from a fresh viewpoint for a few days now when my live account is finally open. Here’s one DMS signal I noticed today.

USD/CAD had a +DI/-DI cross on Jun. 25th signalling short. ADXR is good. Wilder tells us on p. 47 to use the extreme price as the reverse point. So, following this rule, it was only yesterday (Jul. 10th) when the candle closed below that extreme point. +DI and -DI are still in correct order, but ADX is sinking. However, now AC is showing red, while at the time of the +DI/-DI crossing it was green.

Am I correct here that we should wait until the day’s close crosses contrary the extreme point? Or is any daily value enough?

And would you have taken this trade or not? Why and how? For me it seems that there are too many arguments to ignore this one:

  • Long time and pretty much action in the wrong direction after the original signal
  • AC green at the time of the original signal
  • ADX has been sinking a lot

Luckily I didn’t take this one, at least when viewing today’s candle (but played wrongly with the extreme point in another trade, which turned crap, but that’s another story).

J.

USDCAD_DMS_100708.JPG508×594 64.4 KB

642

Just an update - my Delta account is live and I’ve got my first trade going. Right now the emotions are running high as excitement starts setting in. Will be spending a few hours this weekend setting up my Delta indicators (thanks Dale!) to get prepared. As of this time I’m going to trade VS, DMS and RTS live and demo trade the SIS system based on recent events.

One item I think might apply to the DOW issue (totally my personal opinion, no “technical indicators” here) you’re seeing is that with the current state of affairs, I think the VS is the only system I’d trade on it at this time. Reason being, the US stock market, economy, and financial systems are in tough times. It appears that almost daily there is some major news that impacts the DOW, even though its not directly related to the DOW. For example, oil prices, or missile testing, or financial markets, or commodities/food pricing rising, etc all have people on pins and needles. As such, while I’m sure the ADX is probably high for the DOW, it appears to be more of a whipsaw market (violently moving up and down based upon emotion of investors based on the latest news release). Once the US stabilizes the economy some, I think the DOW will return to more of a trending market.

Of course, I can see the attraction of trying to be the investor who weathered the “perfect storm” in the DOW. That’s just my 2 cents, worth the price paid :slight_smile:

643

Good (Saturday) morning all!!!

Aaaaaaargh!!! Please remind me to NEVER drink again!!!

Craig:

Of course, I can see the attraction of trying to be the investor who weathered the “perfect storm” in the DOW. That’s just my 2 cents, worth the price paid :slight_smile:

Well that is ONE way of seeing things!!! Of course there IS another way:

There is always somebody who thinks they can ice skate up hill" Wesley Snipes in Blade" (daydreamer65’s signature)!!!

LOL!!!

(Of course: It IS only a line from a movie script)!!!

Anyway:

STRANGELY ENOUGH: the above ‘BS’ actually DOES have SOME bearing on kaalilaatikko’s post:

After spending the entire week (as you all well know) going over the SIS etc. etc. etc. I’ve reached ONE FIRM conclusion:

It does not matter WHICH system you’re trading from ‘the book’: you NEVER place an order or base ANY trading decision until after the close of the daily bar!!! (Sorry to disagree with ‘the old man’ on this and I’d REALLY like to have a ‘one on one’ with him over this maybe next year at our ‘meet and greet’)!!!

Right now: I would have stopped and reversed on two SIS trades, realised a loss, at this point not be showing enough of a profit on the stop and reverse to be covering such loss, and I firmly believe that I’d now also be trading in the wrong direction had I NOT waited for the close as per the Index SAR order placement instructions as detailed in ‘the book’.

Again: this (as far as I’m concerned) applies to ALL the trading systems in ‘the book’ (of course the exception being the TBPS because with that trading system you simply don’t have a choice).

I mean: think about this logically!!! ALL the trend following systems in ‘the book’ are ‘breakout’ systems. Now what constitutes a ‘breakout’??? Is it simply a penetration of support or resistance or a CLOSE above or below support or resistance??? It’s a CLOSE above or below support or resistance!!!

For FINE examples take a look at the Dow (those who are able to), AUD/USD and AUD/NZD!!! I’m long the Dow, short AUD/USD and (as the WORLD knows) short AUD/NZD. The Dow has not broken through support as yet while AUD/USD and AUD/NZD, although they’ve tried REAL HARD to break through resistance above, have not been able to CLOSE above such resistance. In ALL THREE cases had I placed orders to stop and reverse BEFORE waiting for the close I’d now have realized major losses and I firmly believe that I would now be trading in the wrong direction on all three of these instruments.

Of course: if I NOW place orders below the lows or above the highs and the prices continue to go against me the realized losses will be greater than they would have been. HOWEVER (and this is a MAJOR ‘HOWEVER’): MORE OFTEN THAN NOT this does NOT happen this way. In other words: by NOT waiting for the close you will stop and reverse potentially at a loss MANY MANY more times than the amount of times that the price will continue to go against you. To put it another way: I’d rather have to stop and reverse for a $500 loss NOW AND THEN than stop and reverse EVERY OTHER DAY for a loss of $100!!! Eventually the $100 losses will BY FAR exceed the $500 loss over a period.

Use it!!! Don’t use it!!! All I know is that I for one will be trading the SIS with our ‘fixed’ Trailing Index SAR BUT NOT placing orders IMMEDIATELY after a HSP or LSP has been formed and is showing. Same with the DMS and the extreme point and same with the VS/VSTOPS. (EVEN good 'ol Parabolic SAR comes to mind here i.e. you don’t stop and reverse with Parabolic SAR upon PENETRATION of the last ‘dot’!!! No you don’t!!! You WAIT for a new ‘dot’ to appear the next day before reversing. YES: you MAY stop upon the penetration of a new ‘dot’ to lock in profits but you would not stop and reverse until a new ‘dot’ appeared signalling or rather confirming a change in the direction of the trend). Maybe THERE is a ‘tweak’ in itself!!! IF YOU’RE IN PROFIT and by placing an Index SAR order the moment a HSP or LSP has been formed you’re effectively locking in profits: maybe THEN it’s worthwhile to place the Index SAR order as per ‘the book’.

644

As I’ve read the book and have seen Dale’s recent post, I think the SIS requires some additional studies and demo trading. I wonder if the rules need to change, as back in the day it was applied to commodities (which had day limits) and I really doubt the markets were as volatile then as they are now (ie when direction changed it was more trend based than whipsaws like we see today).

One thing I was even thinking about is whether it should be an AND instead of an OR when looking at index SAR and TISAR. From what I’ve seen the index SAR (ie recent high/low price of pair) seems to be the faster of the two indicators (most of the SARs getting triggered are index related) and hit much more frequently.

Based on that I’m going to try to look at some charts to ‘test’ (maybe demo this as well) out two different variations of the SIS -

  1. Before putting in SAR order have it so the index SAR and TISAR BOTH signal a reverse.

  2. Ignore the index SAR and see what results would be if you specifically followed only the TISAR for SAR points.

Of course the flip side is that in both cases you are eliminating (or at least marginalizing) your quicker responding indicator, which could cause you to get out of trades (reverse) too late, and into the other trade too late as its already run against you some.

Edit: Quick look at the charts doesn’t look good for either of the versions above. One thing I did notice that appears like it could be the answer, is to move from daily to weekly charts, which will help eliminate some of the whipsaws as the longer timeframe “smooths” some of the changes.

One other noteworthy item is the textbook examples (where system works extremely well) show a largely trending market which are much different than reality.

I think the week interval might have some merit to it, but need to demo trade it for awhile to see how it works out.

Edit 2: Note: In order to get the ASI to work on weekly charts, you have to change the reference parameter from 2007 to 2005. (Just remember to change it back if you’re going back to daily charts)

645

All - I’ve found two SIS entries based on TISAR (and my calculation of where it should be) so I thought I’d post something interesting I saw (see attached charts).

I’m planning to demo trade these pairs and try to follow the system through, but looking at the charts I think you’ll see what I see. (I’ve put the RTS overlay indicator on the charts as you’ll see)

EURRON - the reversal occurs right at B2 and EURCAD is right at B1 points from the RTS system.

Gonna try to track this with SIS system and leaving the RTS overlays in place to see if there’s any correlation that can be made between the two.

Also, anyone aware of a way I can input the data from Wilder’s example and have the RTS system overlaid on that price chart? Would be interesting to see if the correlation (if it exists) occurred back in his heyday as well.

eur.pdf (412 KB)

646

kaalilaatikko - Looking through your post, I had a slightly different view of the Extreme Point Rule (at least as applied to new positions). From what I saw/read, this doesn’t apply to a SAR based on the EPR of the day of entry. To me what it meant was that when you got a cross again that signaled long, that you don’t close your position unless the extreme point rule was broken on that day. Of course if I was long coming into this crossover, that would really muddy the waters.

If you look at page 47, the last paragraph on the left column states:

“If you are Long the reverse point is the low made on the day of crossing. (and vice versa if short/high)” So based on you just entering, you didn’t have a position on the day of crossing which is why I’d have not used that as a SAR point, although others might have differing opinions.

So to your point - I wasn’t live then so can’t say what I’d have done with regards to that trade. But if I were to take it here’s how I’d have played it - I’d have gone short on 6-26 (day after close confirms the DI cross). From there you could go in at market, but I’d probably play the extreme point rule and not enter until it hit the low made on the day of the cross (6-25 - 1.0088).

At that point, I wouldn’t look for an exit until the DI cross occurred in the opposite direction (+DI moved above -DI), and then my exit point would be at or above the high point made on the day of the DI cross. So based on taht I’d still be in this trade at this point with an entry of around 1.0088 and looking at a slight loss “on paper”. From this point, it remains to be seen if this will drop (per the system) or if it will turn and run against you. Will try to follow it and update this post with how the trade would have ended, had I gotten in with my understanding of the DMS system. I can say the awesome oscillator currently is pointing at this trade having potential to be a winner, but only time will tell.