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

Trading Systems Free Forex Trading Systems
687

I’d agree that you wouldn’t want to use them both at the same time, but then again Wilder even states you can tweak the constant as you see fit. While he recommends a specific range, there’s no reason you have to stay with it (although I don’t think I’m at a level where I should be making too many mods to his system unless I see something that’s not working).

Jay - If you’re using VSSTOP as a trailing stop, that would set it to a multiple of ATR. I was thinking that using ATR (or some multiple of ATR between 1.0 and 2.0) might prove beneficial in some of these trades as most losers go for you and then turn south before making it past the 3*ATR minimum in your direction to get you “locked in” by the VS system. My initial backtesting (using C=3) shows that things either go well for you, well against you or stay pretty flat. For you and flat don’t hurt, but those moves against you really can put a damper on your profits (and your emotional mindset).

I’ll try to do a little bit of backtesting (been using excel, not sure if you have a better way?) and look at using 3.1 for entry and then using the VSSTOP as a trailing stop, or just simplify it to be a flat rate based on ATR (again 1-2) on the day of the trade.

I just checked and you can put two different instances of the VS system on any particular chart. So I’d set one with a 1 (looking for long) and one with a 0 (looking for a short). This will give you the trailing stop you desire, now we just need to do some testing to determine what constant to use.

BTW - Anybody know what it takes to move from “Newbie” to whatever the next level is?

688

Just making sure that we are talking about the same thing: “not to use them both at the same time” = not to use VSSTOP(2) for both entry and exit.

I think that we are on the same track here. The more I think it here the more I feel that you should use VSSTOP for exit only when it is locking a profit. My backtesting without VSSTOP showed that if you entered at every SAR, for some pairs VS was excellent but for some other lousy, the optimal C being around 2.7 … 3.1 depending on the pair. A big question here is how to select the good trades, so that you could trade virtually any pair.

I coded a program that imports the historical data directly from Delta, calculates the signals and vomits the analysis. C and number of days are given as parameters. I think this is a quicker way to test a huge number of parameter combinations with a huge number of pairs. But I suppose the same could be done with Excel, for me doing this by coding was much more straightforward.

I guess your 50th post earns you a promotion as a “Junior”.

J.

689

We’re definitely on the same track here. I was thinking of using VSTOP when in a profit, but was also contemplating that once the order was executed, if you set a stop loss that is C*ATR (C is somewhere between 1 and 2) below below entry point, how that’d impact the big losers. I’d think that if it was gonna be a winning trade it would normally go your way before it drops too far, but this would provide a “safety net” in the event its going against you. I’ve gotta find some time to look at the data, but work is burying me this week. Hopefully after the end of July my load will lighten up and I can focus more on my trading.

At this rate, I might have a “trading holiday” next week as I’m going to be travelling and unable to have access to the web most of the day.

690

This is some sort of deja vu. A couple of months ago there were some news that turned my demo trades red. Now the same has happened to some of my live trades. I swear I have not paniced now, but I’m still not in such a mental mode that I wouldn’t feel a bit bad when seeing this. My only open VS trade went to loss, an RTS limit was hit without any sign of reversing and a stop was hit in loss. But I haven’t closed the open ones yet, as the systems haven’t told me that, although all of them are showing red right now. I could have avoided the biggest dip by not placing the RTS limit on a news day for that pair, but that’s just being after-wise.

In the meanwhile, I wrote down the Beginner’s Trading Laws of Nature that I somehow felt in place right now (well, the tongue a bit in the cheek…). Now I have these systems in real test. Let’s see what happens.

J.

Edit – Ok, I got a link violation by linking to another post of mine in this forum. Didn’t know that that is not allowed, sorry. I thought that that would work as well as linking to the same thread. So here it is in the good old way:
[ol]
[li]Your first live trade will yield a profit.[/li][li]Your next [I]n[/I] live trades, where [I]n[/I] is a big integer, will yield a loss.[/li][li]Once you account balance has gone below the initial deposit, it is impossible to reach the initial balance ever again.[/li][li]The bigger the size of your position is, the more probable it is that the price will go against you.[/li][li]If the price of a pair is ranging and you try to predict the direction of the next breakout, your prediction will be wrong.[/li][li]If the price of a pair is trending and you try to predict the turning point of the trend, your prediction will be wrong.[/li][li]If you try to jump on a trend, the trend will turn almost immediately.[/li][li]If something unexpected takes place in the market and you panic, all you can get is loss.[/li][li]If something unexpected takes place in the market and you don’t panic, all you can get is loss.[/li][li]If you have a limit position produced by a system and there is market news coming, and you are not prepared for the news, your limit will get executed and the trade will invariably go against you.[/li][li]If you have a limit position and there is market news coming, and you do prepare for the news, your limit will get executed and the trade will invariably go against you.[/li][li]If you have protected your position with a stop and there is market news, the stop will be hit, after which the direction will immediately turn.[/li][li]If you have not protected your position with a stop and there is market news, the price will go against you until you finally decide to act reasonably and close it and take the loss - after which the direction will immediately turn.[/li][li]If you try to circumvent the previous rules and do just the opposite, your action will go wrong.[/li][/ol]Only when none of the above holds for you, you master the zen of trading and may expect success.

691

Good (Tuesday) evening all!!!

Sorry I’ve not posted with my usual ‘fervour’ but I have a visitor here from the UK for the next two weeks (my best friend of going on 25 years now) so we’ve been ‘catching up’. Of course that’s NOT to say I’m not trading just that I’ve had less time to ‘shoot the breeze’ with everyone!!!

I’ve read through some of the latest posts and it would seem that Craig is ‘on track’ with my VSTOPS.

This is how I set it up and trade it:

(I’m going to use an example long position here for explanation purposes):

I look for an instrument / pair that has been trending down for at LEAST a 7 day period.
I put the ‘normal’ VS onto the chart with a constant of 2.8 and add a horizontal marker line at the value of the SAR (this is for referencing yesterday’s SAR in case I’m not watching the close).
Once I get the signal to go long I enter and I then remove the ‘normal’ VS and add the VSTOPS with constants of 3.1 (for the SAR) and 2 (for the STOP).
The STOP is NOT THERE to indicate where a stop loss order should be placed. The STOP will only be recognised if I have a close contrary to the STOP AND the placing of a stop order to close the position ‘a couple of ticks below the low’ of the bar that has closed contrary to the STOP will, if executed, result in profit otherwise no order will be placed and I’ll let the trade run as per a ‘normal’ VS trade.

Now:

It would seem that it does not matter HOW long you spend at this you’re always learning something!!!

What I’m about to tell you is EXTREMELY important so ‘listen up’!!!

Yesterday morning I placed a stop order to buy stock in a company. Due to some news data which I had NO IDEA was going to be released there was a MASSIVE spike in the price. My stop order was executed but ‘slipped’ by a HUGE amount. Of course: ‘I threw my toys out of the cot’ at the broker. HOWEVER: as it turns out it is I (ME) that up until yesterday obviously had no idea about the workings of one of the most basic of mechanisms that we use every single day i.e. the stop order!!!

You need to take a look at this and understand it WELL:

Orders

(Note: this is NOT information from the broker but from none other than the US Securities and Exchange Commission itself)!!!

Basically the term ‘slippage’ is a misnomer!!! You will find that on many websites where brokers are rated as ‘scam artists’ the number one reason for these less than complimentary ratings is because the broker has ‘slipped’ an order a couple of pips or points. Well, now, ‘armed’ with some ‘new insight’, I realise that the broker has nothing at all to do with ‘slippage’ and just because an order is ‘slipped’ it does NOT mean that the broker is a ‘scam artist’ or is trying to ‘fleece’ you!!!

The bottom line:

Stop orders are NOT guaranteed!!!

In other words: JUST BECAUSE you place a stop order to buy or sell at a certain price DOES NOT MEAN that the order will UNDER ANY CIRCUMSTANCES be executed at the price at which it was placed. Once the price of your stop order has been reached the stop order becomes a market order and is executed AT THE NEAREST AVAILABLE PRICE. So: if there has been a ‘spike’ in price for whatever reason then the NEAREST AVAILABLE PRICE (which will inevitably be the highest price reached by the ‘spike’) is where your stop order will be executed.

A ‘real world’ example:

I placed a stop order (as per the SIS) yesterday to buy a couple of hundred units of stock in a UK company yesterday. The stop order was placed at 0.82p (the price of their stock is quoted in GBP). Due to a take over offer on this company by another global investment company the price of the stock ‘spiked’ to 1.37 GBP and my stop order was executed at 1.37 GBP. Of course: AFTER this ‘spike’ the price immediately retraced somewhat resulting in the position turning almost immediately into a loss.

The point is this:

IT HAPPENS!!! It’s something that you have to be aware of!!! It’s just ‘the market’ and the way it operates and has NOTHING to do with the broker trying to ‘scam’ you or ‘fleece’ you. You DO however need to be aware of this potential pitfall is all. ONCE AGAIN: MONEY MANAGEMENT, MONEY MANAGEMENT, MONEY MANAGEMENT!!! DO NOT overtrade your account and think you’re ‘safe’ because even although you are ‘slightly overtrading’ you have stop orders or stop loss orders to limit your potential losses and therfore your account is ‘immune’ from a possible ‘wipe out’. IF THERE IS A SUBSTANTIAL SPIKE IN PRICE YOUR STOP ORDERS OR STOP LOSS ORDERS ARE WORTHLESS AND MEAN NOTHING!!!

DON’T SAY YOU’VE NOT BEEN WARNED!!!

Oh and speaking of MONEY MANAGEMENT:

kaalilaatikko:

I use my 1.875% ‘per position rule’ on any and all trades and just as long as I never exceed my 15% - 30% ‘maximum margin being used’ rule I have never had a problem with any of the systems. By all means: reduce the 1.875% for VS and DMS trades if you feel you must BUT just do not fall into the trap of being TOO conservative for the simple reason that it will do nothing other than frustrate ‘the living hell’ out of you because you will constantly be saying to yourself: ‘now if I’d taken out a normal size postion JUST LOOK at the profits I’d be making now on this trade’. Invariably: you will INCREASE the 1.875% on your NEXT trade to ‘make up’ and thanks to ‘Murphy and his law’ it is THIS trade that will go against you!!!

See ya’ll tomorrow!!!

692

C’mon Dale, you don’t expect me to be held responsible for my actions, I mean every trade that has gone against me to date isn’t my fault :smiley:

693

hello kaalilaatikko,

Rgerading the money management issue you mention I have been uisng a combination of the following:-

1, I set a position size so that if it goes against me and hits my stop (sometimes not easy to estimate as some of wilders systems do not have a stop), I only lose 1% of my account balance. You could change this % to suit your own risk appetite. At Oanda, one of my brokers, they have a variable lot system so I can fine tune my lot size here.

2, Set a position size so that it uses a certain % of my margin, as Dale has been doing with 1.8%. Personally I have been leaning to a figure of 0.75 - 1% of margin used per trade at the moment. This gives me a chance to open 1 or 2 positions on the same instrument if required (sometimes on teh RTS).

  1. On systems where there are no real set in stone STOPS, I will guesstimate a position size based on ATR x 3… Similar to the Volatility system.

Hope this helps in some way.

Cheers
Boca

694

Anyone tracking the AUD pricing?

Seems today everything AUD/??? is down and everything ???/AUD is up with ONE EXCEPTION - AUD/NZD.

Dale - care to comment on that one? :smiley:

All I can say is I’ve got my VS honed in on that one, because I’m ready to ride that one when it falls, and I expect it to be a big one…

695

Boca & Dale, thanks for your MM comments! I’m getting on the real ride now, having taken the courage to move from tiny lots to positions that matter for true profit. I.e. I have ended up now using using the 1.8% margin for RTS and about half of that for VS and DMS, as the latter ones tend to be open longer and have bigger potential drawdowns. Currently my open trades total about 8% margin. I made a small number play about the potential loss if all my positions turned against me and hit the rock bottoms that I’m ready to take. In that case I would loose 25-30% of my account. I think that this exceeds the advised total risk that you should ever take, but on the other hand I think that the probability in ending up in such a situation is rather minimal, as all your trades should skyrocket in the wrong direction at the same time. Maybe that “total max risk” could be some sort of advisory measure as well, maybe setting the limit up to somewhere as high as 50%?? Using the margin for MM calculations is at least quite handy, much easier than doing some sort of inter-system/inter-pair weighing that I originally thought.

Boca: “I have to agree Kaalilaatikko (That’s a hell of a nickname by the way) regarding …”

It’s just an ordinary Finnish word, though perhaps not that common in this forum…

J.

696

Hello chdorry,

As far as the AUD,ZAR,NZD concerned then before jumping into any trade which involves these currencies then u have to keep a good eye on the gold they r dam affected by the gold prices if the gold is up then they will go up if the gold is down then they will go down. just have a quick look on the gold u will see it is a love love relationship!!

due to the fall of the gold 2 days back u will find that AUD has been fall as well!!

Hope that this helped u in a way

Akram

697

Hello!

The time for getting into using SIS is approaching for me little by little. I reread the last 15 pages and collected the recent posts about the peculiarities or open questions of SIS. I think the earlier ones were pretty well summed by this comment by Dale:

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!!!

This makes a lot of sense and makes the system more consistent as well. Personally I’m going to study the system by using this rule.

This one I think has not been commented yet:

I think that ‘Day 7’ is not the correct time to place the order. It might be possible that the order would be hit by a peak, while the ASI would not necessarily ever cross contrary the previous significant HSP or LSP.

The second option “do you place your order THE MOMENT the ASI exceeds (passes???) the previous HSP or LSP” is contradictory with the conclusion not to place an order until after the close of the daily bar, as far as I have understood all this. So I would ignore it as well.

So, if the price is then “way past the high on ‘Day 11’”, you are then left with 3 alternatives:

a) Do nothing, just ignore the trade and consider it as a lost one.

b) Place the order at the original entry point and hope that the price will dip enough to pick the trade. If it refuses to dip, see (a).

c) Place a market order at whatever the price is after the ASI close.

My choice would be (b), as I think it is best in line with the overall concept in these systems. Market orders have been earlier classified as inferior ones in this thread, and therefore I would ignore ©.

I hope I have now caught up with the posts about SIS and can start introducing it into my toolkit.

J.

698

I’ve had an epiphany! Ok, so how many of our RTS trades hit their B1/S1 etc and go instantly green? NONE, maybe you’ve had another experience, but I’ve never had my entry hit and then an instant rebound to TP! How many hit their entry and then go on to the next level and then some, most if not all. Another thing. How often does it rebound and hit the original TP at B1/S1? Not often. AND once it does hit your TP at B1/S1 it then reverses quite often.
To sum up 95%+ of our RTS trades go red quite awhile sometimes weeks before they turn for TP, even those that turn for profit instantly sometimes come back to entry anyways. So… I’ve been thinking why not trade it as a breakout? At (asuming they’re at the outside LRC’s)B2 you sell and at S2 you buy, ride it for a nice profit to then next level or so and then TP and reverse, AND on the reverse you ride it for some more profit? The market just seems too wild atm for a more normal aproach. Also well its what Wilder has been telling us only he says to enter at B1/S1 and then reverse at HBOP/LBOP but that was in alot “tamer” market. Let me know what you think. I’m going to give this method a try this week I’ll keep you updated. Another thing that made me think of this is that I demo traded and entered 15+ rts trades all but 2 were red as of today, half entered last week the other half this week. I’m sure they’d turn green eventually but that takes time and time is money my friends. Another thing if it does instantly reverse why the hell couldn’t we ride it out just like we do now? Asumming ADX is low it should reverse anyways with time.

699

I implemented the Wilder smoothing for ADX so that it shows on the Delta platform. A couple of screenshots are attached as starters. I hope this will spawn some discussion about the good old subject.
J.

AUDNZD_ADX_smoothed_250708.jpg700×491 63.6 KB

EURUSD_ADX_smoothed_250708.jpg700×490 65.6 KB

700

Good (Saturday) afternoon everyone.

kaalilaatikko:

Well: all I can say is WOW!!!

It’s quite obvious that there are MAJOR differences between the ‘smoothed’ and ‘unsmoothed’ ADX/ADXR to the point where it’s obvious that using the ‘unsmoothed’ ADX/ADXR is quite possibly signalling the incorrect trading system to be using at a given time i.e. in many cases the ‘unsmoothed’ may be signalling the use of (for example) the RTS whereas the ‘smoothed’ ADX/ADXR is signalling the use of one of the trend following systems (and maybe so far THIS is why Randon’s RTS trades are not turning to profit as speedily as he would like). Of course it’s also very obvious that the ‘smoothed’ ADX/ADXR cuts down on the number of ‘whipsaws’ given by the DMS.

Nice work!!!

There is just one thing that is concerning me though (and I’m not sure if it will affect the ‘bigger picture’ of things):

kaalilaatikko:

You’ll notice that my ‘unsmoothed’ ADX/ADXR starts on day 14 right from the beginning of the chart. Yours does as well BUT you’ll notice that the ADX/ADXR are not being calculated correctly for (I would imagine) at least the first 42 bars. Now I know WHY this is happening BUT are you sure that this is not affecting the indicator from ‘way back then’ BECAUSE remember now that (because you’re ‘smoothing’) every last bit of data is being taken into account (unlike the ‘unsmoothed’ version where anything prior to a 14 day period is being ignored). Actually: OBVIOUSLY it’s affecting the current data BUT just how much of a difference this makes to the current data IF IT’S A FULL CHART i.e. 999 days I would imagine is negligable BUT if it’s a relatively newly added instrument where the chart is NOT a FULL CHART then the difference will be pronounced (and as a matter of fact the monthly charts for many of the instruments are not FULL CHARTS as yet e.g. AUD/NZD).

I’m also assuming that somehow you’ve managed to test this and compare it to what the ‘smoothed’ ADX/ADXR is supposed to be in ‘the book’ (unlike me who ASSUMED that the ADX/ADXR that I was using was correct)!!!

701

When we dissected ADX last time, there was quite extensive cross-checking of the implementations by different people and re-reading of the calculations by more than one person. As a result, I became very assured that my calculations are done in accordance with Wilder.

What I did this time was to port the same calculations to use Delta’s data structures. Then I checked the values of a few sample +DI/-DI crossing points against my text-form analysis dump, which used my original implementation, and all of the values matched at least to the 2nd decimal (I did not dump more in the text-form analysis). So I was satisfied with this, and forgot to look at the beginning of the chart.

But indeed, there was a bug in this new implementation (but not in the benchmark one). I forgot to divide the sum of the first 14 DX values by 14, and this caused distortion to the beginning. I added the missing division, and now the calculations look as they should right from the beginning.

After the correction, my checkpoints still matched completely with the reference data. So a full chart was able to totally smooth out the initialisation bug.

I hope this got answered by the above.

I will mail you the corrected version in a minute.

J.

702

Good (Sunday) morning all!!!

kaalilaatikko:

Again: well done and thank you for your hard work. And yes: you’ve answered all my questions beyond doubt!!!

HOWEVER folks:

Now that we’re forced to revisit ADX/ADXR I’ve done a comparison between my ‘unsmoothed’ ADX/ADXR and kaalilaatikko’s ‘smoothed’ ADX/ADXR and come up with what I perceive to be some very interesting results. (Before I continue let me say the I believe that the ‘smoothed’ ADX/ADXR is ‘the way to go’).I’ve attached a chart (that you have to download to view i.e. you’d not be able to see my markups clearly if I simply uploaded the chart).

What you’ll find is this:

First instance:

Using the ‘smoothed’ ADX (which started here at 14.92) I’d have been looking to use the RTS for trades and needless to say I’d have lost money BIG TIME i.e. although the ‘smoothed’ ADX was telling me that the market was ranging it’s quite obvious that is was not and had indeed broken out into a trend (down). The ‘usmoothed’ ADX IN THIS INSTANCE was giving the correct signal / value for a trend following system.

Second instance:

Using the ‘smoothed’ ADX (which started here at 31.78 BUT moved down to 17.38) at some point I’d have started using the RTS. Using the ‘unsmoothed’ ADX at no point would I have even considered using the RTS and would have gotten ‘eaten alive’ again. The ‘smoothed’ ADX IN THIS INSTANCE was ‘closer to the mark’.

Third instance:

Using the ‘unsmoothed’ ADX (which started here at 32.07) I’d have been looking to use one of the trend following systems which, from what I can see, would have been the correct choice of systems to be used here. Using the ‘smoothed’ ADX (which started here at 17.38 but did eventually get to a value of 32.57) I’d have been looking to use the RTS and, again of course, this would have resuled in losses.

My conclusions are these:

First:

Don’t get too happy in the thinking that the the ‘smoothing’ is going to ‘miraculously transform’ the profitability of the RTS. I don’t see it happening (even although as I have said I believe that the ‘smoothed’ ADX of kaalilaatikko’s is ‘the way to go’).

Second:

I now find myself thinking ONCE AGAIN that maybe we have to start ‘playing around’ with the period again e.g. using a 7 day period as opposed to the 14 day default period. The reason I say this is that just judging from my above observations it’s really does appear (once again) that ADX is very slow to react in fast moving markets.

Third (and last):

What’s interesting to note is that the VS would have got you into a short trade pretty early on in the downtrend (even before my ‘first instance’ as indicated) and you’d STILL BE IN THE SHORT TRADE right up until this past Friday with not a single stop and reverse!!!

Just to reiterate:

I’m by no means questioning kaalilaatikko’s work here at all and I believe it to be correct. I AM INDEED now questioning the overall reliability of the ADX itself as it pertains to our markets and the use of the RTS. One ‘curve ball’ I’d like to ‘throw into the mix here’: as you are all fully aware I have the AO and AC on my charts all the time and I’ve noticed that when an instrument or pair is range bound the actual height (values) of the oscillators are reduced whereas when an instrument or pair is trending the actual height (values) of the oscillators increases. Could THIS be an ‘ADX Backup’ or ‘ADX Confirmation’??? I’m not sure so take a look and see what you think.

wmadxcompare.zip (50.7 KB)

703

I moved to looking at CSI before jumping to SIS. I implemented the following based on the downloaded data on top of what I already have in my program (this applies for Delta only; I used 10000 as lot size):

  • Margin requirement = lot size / leverage; this is for the quote currency and needs to be converted to the standard currency used.

  • Value of 1 pip move = lot size / pip factor; again for the quote currency (pip factor = 100 for jpy and 10000 for the others) and needs to be converted.

  • Value of commission = value of 1 pip move * spread.

The result is finally multiplied with the pip factor, which gets around the related differences in ATR. The multiplication with 100 in the formula is still there on top of that.

I retrieved the values for all available pairs and applied Wilder’s formula on p. 111 as such (except that I used euro as the reference currency for all values). The results are stored in the attached file csi_rank.txt. What strikes on my face is the dominance of ZAR pairs in the beginning of the list. I think that the constant 150 is causing this. Wilder does not explain at all what this constant means or how he has defined it. I suppose that it somehow balances the values he has for the commodities. But apparently it does not work properly for forex.

So I experimented a bit with that constant and tried to put it in some proportion to the commission. Wilder’s constant was roughly 3 times the commissions he was having. The commission grows with the lot size, and looking at the values that the calculation yielded for the pairs, I tried to use the value (lot size)/2000. The resulting rank is stored in the second attachment.

What do you think, would either of these ranks be usable for selecting good pairs?

J.

  • Edit: I removed the attachments after finding out an “issue”. See my later post where they are updated.
704

Good (early for me Tuesday) morning all!!!

kaalilaatikko:

Nice work although you MAY want to check this out:

I TOO had an ‘issue’ with the CSI and the ???/ZAR pairs UNTIL I ‘modified my thinking’ a little bit.

What I believe you need to do with forex pairs is this:

You need to ‘level the playing field’ for the ATR FIRST and only THEN perform the rest of the calculation. After doing that you’ll find that the ???/ZAR pairs are NOT ALWAYS ‘top of the pops’.

In other words:

I did like this:

For any pair quoted with four decimals you multiply the ATR by 10 000 and for any pair quoted with two decimals you multiply the ATR by 100 and so on and so forth (this has NOTHING to do with a ‘PIPFACTOR’ or ‘Quote Price Factor’ by the way). Ignore all decimal places after doing this. The idea is to get the ATR’s to ‘jive’ (Craig???) with each other. Once this has been done you then perform the rest of the CSI calculation as per ‘the book’ and you’ll see the difference. The ‘skewing’ of the CSI calculation is because of the ATR and has nothing to do with the spread or anything else. As a matter of fact: it is BECAUSE of the spread and therefore the amount payable in commission that GBP/ZAR should NOT always be ‘top of the pops’. Try it out and let me (us) know what you think. It works for me. The only reason I don’t use it on a daily basis is because it’s a REAL pain to have to update the margin requirement every day (remember that the margin requirement in USD changes on a daily, actually on a ‘per second’ basis, because of currency rate fluctuations at Delta. At a broker like GCI where the margin requirement is ‘fixed’ and cannot vary this is of course not so much of a problem but then of course the value per pip movement also changes on a daily or ‘per second’ basis. How MUCH of a problem this is with forex pairs I’m not sure i.e. these fluctuations may be negligable at best given the number of decimals places being used and there may be a sort of ‘one size fits all golden figure’ that can be used).

Stock note (I’m going to start including ‘Stock notes’ now and then if it’s OK with everyone because as many of you are aware I’m shifting my focus to stocks or at very least ‘diversifying my portfolio’ as it were):

A nice little ‘tidbit’ for this morning:

Bloomberg.com: Worldwide:

Now what’s interesting to note here is the fact that even although the fnancial stocks are taking another ‘pounding’ there are some large names that are INCREASING their stakes in some of these companies and NOT DECREASING their stakes!!!

What’s more:

ONCE AGAIN money mangement is ‘key’!!! This may NOT be the ‘bottom’ for financial stocks BUT then again it COULD be!!! The point is that most of the financial stocks have lost most of their value to date since last year so with sound money management it’s possible to ‘buy and hold’ (many of the financial stocks are actually ‘undervalued’ i.e. the share price does not reflect ‘fair value’ and for the most part these stocks have been sold off because of ‘sentiment’ which translates to ‘fear’ ‘in my book’)!!!

Also:

Did you know??? If you’re long a stock and the company declares a dividend you ‘receive’ the dividend (at Delta anyway).

Back to forex:

Why should any of the above be of interest to you as a forex trader??? Well for ONE thing: if the Dow Jones Industrial Average is ‘brought to its knees’ then so is the USD.

705

Maybe I did not write it clearly enough in my post, but the end result was exactly as you described. I may have used the term “pip factor” incorrectly here, but anyway I used exactly the same multiplication factor as you mentioned. I just mentioned doing this multiplication last and not first, but it’s the same arithmetics anyway.

But I had another look at my tables and started wondering why the ADX/ADXR values looked so odd, and here I had an issue of my own. The values were calculated correctly, but my parametrisation was not! There was mixed use smoothed and unsmoothed values as well as differing period lengths because I happened to use an input file which I had been using for backtesting and forgot about these parameters. Latest, corrected tables are attached.

Here I must disagree with you. I think that it is because of the huge ATR that these pairs are risen on the top, rather than lowered as much down because of the big commission. The big divisor offset 150 causes that even rather big variations in the commission do not affect that much in the overall result. To prove this I prepared a small Excel worksheet that is attached.

Wilder’s example commissions were in the area 45…85, and apparently that is much more optimal for his formula. But the values I got were in the area 2…40, weight on the lower end, and I am afraid that this distorts the results somehow from the desired one. And that’s why I think that to get this working better for our purposes, the offset needs to be adjusted in an appropriate way. Unfortunately Wilder does not give any hints how he selected his offset.

This is a great example where I do believe in the power of automation. Once implemented it is a matter of seconds to get the values. There is no magic in calculating Delta’s margin requirements for each pair, it can be done with simple arithmetics once you have the daily prices at hand. And I don’t think that you must stick to converting all values to USD, I’d rather do that in the base currency of your account, which happens to be EUR in my case.

J.

C_and_ATR_in_CSI.pdf (8.01 KB)

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Hello again,

kaalilaatikko:

I’m not going to post any comments YET although I have read your post and need to ‘digest’ it.

I just wanted to post something ‘quick’ here:

It would seem to me that using kaalilaatikko’s now ‘fixed’ and ‘smoothed’ ADX/ADXR the only SURE FIRE WAY of KNOWING WITHOUT A DOUBT that an instrument or pair is trading in a range for the RTS is WHEN ADX IS BELOW BOTH +DI AND -DI (AND < 20) as per ‘the old man’!!! Take a look see!!!