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

Trading Systems Free Forex Trading Systems
101

Hey chirules54:

I hope you get this message after your exams and stuff (and I hope things went well)!!!

I just want to tell you that I’ve spent the better part of two days having another look at the Volatility System again. I tried a whole ‘bunch’ of things that would allow for more trades and smaller drawdowns by reducing the ‘constant’ value and I can tell you that (in my opinion) the best thing to do is to either LEAVE it at ‘3’ as per the book (or even INCREASE it to the maximum of ‘3.1’)!!! While this MAY sound VERY strange, only after you have tried to ‘tweak’ the damn thing and try and MAKE it do more trades, do you THEN realise that there is a very good reason for the value that he uses as a ‘constant’. I’ve been trying it today on the 1 hour chart and with a smaller ‘constant’ (derived by using various ‘Dale methods’) things APPEAR to be working UNTIL you start getting into a range and then you’ve had it i.e. you’re stopping and reversing all the time which of course is costing you money. I’ve now changed the value back (or to) ‘3.1’ and so far it’s made it through the Fed’s rate announcement and kept me in right direction without ‘whipsawing’ me out and I have a feeling that it’s going to continue to do so. If you look at it on the daily chart it would APPEAR that you’re NEVER going to do a trade using it BUT take a look back a few weeks or months and see where you would have opened a position BACK THEN and THEN SEE just how well you’d be doing at this point. As an example: the system would have got you in last year long of EUR/USD probably somewhere around 5 September 2007 or so at around 1.3725. As I type the price is 1.5687. You would have gone from 1.3725 to 1.5687 WITHOUT ONE SINGLE WHIPSAW right up until now. That by my calculation is 1962 pips in 7 months. At GCI or Delta on a ‘mini’ lot that would be $1962 profit i.e. not bad for a layout of around $50!!! It would appear (and quite rightly so because this is what he states in the book) that this system WILL keep in going in the direction of the LONG TERM trend ‘forever and a day’ (that’s MY interpretation not his)!!! Make sense??? It’s obviously not something that can be reliably used for day trading (although if you used the same LOGIC on a short timeframe it SHOULD still work). As I suspected though: if you even THINK abou’ overtrading your account with this system it will clean you out i.e. LOADS of free margin required (which AGAIN is unfortuanately something that not many of us have)!!!

102

Hi Dale… exams are going good so far, I just have one more tomorrow afternoon but I am pretty much done studying for it so I have some free time right now. I am disappointed in myself as I “got scared” with my usd/jpy short trade (which was not taken based on any system, just “me”) and I closed it out it for a loss when it broke 100.50. Now I see it is back below 100, after being as low as the high 95’s. It looks like I have a lot to learn about whipsaws and the like, I mean the 0.75% fed cut is negative for the dollar but since it was less than expected it sent everything back up (temporarily I guess). I hate the news! This is why I want to get started in commodities, you don’t have to worry about that stuff as much. This little experience just confirms to me what I already thought, but wasn’t entirely convinced of: follow the damn system and stick to it!

That aside, I am still in my volatility trade (short aud/jpy) even though it has rebounded over 250 pips today, but it’s still at around 350 pips profit. I was using a multiplier of 2.8 when I got into the trade, and I plan on seeing this trade through, I’m not going to stop and reverse until I’m supposed to stop and reverse.

I’m still trying to figure out my “game plan” for trading in the future. I want to stick with gold, as it is the only commodity I can trade at the time, and it seems to work well with the TBP system so far, 4 for 4 winning trades and it caught the drop today nicely. I am still following it with the volatility system, but with a multiplier of 2.8 it’s quite a ways off from a reverse. I like aud/jpy and gbp/jpy both, they have very high CSI ratings, but do you think that they are correlated too closely? I have this same dilemma with aud/jpy and gold as well since aud is a “comdoll” so maybe stick to gbp/jpy and gold? I also like usd/cad as it follows oil prices to some extent, and while it is stuck in a range right now, it had a fairly high csi as well, although I remember you saying that you weren’t as confident in csi as you were before.

I had a question for you about the SI as well. On page 90 in the book, where you calculate R, I always get option (3) (today’s high - today’s low) as the largest. I did it for several forex pairs and I always end up using the third equation to calculate R. Is this what you have as well? I want to make sure of this before I study the SI any more, and I am looking forward to see if we can make something useful from the “volatility swing” hybrid system.

By the way-- I saw your post on the parabolic sar thread about the fractal and psar combo… how has that been working out? Does it rival Mr. Wilder’s original systems?

103

Hello,

Glad to hear about the exams. That’s great.

Sticking to ANY system no matter how good or how bad is probably the most difficult thing in the world to do!!! Even now that I have something that works in my hands I STILL find it very difficult sometimes (ala my Oil trades a week or two back)!!! And I cannot even tell you that it gets easier as time goes by because I’m not sure at this point that it does indeed get any easier!!! We’re STILL human no matter HOW much faith we build up in a system and our ‘normal’ reactions to fear and greed will ALWAYS come into play I believe. Learning to control these reactions is about the best we can do I reckon but the emoitions will ALWAYS be there!!! Sad but true (but then I suppose this is what makes us different to robots)!!! There’s a plan: if you could invent a robot that was intelligent enough to trade but NOT intelligent enough to ‘feel’ then you’d make a ‘gazillion’ a month!!!

Like I said I was (again as I always do and cannot help it it’s just me type of thing) ‘messing around’ with the Volatility System to see what would happen if you made the constant smaller. Funny enough the reason that you (I) thought the Volatility System needed a ‘tweak’ is for EXACTLY the reasons mentioned in the first paragraph i.e. when you first ‘plot’ the Volatility System’s SAR on a chart it seems as though you’re NEVER going to find a trade and when you DO it THEN seems as if you’re NEVER going to make any money out of it because the SAR is SOOOO far away!!! Not true. Even on the 1 hour chart (which I do not recommend but that’s just me) using a factor of 3 and then even ‘upping the ante’ to 3.1 has kept me in trades LONG after I would have been ‘whipsawed’ out a few times or been forced to stop and reverse a ‘gazillion’ times as dictated by most other systems. Decreasing the constant just puts the system ‘on a par’ with any other system that would have ‘whipsawed you around’ (which is just another way of saying ‘fu*ked you around’). This system DEFINITELY requires LOADS of free margin and LOADS of patience but the rewards at the end of the day I think will be GREAT!!! I’m still managing some 1 hour trades from yesterday this morning as we speak and there have been times when there’s been a terrible feeling in the ‘pit of my stomach’ watching losses grow BUT it’s ‘uncanny’ how most of the time the price reaches and even goes past the SAR and then almost immeditately retracts from there and starts going in ‘your’ direction again!!! Let’s face it: the ‘old man’ did not become a millionaire because he traded and wrote about systems that DID NOT WORK!!!

As far as ‘commdolls’ are concerned I STILL don’t like them. I have made a little over the past week or two with AUD/??? but nothing to ‘write home about’ and I ‘bailed’ early on these trades as well i.e. they ‘scare’ me. I’ve seen it AGAIN in the last week or so i.e. Gold going to RECORD highs and the AUD and ZAR losing ground against the USD (the ZAR ALSO losing ground against the EUR and GBP). The correlation between Gold and these pairs has always been strong but lately for some or the other reason they seem to have ‘lost touch with each other’ and that makes NO sense to me. Like I said: it ‘scares’’ me because something is happening that I don’t understand so I prefer to stay away from them. Period!!!

My only concern with the CSI is the fact that if you work out the CSI of ALL the pairs (including the ‘exotics’ and ‘weird’ pairs) you’ll find that the ‘exotics’ and ‘weird’ pairs ALWAYS come up ‘tops’ BUT remember that the CSI uses the ATR in the equation and the ATR for the ‘exotics’ and the ‘weird’ pairs will ALWAYS have a higher value REGARDLESS simply because of they way their prices are quoted e.g. there is a HUGE difference in the ATR values of a pair like GBP/ZAR (quoted as 17.2542 or something like that) and EUR/GBP (quoted as 0.7816 or something like that) and BECAUSE of this they will ALWAYS be the highest on the CSI BUT it does not necessarily mean that they are the ‘best deal’ (using his term). In other words (in my opinion) you’re not ‘comparing apples with apples’. If, on the other hand, you’re calculating the CSI for ‘like’ instruments (like Soybeans, Coffee, Sugar, and Wheat OR AUD/JPY, CHF/JPY, EUR/JPY, and GBP/JPY) THEN the CSI ‘has meaning’ I reckon. I’m not saying that the CSI does not work (as a matter of fact I STILL believe it is the ‘keys to the Wilder kingdom’ BUT it’s only ‘accurate’ if you’re comparing ‘like for like’)!!! I hope that ‘clarifies’ things for you.

As far as the SI calculation is concerned I’m not sure why you’re always getting option 3 as the value to use. It could only be for two reasons: 1) you’re not using the ABS value i.e. you’re using the + and - values OR 2) options 3 IS in fact the right option and value to be using!!! Not sure. I suspect it’s because you’re not using the ABS value of the equations though. Just a guess. Either that or there is something wrong with your Excel formula (I’m assuming you’re doing this in Excel of course).

Do you like my ‘PSARFRac’ System??? It was just one of those things that I ‘came up with’, tried out, made a little ‘dough’, and then forgot about, so I can’t HONESTLY tell you that it WILL make BIG money over time. It does make ‘sense’ however to do it that way i.e. it seems to keep you out of most bad Parabolic SAR trades BUT also get’s you into good trades very late. I’m not sure which is worse!!!

By the way (yet another one of those things that I ‘come up with’ all the time) give me your opinion on this:

It’s been ‘bugging’ me for MONTHS now and now that I’ve been ‘testing around’ on the 1 hour charts it’s bugging me EVEN MORE:

I stare at these charts ALL DAY ALL THE TIME as you know and it has become very apparent to me that if you placed a stop order buy 5 ‘ticks’ or pips above the high of every bull candle and kept doing this until you got a bear candle at which point you’d then start placing stop order sells 5 ‘ticks’ or pips below every bear candle and you just kept doing this all day long it would appear that you’d make money regardless!!! Am I right??? Take a look at ANY chart (well not ANY chart i.e. nothing under 1 hour). Because of the ‘simplicity’ I find myself saying ‘it’s TOO simple so it can’t work’ but WHO KNOWS??? Basically in an uptrend for example you’d end up with multiple lots going up (you’d be buying one lot at a time) and then, when you get a bear candle, your initial stop order sell would close all of those lots (at a profit which is the idea), and then open a new single lot in the opposite direction, and so on and so forth. From where I sit if you could STICK to this you’d HAVE to make money in the end. Have a look see and tell me what you think. (I know this is ‘off Wilder’ but just something I’ve been looking at for months but never got around to trying out for myself ALTHOUGH I THINK I’m going to see what happens with ‘ultra mini micro’ lots of Silver to see what happens)!!!

104

Is it just me or is everyone experiencing problems with the site lately??? It’s seems to get REAL slow sometimes and I find that Internet Explorer comes up with a lot of ‘Error on page’ messages lately as well. It took me the better part of half an hour (of retrying and retrying) JUST to add the attachment to the above message (I forgot to add the attachment and had to edit the message afterward to attach the file). Let me know so the we can try and get this sorted out if possible.

105

Hmm, once in awhile the site is slow for me and won’t load, but it hasn’t happened for a while.

Thanks for posting your excel spreadsheet Dale, it seems that your H2-L2 also always has the highest value, at least on that spreadsheet. I did use the absolute value, so I’m pretty sure my calculations are correct as well. I guess I could test it by using the high, low, close and open values from the worksheet in the book, I’ll do that a bit later.

So since you (and I) have come to the conclusion that the volatility system’s multiplier should be “left alone” are you not following the “swing volatility” combo anymore? I liked the idea, but to be honest I’m still trying to grasp the swing index and adding more stuff to the mix confused me a bit. Maybe using it with the original 3 multiplier would work better. As “the man” said in that interview a while back, he thinks the volatility system is the best and while it is hard to stick with the relatively few trades and sometimes big swings, it looks like it can work great as long as long as you aren’t stuck in a range, where at least it will keep you from whipsawing back and forth because it seems until the price breaks out of that range, you won’t reverse as indicated by the sar. I thought about maybe trying it out with a shorter timeframe, like the 1 hour or 4 hour maybe… it might give you more trades, but then again more losses… I will have to do some research.

With regards to your last idea, I believe I understand how the system would work, but I have to ask you (dumb question) what is a “stop order”? With Oanda I can either execute a “market order” which is simply buy/sell at the current market price, or a “limit order” which is executed when the price hits a certain price that you specify, either above or below the current market price. I assume that a limit order and a stop order are the same, right? If so, I do understand, and in my mind it seems that it should work, unless maybe you are stuck in a range, but… well it still seems that it should work… Arrghh. Now I can’t stop thinking about it.

Anyway, I have one more exam tomorrow morning so I should be getting to bed. I’ll be driving home tomorrow for spring break where my new laptop awaits, so no more running windows xp on a 1.2 GHz Pentium III and 256 MB of memory (woohoo!). I’ll be bringing the book with me so until tomorrow… good luck and good trading.

106

Hi,

I know when I first created those spreadsheets I had a seperate column for each of those values so that I could visually check that my MAX() function in Excel was INDEED picking up the correct values and I remember that they were not always the same. The only way to check really is to take a couple of days and do the calcualtions manually on paper and see what the outcome is (I’d better check this myself as well but then again remember that if you ‘plug’ HIS figures into mine or yours spreadsheets we got the right figures as per his work sheet, except for the ‘errata’ of course, so we must be right but it needs to be checked anyway).

The ‘Volatility Swing Combo’ (I like that)!!! I don’t think it’s possible using HIS constants i.e. you might as well then just be trading the Volatility System on its own because the Swing Index System requires that you stop and reverse a lot sooner i.e. if you use them together with HIS constants the Swing Index orders will NEVER get hit. The ‘Volatility Swing Combo’ only works if you make the constant something like 1 i.e. then the ARC is exactly equal to 1 x ATR and this seems to keep you out of ‘false’ stop and reverses quite nicely (this is what I’m doint at the moment and it’s cut down my ‘false’ stop and reverses almost by 100% although sometimes is is keeping me out of good trades as well but so be it). I’m using the ‘standard’ Volatility System on the 1 hour at the moment (testing with small lots of Silver) and this seems to be working well. This system definitely CAN result in HUGE drawdowns but the profits seem to outweigh the losses by far IN THE LONG RUN!!! Margin (once again) is the key here. Either LOADS of margin OR NO 200:1 / 400:1 leverage i.e. maybe 50:1 leverage will do the trick and keep you from getting ‘nailed to the wall’!!!

My ‘idea’:

At both my brokers (Delta and GCI) a ‘stop order’ is an order that you place if you’re ‘within’ your price range. In other words: if the price of Silver is 19.95 and I want to buy or go long at 20.00 I can place a stop order buy at 20.00 i.e. the price of my order is ABOVE the current price and I want to go long with the order. Conversely if the price of Silver is 19.50 and I want to go short at 19.40 then I can place a stop order to go short at 19.40 i.e. the price of my order is BELOW the current price. Those are ‘stop orders’. A ‘limit order’ is used if the price at which I want to enter is already ‘out of bounds’ as it were. In other words: let’s say that I wanted to go long at 20.00 as in the previous example BUT the price is ALREADY PAST where I wanted to enter (let’s say it’s now at 21.00) then I would place a ‘limit order buy’ at 20.00. In other words the price in this example would have to retrace from 21.00 to 20.00 in order for my order to be executed. See the difference? If not tell me and I’ll try to explain it another way. I suppose another way of putting it is like this: ‘I want my order to get executed WHEN the price gets to X’. That would be a ‘stop order’ as opposed to: ‘I want my order to get executed IF the price gets BACK to X’. That would be a ‘limit order’. Something like that anyway!!!

Anyway: I’m currently trying this ‘thing’ on a GCI demo that I registered for the purpose, as well as on Silver at Delta (trading the most ‘minuscule’ of lots for testing purposes), and so far so good. I must admit that I’m kind of hoping that IT DOES NOT WORK because if it does then you can ‘scrap’ just about every system and indicator (and everything else) that you’ve ever seen or heard about in trading and it would then mean that I have certainly spent a ‘shtpile’ of time creating systems and ‘wracking my brain’ for nothing!!! If it DOES work (well and consistently) do you know how easy it would be to create an EA for this??? ‘Plonk’ a 'shtpile’ of capital into an account, turn the EA on, go away, and take profits whenever you feel like!!! Bliss (actually not i.e. what would I do all day)!!! Let’s see what happens!!! (Maybe ‘the man’ will buy it from ME for $1 000 000 and then I’ll fly all you guys and dolls out here for a ‘party of note’)!!!

107

Hi Dale, thanks for explaining that to me. Wow… have you seen gold today?! I went to bed last night a little worried about my short TBP trade, I wake up and gold’s at $940 an ounce!! It’s getting pretty close to the sar point (2.8 multiplier) for the volatility system, same with usd/cad. Although, that was yesterday’s sar point, and the big volatility today is going to push the sar point further away, but still, it was a major move. The aud/jpy volatility trade is also seemingly back on track, now up around 500 pips profit.

I was thinking about your “stop order” system last night and I came up with something, maybe you already saw it, but it bugs me a bit. What if you just got a bull candle for the day, and placed a stop order 5 pips above the high of that candle. The next day, the price goes up past this point (so your stop order is hit) but soon after the price goes down and ends the day as a bear candle. You would have suffered a loss, but I suppose that if this happened after say, 5 bull candles in a row, the profit from those first lots should outweigh the loss on that last lot that “turned on you” as the price closes below what you entered the trade at. Looking at a chart, this doesn’t seem to happen all that much, I guess it is just one negative part of the system. In a ranging market the system could hurt you too, but as long as the next day’s high or low didn’t hit your stop order, you would be okay. It’s an intriguing idea, I think I’m going to demo trade it for a little while. What timeframe have you been using? My guess is that the 4 hour or daily charts would give better results because you are trading less “noise” of the market ranging up and down throughout the day, and trends are easier (at least for me) to identify on longer-term charts.

I also wanted to confirm a few rules of the swing index… I’m pretty sure I have got it down now, but I just wanted to make sure. I have to go take my last exam in a bit so I will post later.

Good day and good trading,
Nick

108

Hi Nick (that’s the first time you’ve metioned your name you know)!!!

Dale here. Nice to finally ‘meet’ you!!! :slight_smile:

Great news about the TBP System and the Volatility System. I’m so glad it’s working for you and I hope it continues to do so (no reason that it shouldn’t either)!!!

Your observations about this ‘other thing’ are ‘spot on the mark’ i.e. that’s exactly what happened today BUT I have to admit that today I actually got ASTOUNDING results with it. I was trading ‘mini micro teeny’ lots of Silver (live) just to test and I’ll tell you what: fantastic!!! It does, however, require a lot of self control because when the situation arises that you describe which, as I say did in fact happen twice today, you just have to take the loss ‘like a man’ but by stopping and reversing each and every single time ‘no matter what’ I cleared out with nice ‘little’ ‘test’ profits. I reckon that the BEST pair to trade with this would be GBP/JPY because of the volatility of the pair and the way it moves (Silver was probably the WORST example for this). I did try it on GBP/JPY on a GCI demo account that I opened for this purpose but was trying it out on the 30 minute timeframe. Not too good i.e. this timeframe is too short for ANYTHING let alone this little ‘system’. I would say the MINIMUM would have to be the 1 hour timeframe and, as usual, the longer the better. I will continue to test it tomorrow and if I get the same results then I’ll start trading ‘normal’ lots next week. The ‘sky’ is the limit with this ‘little thing’ as well. For example: you could reduce whipsaws by increasing the order distance by more than 5 ‘ticks’ or pips and maybe even use a random number between 5 and 20 on different days. Another idea would be to have the distance based on some or the other factor of the True Range or Average True Range or on some or the other variation of one or two of Wilder’s formulae. Play around but the ‘concept’ seems to be very ‘sound’ SO FAR!!! Let me put it this way: the INEVITABLE drawdowns are no better or no worse than the potential INEVITABLE drawdowns when using ‘pure’ Parabolic SAR but the RESULTS are quicker and faster!!! Seems ‘sound’ to me!!!

Let me say this though: this should NOT detract from the ‘real’ systems i.e. Wilder’s stuff. The way I see it is if this works it will be the ‘bread and butter’ money and Wilder’s stuff will be the ‘investment riches’ at the end of the day. Just my opinion and that’s how I will continue for myself anyway.

By the time you get this message your exams will be over (and I’ll be in bed) and I hope that they all went very well for you (which I somehow think they did). Anything I can help you with regarding the Swing Index System then feel free to ask.

By the way: I have to publicly thank a ‘new friend’ that I made this week (Brian) who has sat with me the whole day giving input on this new ‘little thing’ that I’m trying out. Thanks for listening!!!

109

Hi Dale,

I’m new to forex, and after reading your ‘P SAR - that’s all!’ thread and now this thread, I have decided to order Wilder’s book off Amazon.com (should be with me in 2 weeks).

I’m really interested in learning the SI system from the book once I receive it as you seem to have had quite a lot of success from it - is this system still treating you well? What kind of results (pipwise) are you getting from it at the moment? Also, would you recommend it be used with commodities/equity/indices rather than Forex?

I believe I have already learn’t a lot more from your experiences in these two threads than I think I would ever learn from courses that would cost be thousands of $$!

Many thanks,
Tom

110

Hi Tom, and welcome to ‘the business’.

Pleased to hear about the book. I don’t think you’ll be sorry and so far it would appear that, in addition to myself, there are one or two others that can vouch for the effectiveness of it’s content!!!

I appreciate the good and kind words about the ‘Parabolic SAR - that’s all!!!’ thread. I sometimes go back over that thread now and then and sometimes it makes me feel foolish, sometimes it makes me feel sad, and sometimes it makes me ‘laugh my head off’, but at the end of the day I think it shows what this business can do TO you if you’re not careful and also what it can do FOR you if you approach it the right way and, as you say, I do believe that it contains an element of ‘brutal honesty’ that was shared by everyone and that ‘low down’ you will NOT find in any book on trading or on a brokers website or disclaimer. Anyway: thanks for going through it.

Wilder himself will not rate the systems in the book and I personally don’t think you can rate them against each other either i.e. they ALL work (well) but you need to find the one that suits your ‘trading personality’ I think. For instance: the Parabolic Time Price System (which really is just Parabolic SAR and has been covered ‘every which way from Sunday’ in the old thread) requires LOADS of patience, a fair amount of free margin / capital, has very little ‘action’ BUT is EXTREMELY effective in ‘the long run’ and requires very little ‘maintenance’. The Volatility System requires LOADS of patience (and I cannot stress the fact enough that it also requires LOADS of free margin / capital) BUT it will probably generate the most profit with the least amount of effort on the traders part. The Trend Balance Point System and the Reaction Trend System require more ‘maintenance’ but are also very effective and they have ‘action’ every day if that’s what you ‘need’. The Directional Movement System is nothing new i.e. it’s based on ADX which is included with most trading platforms (although the book gives you insight into the CORRECT use of ADX which most people, who have not done their ‘homework’, tend to use incorrectly). As you know I favour the Swing Index System because it has loads of ‘action’ and needs loads of ‘maintenance’ and it suits my ‘trading personality’ i.e. I ‘need’ to ‘tinker’ about with a system all of the time otherwise I get bored and this allows me to ‘shine’ as it were.

As far as pips go I never count them so right now I could not even tell you with any accuracy how many pips I make on average. I tend to look at the percentage gained of my monthly starting capital at the end of each month or period. I think that it would be an intersing excercise to do though i.e. maybe at the end of this month I’ll work out the pips made or lost per trade and post the results. I can tell you that since I’ve been using the Swing Index System my percentage can can vary between 50% and the highest so far has been 280% BUT let me qualify the statement by saying that it depends on what has been traded during the month. For example: during the month that I was ‘up’ 280% I traded the Brasilian Bovespa Index once or twice during that month (using signals from the Swing Index System) and this index can move $500 (either way) in minutes (and has a tendency to takes ‘years off of your life’ while you’re in a position because of the ‘violence’ of the moves). That particular month I also did some ‘stirling’ trades on Soybeans (which is also a ‘high payer’). What I’m saying is that taking those few trades out of the equation my percentage gain was probably only around 100% that month and would have been made up mostly on trades on forex pairs, the Dow, Nasdaq, and S&P 500. The point I’m trying to make is that there is no way you can expect gains in that ‘realm’ during the normal course of trading with ANY system INCLUDING the Swing Index System I don’t think. While I cannot say that the BIG trades were ‘luck’ (because they were not i.e. I entered as per the Swing Index System) I had ‘no business’ trading the Bovespa with my capital so if you look at it THAT way it was a ‘chance’ that I took which paid off BUT it could very easily have gone the other way ‘in a heartbeat’. Get the picture??? (Sometimes I ‘slip’ and get up to my old ‘overtrading antics’)!!! Not good!!! Lucky that time!!! Not sustainable though.

As far as equities, commodities, metals, and oil vs forex pairs: I’ve been quite vocal about this in the past and I ‘stick by it’. I don’t like forex pairs, I don’t like the way they move, and I don’t like the money that they have cost me in losses. While I’m sure that there are LOADS of people who ONLY trade forex pairs these trades either don’t work out for me or the rewards are not comensurate (geez now there is a word I have not used for a long time) with the amount of time and effort involved. I also don’t believe that they ‘follow the rules’ as does the Dow for example. But this is JUST ME. If you’re asking for MY advice I’d steer you in the direction of the Dow, Nasdaq, and S&P 500 (futures) to start with then move on to metals, commodities, and oil when you’ve built up a bit (a lot) of capital. The only problem is that the amount of capital that you have available to you to start with will limit your choice of broker and therefore your choice of tradeable instruments. I’m working on something for people who want to open accounts with GCI Financial (GCI Trading???) that have a minimum of $500 starting capital (GCI requires a minimum of $2 000) but I can only do this if I have more clients to justify the arrangement. GCI has EVERYTHING on offer so that’s why this is such a ‘big deal’ to sort something out.

I hope this clears a few things up for you (well from my point of view anyway).

Any questions: that’s what we’re all here for!!!

111

Well folks,

That is ME for the week!!! Fantastic week!!! Thanks to everyone on the thread, the markets, Mr Wilder, and the moon (don’t ask)!!!

OBVIOUSLY I’ll be checking the thread over the weekend (probably ever hour or so you know) so any input or questions welcome!!!

For those of you who are trying to succeed in this business but for some or the other reason it just does not seem to be working for you: have patience, do not over trade your account, stick to your system, and you WILL succeed and WHEN you do it will be more than wealth that you gain I can assure you.

And if my creditors are reading this: it will NOT be TOO much longer now I promise!!! Your patience is GREATLY appreciated!!!

112

Are the indices and futures the same thing Dale? Also, I was once told that Futures are more riskier than Forex because sometimes you are not able to get out of a futures contract and you are pretty much stuck with it (even if it means you losing all of the initial deposit that you put into your brokers account + liable for even more $$ after that) Is this true? Or was I told wrongly? And why would you recommend these futures/indices in front of commodities?

Oh yeah… I would be interested in the $500 account with GCI if you are able to pull some strings!

Many thanks for your wisdom words,
Tom

113

Good morning.

The indices (indexes???) (never quite sure which word to use but always seem to use ‘indices’) is a term that is ‘loosely’ used to refer to a whole RANGE of different instruments. An index is made up of underlying stocks. The S&P 500 for example is an ‘average’ of the prices of the stocks of 500 companies listed on the NYSE, the Dow is made of 30 stocks of ‘blue chip’ companies listed on the NYSE. Same with the Nasdaq 100 i.e. consists of the stocks of 100 companies listed on the NYSE etc. Each of these companies fall into different sectors and each sector has a different ‘weighting’ on the index and as such on the price movement of the index e.g. the S&P 500 is financial and banking stocks ‘heavy’ while the Nasdaq 100 is tech stocks ‘heavy’ etc. Price movement in the underlying stocks causes movement in the associated index. While this may seem ‘daunting’ at first it is not I can assure you. As far as you being able to lose MORE money than you put in it would depend which options you are trading and on the broker you are trading with and a variety of other factors. Suffice to say that for people like you and me and the brokers that we are able to trade with due to our limited resources this cannot and will not happen i.e. same as forex. The stuff you’ve heard about concerns the ‘big time’ players and while whatever you have heard is probably quite true it is not a concern for people like you and me. As far as not being able to get out of a trade again: not a concern for people like you and I. Having said that be aware that certain commodities are subject to ‘limit’ moves e.g. the price of Soybeans can only move a certain amount during a session and if it tried to move MORE than the ‘limit’ then trading in one direction or the other would be halted until the next day. This is to stop ‘frantic’ buying and selling in those markets (sort of like a ‘cooling off period’) and HUGE price swings. This means, for example, that let’s say the price of Soybeans was going down BIG TIME during a session and the price moved the ‘limit’ early on during the session (moved down in this example). You would at that point ONLY be able to go long or buy Soybeans and would not be able to go short or sell until the next day (session). Problem: if you were ALREADY long you would not be able to realise your loss and close out your position until the next day and if the price continued to move down there is nothing you can do about it. After one of the ‘crashes’ (I forget which one) a type of ‘limit’ was introduced on the Dow etc. (I think it was called the 20% or 25% rule or something like that i.e. I forget now but you can look it up on the Internet). The idea was that you could not place orders MORE than 20% or 25% below the closing price of the day before (or something like that). This was to stop ‘panick’ selling and thus avoid another ‘crash’. While I MAY not be too clear on the ‘ins and outs’ of this ‘rule’ suffice to say that it has been subsequently ‘done away with’ so it’s not something that you have to worry about (at least not on the Dow, Nasdaq, and S&P 500)!!! The reason that I (ME) would recommend that you start with the Dow (futures) is because it is ‘manageable’ i.e. each single point movement on the Dow (futures) is $1 (mini lot at GCI which will cost you $50 of margin). There is unbelievable intra day movement (volatility) and you can make some good money while not ‘losing your shirt’. The value of a pip (‘tick’ actually i.e. ‘pip’ only refers to forex) movement on commodities can be WAY more than $1 and with a $50 lot at 200:1 leverage on Soybeans this CAN result in a loss of $500 in a matter of minutes i.e. whole account ‘wiped out’ in a heartbeat. See the point? I suppose that trading one mini lot of the Dow is the ‘equities equivalent’ of trading one mini lot of EUR/USD in forex. I hope this clears things up for you somewhat.

The best thing that you can do for yourself is open a demo CFD account at GCI Financial and then you will be able to get an idea of how the different indices and commodites ‘move’. DO NOT be fooled by the demo however. The prices will be the same as the live accounts BUT order execution is NOT e.g. orders on the Dow, S&P 500, and Nasdaq are executed in realtime on the LIVE accounts i.e. no dealing desk and the SAME on the DEMO account BUT orders on Soybeans are executed in realtime on the DEMO account BUT the LIVE account orders for Soybeans go through the dealing desk so sometimes you may wait a minute or two for a Soybeans order to be executed on the LIVE account and you will nearly always be requoted. Nothing to worry about i.e. THIS IS A NORMAL MARKET (this ‘business’ of people getting upset when they are requoted is nonsense i.e. that is how the REAL market works).

There is ONE thing I need to make quite clear here to you and everybody else: I am makiing this ‘deal’ to allow people to open accounts with $500 minimum at GCI (given enough clients) BUT this DOES NOT mean that it’s a good idea i.e. I believe that at GCI their $2K minimum is a good thing. It’s REAL easy to wipe out $500 with 200:1 leverage at GCI I can assure you. My recommendation for anybody with less than $2K (and a minimum of $500) would be to rather open an account with Delta and trade micro lots until you’ve built up AT LEAST the $2K. Unfortuanately this exlcudes you from being able to trade the futures and commodities although you can trade Gold and Silver and Oil (and the ‘proper’ or ‘main’ Dow IF you can afford $700 per lot)!!!

114

Thanks for your quick reply Dale!

So for all the instruments you trade (forex, commodities, futures etc) you basically stick with Wilder’s SI system? (I don’t know much about it at the moment… but will study it thoroughly when I receive the book!!)

Is it just the SI system you trade with now that’s found you success? Or do you add other systems to it as well (I’ve heard the volatility system mentioned around).

Cheers,
Tom

(I can’t wait to receive the book!)

115

Hi,

Me: I am only trading the SI System now (and currently testing a little ‘variation’ on the order entry to try and keep away from ‘spikes’ in the price which result in a bad trade now and then) and this is ‘the ticket’ for me. The Volatility System is a great system BUT again does not ‘suit’ ME i.e. LOOOOONNNNNGGGGGG trades (on the daily charts a trade could be MONTHS long) and although EXTREMELY profitable by the looks of things requires LOADS of patience and LOADS of margin and ‘nerves of steel’ in my opinion. I have tried IT on the shorter timeframes with mixed success i.e. too much ‘market noise’ to make it a winner on a short timeframe in my opinion (although you MAY find that it works on the 4 hour timeframe which I did not try i.e. to me if I’m going to trade the 4 hour then I may as well be trading the daily and have done with it). The Swing Index System can be traded on ANY timeframe and ironically (I say ironically because up until about a week or two ago I would not even LOOK at any other timeframe other than the daily) it seems to give BETTER results on the 1 hour than the the daily would you believe and I"m starting to think that this is THE ONLY ‘tweak’ needed with the system i.e. shortening of the timeframe. By doing this you’re in all the intra day moves up and down whereas on the daily chart you miss these moves. I never thought I see the day when I was a proponent of the 1 hour timeframe but you’re never too old to learn I guess. It does make logical sense though. Think about it: the book was written in 1978 and I don’t think they knew what the REAL meaning of ‘volatility’ WAS back then!!! I have a documentary on the October 1987 ‘crash’. At the time they actually reported the fact that in a single day the Dow dropped 50 points!!! Big headlines!!! 50 Points!!! If the Dow moves anything less than 150 - 200 points during a session nowadays then the market may as well be closed!!! See my point. I’ve been thinking about converting the documentary to MPEG format and putting it on a website for everyone to view (if they want). I love watching it (I normally watch it when I’m ‘piss*d’ and the markets are closed like over a weekend. Sad I know)!!! It’s very interesting though and it gives you insight into what CAN happen when things start to go ‘pear shaped’ and people get ‘scared’ and ‘fear’ takes over the market. Riveting sutff to me!!! It also gives you an insight as to WHY they introduced the ‘limits’ and the 20% or 25% rule that I mentioned earlier (for a while anyway). Hmmm. Just had a thought. Maybe I could put it on YouTube for us. I’ll see.

116

Evening all, Dale and everyone else,

I just got home after a 2 week job offshore and my Wilder book has arrived. Woo Hoo! :smiley:

I’ve got 12 pages or so of this thread to catch up on and of course I’ve got to work my way through the book as well. Thanks again for the discount and the code Dale.

Hope to be involved once I’m up to speed.

Best Regards
Boca

117

Further to my post above (with regard to the documentary):

I did not realise it at the time of posting but this documentary is available direct (for purchase) from CNBC so I would be unable to post a copy on YouTube as this would be a violation of copyright.

I also cannot insert the link here because the site will not accept it.

The documentary is called 'October ‘87: Crash and Comeback’. Google ‘october 1987 crash and comeback video’ and you will find some links there (as I mentioned previously it is avaliable direct from CNBC and it would also appear that it is available for purchase from Amazon as well).

If you can: buy it (or rent it if possible). It gives some amazing insight into the world of stock market trading and the similarities between what happened back then and what has happened in the past couple of months are uncanny.

And while I’m on the subject it would certainly appear that the Dow has averted disaster (for now anyway) and, if Wilder’s ‘Delta Phenomenon’ is anything to go by, should rally for at least the next two weeks or so (I’ll attach a chart to this post sometime this weekend after I’ve drawn the ‘lines’ again). Again, according to ‘The Delta Phenomenon’ this may be a temporary ‘reprieve’ i.e. according to ‘The Delta Phenomenon’ look for the Dow to get to 10 000 or below: this drop to be starting somewhere around 21 April 2008 and only reaching a bottom somewhere around 20 May 2008. Could this be the NEXT wave of sub-prime casualties (credit card companies)??? Already VISA is looking to raise cash via an IPO (as of Thursday last week VISA stocks are tradeable at Delta Stock and the stocks MAY NOT be shorted i.e. only long orders)??? A foreboding of things to come??? Watch this space!!!

118

I was wondering if you had any feedback on the effectiveness of the Awesome oscillator in conjunction with the accelerator/decelerator indicator

thanks

119

Good day all,

Recieved my book recently so just trying to make my way through it and understand it fully. I’m also half way through “Japanese Candlesticks” by S.Nison so it’s pretty full on reading at my place at the momement, Anyway, on to the subject in hand.

In section II of the book, the section about PSAR (sorry to talk about this again) it mentions that the SAR point should increase by .02 every day as long as a new high is made. I picked up a chart and went through and calculated the position of the SAR dot and is quite fascinating to see how it all works out.

Great stuff! On to the next section.

120

Hi Boca,

Agreed: it IS fascinating to see how the thing works isn’t it? What’s even MORE fascinating is that if you pick 10 brokers or charting packages I’ll almost guarantee that 5 of them will give you an incorrect Parabolic SAR parabola!!! Not ‘out’ by much but incorrect nevertheless.

Oh and don’t worry about bringing up Parabolic SAR (again). It’s STILL Wilder and it’s CORRECTLY detailed in the book. I myself, however, cannot think of ANYTHING more that I personally could contribute to a discussion on Parabolic SAR i.e. the other thread is 222 pages long and counting AND someone has started ANOTHER thread on it because the original ‘is just too much time consuming reading’ from some!!!

I think you’re also going to find the section on ADX interesting i.e. there is a lot of info there on the CORRECT use of ADX / ADXR. Same with RSI.

Anyway: good reading. Let us know what you think of Steve Nison’s book as well i.e. I ‘toyed’ with the idea of buying it once but seeing that I have ‘issues’ recognizing the patterns as they are forming EVEN WITH the ‘forests’ of paper that I printed out on the subject I figured it would not help me at all and it would therefore just be a waste of $$$ for me.

I was actually saying to someone yesterday: I thought this thread would take off ‘like a rocket’ i.e. it is ALMOST a ‘licence to print money’ and yet for some or the other reason the ‘free’ systems STILL seem to be the more popular regardless of the fact that a lot of them MAY have been developed by someone who’s been trading a demo account for two weeks and got ‘lucky’ with what they assume to be a ‘holy grail’ system (and I include myself in that statement by the way i.e. when I started the ‘Parabolic SAR - that’s all!!!’ thread this was just about the case and look where I ended up because of it)!!! Don’t get me wrong i.e. I’m not trying to ‘stifle’ other peoples creativity or ingenuity but we are here to make a living not prove a point (well that goes for me anyway) (see my signature)!!!

Anyway: for those prepared to do the ‘slog’ the rewards are great.

Edit:

Just remember to check the ‘errata’ post at the beginning of the thread i.e. you’ll save yourself LOADS of time by NOT having to spend DAYS AND DAYS trying agree your own workings to workings in the book where there are indeed mistakes here and there!!!