Hey Dale… how has your weekend been? I’ve been studying the SI and I think I have it down, I just had a few questions I wanted to ask just to confirm that my understanding is 100%…
-
When you enter initially (after above/below a significant swing point) the [U]INITIAL SAR[/U] is the [U]MOST RECENT[/U] swing point in the other direction, so if you are going short then the SAR is the [U]most recent[/U] high swing point, correct?
-
After this, the SAR doesn’t change until a new low swing point is made, which then makes the [U]most recent[/U] high swing point the new SAR. This repeats itself every time a new low swing point is made, correct?
-
You don’t use the trailing index SAR unless the ASI reverses on itself 60 points away from the most favorable ASI since you were in the trade. When you do this, the SAR becomes the most extreme price since the 60 point drop, which usually is going to be the high/low that occurred on the day that the ASI dropped by 60 points.
-
The SAR used is always the closest one calculated, so if you have a 60 point ASI change which triggers the trailing index sar, if the “standard” SAR calculated by the previous high/low swing point is still closer to the price, then you are still going to use that as the SAR regardless of the trailing sar being activated.
-
I was pretty sure about this one, but just to make sure: The SAR is if the price [U]closes[/U] above/below that point, not if it simply hits that price sometime during the day.
Also, I was wondering what you did in a certain circumstance which seems to happen sometimes with the TBP system, I’ve having a bit of a dilemma. For example, I went short gold on wednesday night at about 938, and my target was 903 or 904 I think. The price went within a dollar of this target, but it ended the day at 918 or so. I was wondering if you would take the profit on this trade since it is favorable for you, and then just reopen the same position at the current price with the updated target, which is 906 I believe. I think this is a good idea because you are basically “locking in” these profits even though the target wasn’t hit, but since you are reopening the same position you are still going for the target, so for example I would reopen the same position at 918, going for the target at 906. To me this seems like a good way to “insure” some profit on the trade without giving up any more potential profit since you are reopening at the current price and still going for the same target level you would be going for if you had never closed the original trade.
In other words: No matter what, if at the close of the day your TBP position is showing a profit, take it and then reopen the same position at the current market price going for the same target/stop loss that you normally would.
Anyway, hope this makes sense as I believe this may be a way to slightly improve the TBP system, and I look forward to your feedback…
-Nick
Hi Nick.
As far as the SI System goes you’ve ‘got it down 1000%’. That’s EXACTLY it. One thing that you will notice, however, is that the Trailing Index SAR is normally ALWAYS the closest SAR (definitely on forex pairs anyway) so don’t get worried that you’re always finding this. At first I thought it was a mistake on my part BUT I think it’s got a lot AGAIN to do with the difference in quoted prices i.e. the ‘PIPFACTOR’. As a matter of fact a lot of the time with forex pairs I find that I’m REALLY just trading the Trailing Index SAR not the Swing Points i.e. the Trailing Index SAR normally gives you a signal to stop and reverse LONG before a HSP or LSP is giving the signal. EXACTLY why this is I am not sure. You COULD trade the system WITHOUT USING the Trailing Index SAR i.e. ONLY trade the HSP’s and LSP’s BUT from what I’ve seen this keeps you out of LOADS and LOADS of highly profitable trades. On the other hand on the daily timeframe the HSP’s and the LSP’s are the more ‘sure’ signals. I really think it’s got to do with the volatility that our market(s) has / have nowadays and the fact that things ‘happen faster’ than they did in 1978. It’s the only explanation I can think of.
Also: that ‘business’ of placing an order ‘a few ticks above or below the high or the low’ does not work very well (not in todays markets anyway) (he uses 5 ticks or points or pips). I use 2 x the spread instead and this seems to work FAR better i.e. it ‘adjusts’ itself particular to the instrument being traded. In other words: it would suicidal to place an order 5 pips above or below the high or the low on a pair like GBP/ZAR for instance (the spread is 500 pips) because the order WILL ALWAYS get executed false entry or not. EUR/USD would be 6 pips normally. I’m certainly not advocating that you trade something like GBP/ZAR UNLESS you’ve got a LOT of money but suffice to say the system will work. Also: as I have stated previously: this system appears to generate FAR GREATER profits on the 1 hour timeframe (that’s the minimum I reckon i.e. I tried 30 minutes and far too much ‘market noise’ so no point in testing anything less). I also use an additional little ‘trick’ for order placement i.e. I have a 7 period EMA of the (H+L+C)/3 (one of HIS ‘favourite’ formulae by the looks of things) and when I’m unsure about the entry then I check to see if the price has CLOSED above or below this EMA AND ONLY THEN will I place an order at 2 x the spread away from the high or the low. Yes, again, like every other ‘addition’ to any system, it keeps you out of some ‘magnificent’ trades BUT it also keeps you out of most bad ones (this is pretty much an ‘offshoot’ of that ‘little system’ that I described ealier to you AND if you use BOTH together you can add to positions as well i.e. if you’re ALREADY in a SI System trade you add to your current position based on signals from the ‘little system’ that I described). Again: don’t get me wrong i.e. the SI System works perfectly in its ‘original’ form BUT we are here to MAXIMISE profits are we not???
AND BY THE WAY: Capital mangement EVEN WITH THIS SYSTEM is crucial to your success. I have become EVEN MORE conservative than Wilder i.e. he says to NEVER MARGIN more than 60% of your capital at any one time (I now stick to 30%) and he says to NOT EVER margin more than 15% of your capital on a single instrument (position???) and I stick as close to 7.5% as I can get. You cannot BELIEVE the ‘piece of mind’ this gives you when you’re trading. No stress and no possibility of overtrading etc. Remember that there WILL BE drawdowns with this system LIKE ANY OTHER AND you are not really using ‘stops’ AS SUCH with this system either i.e. your SAR points are actually your stops and sometimes these CAN be very far away (based on the HSP’s and the LSP’s anyway i.e. the Trailing Index SAR is normally VERY close as he quite correctly states in the book).
TBP System:
I never thought about it but I agree with you wholeheartedly BECAUSE if you’re in a profit now and your TP has not been hit during the day then the TP is going to move almost always against you i.e. your TP today IF HIT would have generated MORE profit than leaving the same position open with a lower TP the next day which is normally what the system will give you (sometimes holding on to the position and adjusting the TP for the next day may even result in a loss).
Thanks for your quick response Dale. Sure is interesting stuff working my way through the book.
I have a couple of questions on Section III though.
1, The book details how to calculate ATR. Is it not the case now that our brokers software package caculates this for us saving us a bit of work here? We can use the current ATR supplied by the broker?
2, If I understand it correctly, ATR x C (a number between 2.8 - 3.1) gives us our SAR point when added or subracted to the last SIC? This SAR point is only valid to a close so essentially, we would really be trading without Stops if using this system? Good discipline required me thinks.
Thanks and Regards
Boca
Hey Boca,
You ALSO have everything 1000% correct!!!
You are quite right i.e. MOST of the Volatility System’s ‘instructions’ detail the method of calculating the TR and the ATR and YES most packages have it ‘built in’ (although I have learned to NOT trust what the broker gives me i.e. I now ALWAYS do a few manual calculations to ENSURE that the ATR I’m being given is correct)!!! So yes: to answer your question the ARC REALLY is just the ATR x the constant (whatever you choose to use).
Also: YES you are not using stops with this system and THAT is why I keep ‘banging on’ about the fact that this system (I think) is NOT for the ‘feinthearted’ or ‘undercapitalized’ of us i.e. the SAR moves AWAY from the price based on volatility and there is always the chance that the price could keep moving against you BUT IN SMALL INCREMENTS i.e. not enough to signal a stop and reverse and if this happens who knows where the bottom is??? I have NO DOUBT that with enough capital and patience this IS probably the ‘top’ system in the book BUT we all have to build our accounts up to a point where it is SAFE to use it I think. And with NONE of his systems does it help to add stops ‘to the mix’ i.e. you will almost always get stopped out for no good reason. I think the only system that uses a ‘physical stop’ is the TBP System. ALL the others are based on a stop and reverse for a ‘stop’ (the SI System does mention the fact that your initial stop is the last HSP or LSP BUT if you look closely THESE stops are usually so far away from the price that they’re ‘outta sight’ AND the Trailing Index SAR WILL ALWAYS get ‘hit’ first anyway and, this is of course, a stop and reverse signal anyway).
Again Dale, thanks for your comments and answers to the questions.
I agree with you about the uncertainty of this system as you would have to choose position sizes very carefully so that your risk would be managable.
Thanks
Boca
Hi Dale, how’s the trading this week going so far? So from your experience the SI is more effective on the 1 hour timeframe than the daily? I have 1 hour and 3 hour charts with oanda, I wonder if the 3 hour would be any good…
Also, I was wondering how that little system you created with the stop orders has been going… I believe you said that you tried it with silver initially and got good results but that you were going to try it with some other instruments… as for me, I have the spreadsheet for the SI completed and I am going to plug in the figures from the book in a little while to make sure everything is correct. I still have the aud/jpy volatility trade open, and last week I opened a long position with the usd/cad, it is currently down about 60 pips as it has retraced a bit but the volatility system is keeping me in the trade for the long run, gotta keep following it.
Hi,
My trades are not going too well this week so far because I have not done any trades this week so far!!! I’ve been too busy updating indicators and adding stuff to the GCI platform unfortuanately (but today it looks like I’ll be able to concentrate on trading again)!!!
Timeframes:
I think the timeframe depends on the instrument being traded. For example: the Dow moves LOADS intraday and if you’re only trading the daily timeframe then you miss these moves. On the other hand there may be other instruments that do NOT move this much intraday so there’d be little point in trading them on a short timeframe. See my point? Soybeans is a good example of this i.e. Soybeans very rarely moves ‘up and down’ during a single session i.e. most times the price is either up or it’s down in a session so it makes little or no difference whether you’re trading Soybeans on the daily timeframe or the 1 hour timeframe. See the difference? Of course trading the shorter timeframes limits the number of instruments you can follow at any one time i.e. if you’re trying to follow too many instruments you simply just do not have time to update the ASI and place orders i.e. most times the price will have already moved past your order price by the time you get to placing the order EVEN WITH my ‘Integrated SI System Indicator’!!! Just something to bear in mind of course.
I’m please to hear about the Volatility System trades. Keep us updated if you don’t mind.
As far as the other ‘little system’ is concerned (it definitely needs a name for reference purposes) it seems to work on everything (and well I might add). The strange thing is that I seem to be coming up with REAL simple stuff lately i.e. the ‘it’s so simple it’s too simple to have lasting merit’ but still I have not come across ‘the pitfall’ as yet and believe me I keep looking for one!!! I’m currently demo trading it (yes me: demo trading would you believe) on various instruments and so far so good. When I’m happy I’ll post some results.
Hi Dale, just wanted to give a quick update on my volatility system trades. Still holding on to the original AUD/JPY trade, by the looks of the chart an obvious downtrend has been in place for several weeks now (the trade was entered 27 days ago) and the SAR point is getting closer and closer to the price, so a reversal may be coming up in the next week possibly. Right now it is at about +450 pips, it’s been as high as +700 or so. USD/CAD was in the red a bit but is now approaching the entry price again, it is back above 1.0200 so far today. GBP/JPY is still a bit away from entry (long) but the decreased volatility in the last few days is bringing the SAR point closer, it was around 202.00 for today. Gold is VERY close to a short entry, which makes me a bit nervous since it has been in such a long uptrend for so long. Even using a multiplier of 3.0 (I normally use 2.8) it will be within a dollar or two of a short entry, we’ll see what happens today.
Finally got around to testing my SI spreadsheet by using the figures from the book, and everything looks good. I think starting tomorrow I’m going to start following it and entering small trades with the following: gold, gbp/jpy, aud/jpy, and maybe usd/cad. I believe you said earlier that it seemed to work best with the 1 hour timeframe because of the increased volatility compared to the 1970s when the book was written… do you still feel this way? If so I may only follow gold and gbp/jpy because the constant data entry will make it harder to follow more instruments. Also, I was wondering: do you think that using more than one system at the same time on the same instrument is okay? Obviously gold is very high on the CSI and is a good instrument to trade, but do you think using the volatility system, the TBP, and SI is too much? I reckon that the TBP system is still okay because it is pretty much an intraday system and doesn’t require a lot of directional movement to work well. If the SI is used on a 1hr timeframe it would appear to be a shorter term system too, and the volatility system an obviously longer-term system. Based on this, I don’t see any harm in following all 3 at the same time, but if you get conflicting information among the systems you could have a problem.
How is the “simple little system” working out lately? Are you using a 1hr timeframe with that as well? Also, when you mentioned above a “filter” for the system as a 7 period ema of the H+L+C/3, was that for the “simple little system” or the SI? I am a bit confused as you were discussing both in that post and also combining them together in some way.
Anyway, I am enjoying my short break from school as it is giving me more time to spend on trading, next term is looking to be a bit more demanding as I am taking 3 finance classes, but we’ll see how it goes. :o
Hope things are going well for you this week.
-Nick
Hi Nick,
Thanks for the info on the Volatility System trades. If those trades all close above or below the SAR will they all be profitable or will some of them stop and reverse at a loss? Just curious.
I’m still happy with the SI System on the 1 hour i.e. working well although I’ve been kinda ‘messing around’ with that ‘little system’ more lately to be honest not for any good reason i.e. just being me again!!! The ONLY problem I have with the SI System / 1 hour is the fact that it limits you to the number of instruments that you can ‘track’ i.e. you cannot have a whole long list of instruments that you want to trade AND have two or three trading accounts ‘to boot’ as it is just not physically possible to be able to check the Swing Index, place orders, remove orders, etc. etc. etc. because by the time you get to the 3rd or 4th instrument the price has normally already gone past your price. Add to this the Volatility System and the TBP System and I don’t see how you’re going to cope well BUT try it and see just don’t overtrade is all (of course). As far as getting conflicting signals between the systems is concerned I’m not sure I’d worry too much about it i.e. they’re all designed to work a different way so you may find that although all three are giving conflicting signals it does not necessarily mean that ANY of them are wrong.
I’ve traded Gold and Silver a little this week with not such spectacular results i.e. not as much movement as I would have expected on the 1 hour timeframe. I’m FAST starting to see why GBP/JPY is so popular i.e. because of it’s volatility. For me (of course) nothing beats the indices but I have not done too much this week at all (to be honest I’ve got the flu and it’s getting me down big time).
The ‘simple little system’ seems to work well but in the past day or two I’ve found that the strangest thing is that all it is doing really is ‘mimmicking’ the Swing Index System. Try it with both on a chart and you’ll see. Sometimes the ‘simple little system’ will get you into the trade earlier and sometimes it will give you a false signal that will cause you to stop and reverse and take a small loss but the same thing happens with the Swing Index System whether you use the ‘simple little system’ as a filter or not. Basically after ‘messing around’ with it (both together) for the past day or two I’m starting to think that it’s ‘either / or’ again i.e. no point in using them together and maybe just complicating things (which seems to have become my ‘trading speciality’ as if the Swing Index System is not complicated enough on its own for crying out aloud)!!! The main problem with BOTH is WHERE to place the orders. I thought the EMA thing would keep you away from those orders that get hit due to a spike but no matter what you do you’re etither too far or too close or whatever. It does not matter how you ‘slice it’ i.e. it’s just a fact of ‘trading life’ that orders are going to be hit due to spikes or whatever and this will result in a loss on the stop and reverse and there is no way around it.
While I’m on the subject of order placement here is another ‘idea’ that I’ve ‘come up with’ that MAY keep you out of bad trades i.e. orders getting executed and then the price immediately retraces on you and you end up (possibly) having to stop and reverse at a loss (for the Swing Index System):
Instead of placing your order immediately on the close WAIT for the price to TEST this level first. Wait for it to retrace for a bit and THEN place your order. This of course DOES have the drawback that your order price is hit and the price just continues to ‘steam roll’ it’s way straight in your direction without stopping. Having said that: I’m seeing more and more often that when an order is ‘bad’ the price hits the order and immediately retraces and changes direction i.e. it does not hit the order, retrace, come back to the order price, and then retrace again. Basically from what I have been seeing very often in the past two or three days is that the order price gets tested and if the price then retraces it will either keep on going in the opposite direction OR if it gets back to your order price it then just keeps on going in your favour. Like I said: could be a ‘double edged sword’ i.e. you COULD very well miss a good trade BUT it sure looks like this little ‘manoeuvre’ will keep you out of a lot of ‘false starts’ as it were. Just a suggestion.
Hi Dale, I am starting to follow gbp/jpy with the “simple little system” on the 1hr timeframe and I had a quick question… if you place a stop order at the close of a candle, the hour goes by and the candle closes without the order being triggered, yet the candle still closed in the same direction, do you leave the stop order price alone or do you change it to the high/low plus the spread of the candle that just closed?
Also, to answer your question about my volatility trades, the aud/jpy would still be in profit if the sar is hit, about 150 pips or so right now. The usd/cad trade which was just opened several days ago would be closed at a loss of about 200 pips right now, though usd/cad has been ranging lately and the sar point is getting closer to the price so this should be reduced. I’m nervous about gold today, it looks like it is going to close low enough to enter a volatility trade, if it does I will enter it, but probably a pretty small trade size though.
Hi Nick,
It’s funny that you should ask that question because the answer to it (as it relates to BOTH systems) just about kept me awake last night!!! I have the SAME issue with the Swing Index System i.e. what if you get an entry or stop and reverse signal (valid entries according to the system of course) and the bar closes and does not hit the order and the NEXT bar ALSO closes but only SLIGHTLY up or down from the previous bar. What do you do with the order??? It’s not covered in the book!!! We’ll have to help each other out on this one i.e. follow some trades through and see what the result of leaving the order / changing the order / removing the order would / should / could have been!!!
Thanks for the Volatility System info. I see / hear what you’re saying about Gold. Gold is a problem for me (always has been) i.e. again the analysts are saying that it’s going to go to $1 200 an ounce or more but the question is WHEN i.e. the last time they made a ‘prediction’ like this it took over six months to get there (and cost me a sh*tpile of money in the interim as you probably know). I can only assume that if Gold’s VS SAR is penetrated it would be a short entry signal. The problem is: ‘who knows’??? The last time these analysts predicted the Gold price not only did it take over six months to get to the price (as previously stated) BUT it ALSO corrected by MILES and MILES before it went up again. Short or long??? Correct or no??? I’m afraid I cannot help you on this one either!!! Sorry.
Yes, this is a dilemma. So far I’ve just been leaving the stop order alone and not changing it to the newest candle that just closed. Maybe it’s just the market right now, or maybe I’m not placing my orders far enough away from the high/low, but so far on the 1hr timeframe I haven’t had very good results with gbp/jpy. The spread is 6 pips, so I am placing my stop orders 10-12 pips away from the high/low, do you think this is too close?
Also, I have pretty much come to the conclusion that there is no way I can trade off the 1hr timeframes for a long period of time. First of all, when am I supposed to sleep? 
I don’t think I can set alerts with oanda, and even if I could, I really don’t want to be waking up in the middle of the night to look at charts, especially when I have class the next day. Even the 3 or 4hr charts wouldn’t work for me because I would miss at least one or two candles during the night. I have to ask you: how do you deal with this problem? For now I might have to stick with trading off the daily charts, which seems to be fine for the TBP and volatility systems, but I believe you said earlier that the SI seemed to work better for you on the 1hr charts, do you think it would still be worthwhile and profitable if I just stuck to the daily charts?
One more thing, how is that business with GCI going? I want to switch over to trading the “good stuff” and leave these stupid forex pairs alone, in a few weeks I should have close to $1,000 I could open an account with, but I want to trade the commodities obviously so I was wondering if they would let me open an account with this amount?
I also entered that short gold volatility trade today, we’ll see what happens…
Hi,
Tell you what I’m doing: I have my charts set to the ‘middle’ price i.e. not ‘bid’ or ‘ask’ and then I’m placing my orders 1.5 x the spread + 5 points (which I supposed is equal to the spread + 5 pips on a ‘normal’ chart). This is keeping me out of most bad trades along with the ‘wait for a test and a retraction’ ‘action’.
As far as the 1 hour is concerned I sit here in front of this stuff from anywhere around 06h00 in the morning until 03h00 the next morning (but do take a nap most afternoons though of course AND THEN spend most of the weekend sleeping)!!! That’s how I cope!!! Not much of a life I know BUT prepared to do it while I’m still ‘loving the game’!!!
The SI System will work on anything and any timeframe. The longer the timeframe the more sure you have to be that you have a lot of free margin if things go ‘pearshaped’ and of course you have to wait for 24 hours to find out if you’re in a good trade or a bad trade BUT the system still works.
The GCI thing is still pending i.e. I would have you and one other person so far to open accounts there. I’d say to give it another three or four weeks and I should then have enough ‘clients’ (you know what I mean) to justify the deposit account. I know I’ve said this before BUT I’m saying it again though: if I do this ‘deal’ with them and people can open accounts with a minimum of $500 then ‘be it on the account holders head’ i.e. to me the ABSOLUTE minimum should be $2 000 and I personally would recommend $5 000. Just ALL bear that in mind. I know that’s not ‘child’s play’ money BUT I can assure you that you will not be sorry WHEREAS with a $500 account no matter HOW good ANY of these systems are you’re ‘skating on thin ice’ I can assure you. All you need is one really big spike up or down during a day (especially on something like Soybeans) and your account is ‘done for’. I cannot force you but can only give you advice based on what I have learned the VERY hard way. Even the Dow has been known to move 400+ points in a day and remember: if you’re working on the daily charts that means that you have to be able to be $400 DOWN if you’re on the wrong side of the trade that day and although this MAY change the next day the possibility always exists that it won’t and you have to stop and reverse and realise the loss. If that happened you’re now ALREADY down $400 and let’s say the next trade is also bad: down ANOTHER 300 points or $300 let’s say. See my point??? Put it this way: I’d say the bigger your account balance the longer timeframe you can trade but I would NOT even LOOK at trading the indices or commodities on a daily timeframe with under $5 000 at GCI. To be honest: I’ll get commission on your trades either way but my intention here is to help new traders to NOT wipe out and end up in the ‘sh*t’.
Edit:
Sorry: I’m not trying to put anyone off here i.e. it’s just that it’s happened to me MORE than once (last year). Remember that at GCI EVERTHING is traded with a 200:1 leverage and the lot sizes are ‘fixed’ ($50 or $500). I’ve seen single positions on the DAX 30 (for example) turn to $500 or so profit in a matter of hours and I’ve also seen those same positions turn into a $500 loss in an even shorter period of time (on $50 lots)!!! I’ve seen Soybeans drop limit down for the day and a $50 position go from $100 profit to $500 loss in MINUTES!!! I’ve MADE (thank goodness it was ‘MADE’ and not ‘LOST’) $840 or whatever it was in FIVE MINUTES on the Brasilian Bovespa Index on a $50 lot (something which I would not attempt to do again any time soon)!!! THIS is the REAL ‘game’ in town but this is POSSIBLY ALSO the reason why everyone sticks with forex pairs BECAUSE of this type of ‘action’. Never thought about that until now.
Dale, thanks for that input. I guess I never realized how the commodities and indices are so different from forex pairs. Looks like I might have to stick with forex pairs and gold for a while, as it looks to be a little “rich for my blood” for the time being. I was doing some reading on it, and I came across the terms “limit up”, “limit down” and “locked limit”. I know what limit up and down means, but how do you know what the limit price or the value of a limit move is for a specific instrument? This is part of the SI equation so it looks to be important. I also don’t quite understand what happens in a “locked limit” scenario, I was doing some reading and apparently it is a pretty bad thing if say, you are long soybeans and the price gets locked limit down, because the position has moved against you and since the market is locked, you can’t get out. What do you do in a situation like this?
-Nick
Hi,
You know what: I never thought about this until I read your post (very silly of me to not have thought of this before I must say) BUT I wonder if you can request a lower leverage from GCI i.e. 100:1 or even 50:1. THAT would certainly solve the problem of being ‘wiped out’ by Soybeans with less capital not so??? I have looked on their website and I don’t see this as an option anywhere BUT I WILL send them an email to ask. If it IS possible then it will solve your problem as well as quite a few others that may have the same problem but want to trade stocks and commodities!!!
Limits:
Well you’ve got it right (mostly). If the price of Soybeans moves its ‘limit’ down in a day and stays there and is now ‘locked limit’ it means that you can ONLY long Soybeans at that point i.e. not short them. There’s the problem: let’s say you WERE long Soybeans and the price dropped ‘through the floor’ i.e. ‘limit down’ and ‘locked limit’ you would NOT be able to close that position i.e. you’d have to be able to sell (short) in order to close the position but you cannot at that point. Of course the opposite would apply to a ‘limit’ move up. See the problem???
As far as knowing what the limit is for a particular commodity you can get that information (normally) from the exchange’s website (like the CBOT i.e. Chicago Board of Trade).
To be honest I have not found HOW the value of the ‘limit’ comes into play with the SI System so if you figure it out let me know. I agree that it’s there for a reason but I’ve not been able to figure out the reason i.e. it does not matter WHAT value you put in there (or even if you just leave it out altogether) i.e. it makes absolutely NO difference to how the ASI is ‘plotted’ on a chart or indicator i.e. the ‘shape’ is EXACTLY the same and only the actual ASI value changes so I don’t know what you make of that.
Hey Nick,
Just thought I’d let you know that I spent a good deal of the weekend looking for the reason that Wilder includes the ‘limit’ of 3.00 (as in the example in the book) and I STILL cannot see WHERE it makes ANY difference so I’m REALLY hoping that you or someone else comes up with something!!!
Over the weekend I tried using various other ‘derivates’ of the formula e.g. making the ‘limit’ 1.00 instead of 3.00 and all this manages to accomplish is to keep you out of LOADS of good trades on a stop and reverse signal. I also tried dividing the 50 by the ‘limit’ and then removing the ‘limit’ (which is MATHEMATICALLY ‘allowable’ and ‘correct’) and the resulting ASI is EXACTLY the same as if you kept the formula ‘original’. The ONE THING that STILL worries me about this is the in the book Wilder says that the SI will ALWAYS be between 100 and -100 and this is NOT the case i.e. the ONLY place this seems to be the case is in his example. What I DID do is ‘modify’ the ‘PIPFACTOR’ for a pair to the point where the SI DID INDEED fall into this range (on EUR/USD in order for the SI to fall between 100 and -100 the ‘PIPFACTOR’ has to be 0.001 and not 0.0001 as we would ‘normally’ use) but again: this has the effect of pushing the TISAR FAR away from the reversal point and thus AGAIN keeping you out of trades. The very strange thing is that EVEN WITH SOYBEANS CURRENTLY the SI falls outside of this 100 / -100 range and the ONLY thing I can possibly think of is that either the ‘limit’ has changed from back then or it’s because the prices are WAY different than the prices quoted back then. By the way: you’ll find that adding the ‘PIPFACTOR’ as we have done has EXACTLY the same effect as reducing the ‘limit’ and NOT USING a ‘PIPFACTOR’ i.e. if you make the ‘limit’ for EUR/USD equal to 0.0003 this is the same as LEAVING the limit at 3.00 and dividing by a ‘PIPFACTOR’ of 0.0001. See the ‘dilemma’.
By the way: I going to be using the SI System on some slightly longer timeframes from today (purely because my little IB business seems to be getting a bit of a ‘kickstart’ and it will become IMPOSSIBLE to trade managed accounts AS WELL as prepare signals and send them to clients every hour UNLESS I was trading at only ONE broker, ONE account, ONE instrument, and ONE client i.e. ‘time’ is / will become a limiting factor here).
Hi,
OK:
This is for those who have asked about opening an account at GCI with LESS than the $2 000 minimum as required by them:
I have concluded my discussions with them and this is how it works:
1 - I will deposit $2 000 into an account IN MY NAME (I cannot trade this account nor withdraw the money from it until there are no other accounts ‘linked’ to it i.e. see below).
2 - You (the client) will open an account directly with GCI in your name BUT I have to be specified as the SECONDARY ACCOUNT HOLDER AND THE INTRODUCING BROKER. I’m sure you’ll be happy to know that me as the SECONDARY ACCOUNT HOLDER is in ‘name only’ i.e. I cannot trade your account, deposit funds into your account, nor withdraw funds from your account but it is this ‘link’ that allows you to open an account with GCI with less than the $2 000 minimum as required by them.
That’s the best that I and GCI can do for you.
I have investigated the possibility of reducing the leverage on their accounts from 200:1 to 100:1 and also 50:1 BUT it’s NOT going to help you i.e. all this means is that instead of a lot costing you $50 (at 200:1) a lot is going to cost you $100 (at 100:1) or $200 (at 50:1) BUT the tick / pip values are the same as on a ‘normal 200:1 account’ and the profit / loss per tick / pip movement is not going to change regardless of the leverage setting. Interestingly enough they can ‘bump up’ the leverage to 400:1 and what this means is that instead of a lot costing you $50 (at 200:1) it now costs you $25 (at 400:1) so you have more margin available ‘for error’.
Like I said before though: I am NOT recommending any of this i.e. you don’t really have enough margin available ‘for error’ with $500 UNLESS you’re going to trade ONLY forex pairs. Again: notwithstanding this agreement: THEIR minimum is $2 000 and MY RECOMMENDED minimum is $5 000. I’m prepared to put the ‘deposit’ up BUT ‘be it on your own head’ if you wipe out your $500 account trading Soybeans and they go ‘limit down’ like they did today!!!
Hello Dale,
I also have been looking into the importance of the limit value in the equation and I can’t see how it is going to change the output too much. It will change the actual number value that you get, but if this is the case then as you said earlier, the “shape” of the ASI will be the same, just the values will be different. With forex pairs, since there is technically no limit, I’ve thought about deleting the limit altogether (by dividing it by 50 which as you said, would mathematically make it irrelevant). I have not had the problem yet of a SI value being greater than 100 or less than -100 because so far I only have it set up for gbp/jpy, which is quoted in the same format (xxx.xx) as the commodities in the book it seems. In the book, on page 89 example 15 where he says that the SI will have a max value of 100 on a limit day, perhaps the reason you are getting a value higher than 100 is because the price is moving more than the “limit” value in the equation which gives you a number higher than 100 or lower than -100. I can see how the limit value might mean something in instruments that have a limit, but with forex pairs, and gold (to which my knowledge has no limit) it is useless.
I went to the CBOT website and looked around a bit, but I couldn’t find a page where it listed the limits for the commodities… what would you say are the most popular commodities? On bloomberg I see soybeans, oil, coffee, gold, natural gas and corn most often. Is the limit usually a set number or do they change it often?
Also, here’s a quick summary of my current volatility system trades:
AUD/JPY short @ 96.04 +521 pips
USD/CAD long @ 1.0232 -4 pips (was as high as +50 earlier today)
Gold/USD short @ 943.85 +29.25 
Because aud/jpy is a “commdoll” and since it is decently correlated with gbp/jpy, after I get reversed out of this trade I am probably going to stop trading it altogether and switch to gbp/jpy exclusively to avoid any problems. For now I’m going to keep watching usd/cad, unless I can find a pair with a higher CSI that isn’t correlated strongly with gbp/jpy or gold.
Good morning Nick.
Thanks for that insight. It’s something I did NOT think about i.e. the reason that I get SI values outside of the range. Very well done!!! And thank you. It makes sense (especially if you look at the different price quotes). It’s been bugging me for months and now at least you have given me a good explanation as to why. It has not affected the performance of the system or anything like that so I’ve sort of ‘lived with it’ but it’s great to finally have a possible reason for this ‘anomoly’. Thanks again.
I see that you have probably also done exactly what I’ve done NUMEROUS times i.e. it does not matter whether you leave the limit out, change its number of decimals to ‘suit’ the instrument being traded, divide the 50 multiplier by the limit, or add a ‘PIPFACTOR’ to the equation. No matter what you do the ‘shape’ of the ASI does not change ony the value of the ASI which you have now confirmed and no matter which value you are getting and using the TISAR is always in the exactly the same place.
I’ll try and find the info you’re looking for (I was almost sure that I saw it on the CBOT website - well - for Soybeans anyway). I’ll obviously post anything I find.
To the BEST of my knowledge the limit is a set number (for a while) but can and does and has changed in the past but I will confirm all of this (somehow).
I also see those same commodities on Bloomberg and it’s only those that GCI has as tradeable instruments (funny enough GCI does not have Sugar which is always quoted on Bloomberg).
Well I don’t think that those VS trades look too bad do you??? What would your ‘summation’ be of the VS??? Recommended??? Pitfalls??? I started following some trades through but stopped because I’m starting to run into ‘time’ issues i.e. just not enough time to do everything I need to do so I’m again back to the SI System ONLY so that I can concentrate on what I’m doing. Going well as always (even on the 4 hour timeframe).
Thanks again for the post.