Wilder's Trend Balance Point System (TBPS) and Pivot Points Revisited

Dale and friends,
I spent last night running this on a simulator for a number of randomly selected months from the period 2016-2019 with very mixed results!!

I would totally recommend that one only trials this kind of approach on paper to start with until some kind of rules/additional method overlay starts to emerge…

Don’t you people sleep???

Good morning.



Now now.


Thank you for the heads up and the effort.

Will monitor myself and see if there is any point in pursuing

Spent time yesterday taking another look at Wilder’s Reaction Trend System which is based 100% on the standard levels. Will see how that plays out during the week too i.e. same thing except with a predefined entry and exit plan is all. Demo only obviously.

Back to he real world. Got some stuff to do on my thread.

Have a great week.



Hi @GilasTrading, I wanted to get back to you on this earlier, but got caught up in looking at these pivots in a new light!

I fully agree with you that whenever multiple TA lines/areas/zones, etc coincide, especially when they come from various timeframes, including longer term ones, then there will be a stronger reaction. And that is definitely worth watching.

The main problem is if one starts watching too many different things and finds that for most of the time they do not coincide! :slight_smile: Then we can easilt find a state of Analysis Paralysis v. Confluence! :smiley:

Naturally, one has to decide which are one’s prime structures and which are secondary - and preferably they have different purposes in one’s analytical set-up.

The other issue is, of course, how far cumulative speculative, TA-based, trader input can move a market, if the underlying fundamentals are going places…

Once you do it for a few thousand hours your eyes get used to it and it’s pretty much almost second nature looking for confluences :wink:

I am sure you are right, there! Wouldn’t work for me though. It just throws me into a state of indecision! :joy:

I am already going goggle-eyed just looking at these pivot lines and have almost chucked the whole thing before even starting. I just can’t take multiple lines, but that is just me. I would probably do a lot better if I could cure that fault - but I am so very simple. :crazy_face:

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You and me both (simple). Maybe age??? LOL!!! Or could it be experience???

Here’s what my charts really look like.

Told you before: love the colors!!! LOL!!!

Wow! I really couldn’t handle that at all! If my PC didn’t crash my one brain cell certainly would! :scream::joy:

Have you built that up over time personally or is it based on a certain system?


It’s a mix and match of different things that I’ve learned and have thrown together into a system that fits my personality and thinking.

That is really great! I really do admire you for that. The one thing that I think everyone should seek is a personalised chart set that does precisely what you said: “fits my personality and thinking.”

There are thousands of different car makes and models and we always select one that does precisely what you describe - but with TA it sometimes seems that traders are always looking to just copy someone else’s - or even worse, telling others what their’s should look like!!! :thinking:

…and I guess if one’s chart set, whatever it is, actually works and makes money then that is an additional benefit!! :joy::joy:

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Well here’s the plan I’ve been testing (live) since last week. See what you think.

Based on my core system is all (which I’m not going to detail here).

Basic plan is simple (and here we are assuming short trades):

Wait for RSI(2) to close above 75 for two consecutive days. Once that’s happened: you simply place sell limit orders at either R3, R2, or R1. Which level is up to you i.e. depends on how “sure” you want the trade to be and how much you’re prepared to lose on a trade. I’ve been selling at R3 and taking profit at R2. Have only lost one trade and the loss was minute. You don’t get many trades selling at R3 that’s true. But when you do get a trade it’s a cinch as price trading past R3 and closing above it are quite something. Also: you don’t hold trades overnight. You close no matter what before the close. Also no point in leaving pending orders when half the day or more has gone by because you don’t want your limit orders to be executed and then there’s not enough time for them to trade to your TP level. And where you TP is also up to you. You could close half a position maybe at the next pivot level and the balance at the next. That type of thing.

Using the above as an example: you trade this day in and day out UNTIL RSI(2) has closed below 30. From that point onward you are then waiting for two consecutive closes of RSI(2) below 25 and then you’re only looking for long trades i.e. buying at S3, S2, or S1.

And so on and so forth.

I don’t use stops by the way so how you do this is up to you. Obviously my position sizes are much smaller (as a result of my risk based position sizing) than were I to place stops somewhere closer to the pivots e.g. above or below R3 or S3. But the risk / reward on these trades (the way I’m doing it anyway) is perfectly acceptable to me anyway.

Now ONE thing new that I tried today:

I was awake at the open at midnight. So I checked to see where the S&P, Dow, NASDAQ, and Japan opened relative to the pivot. All had opened below the pivot. So I placed limit sell orders at the pivot. All were executed. I took profit manually on the Dow and Japan but am currently carrying two losers on the S&P and the NASDAQ. But even if I closed these two out now I would have made a net profit on the trades.

Now to this end I’ve something else that may or may not have merit but will see.

Wilder developed a trading system called the Trend Balance Point System. Long story short one of its components is a very short term, price action based, momentum gauge (not an indicator by any means). It’s actually called the “Momentum Factor”. So far my theory is panning out on paper. And it adds an extra level of comfort to the direction you should take the trades. Will post about this sometime this week I expect (only problem is you will need to manually work out the Momentum Factor purely because it’s just not something you will find on a platform anywhere).

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Makes logical sense if I have understood it correctly!

I.e. you are looking to sell into extreme overbought conditions and vice versa. With a closing RSI value of 75 (25) for two days (on daily charts) and then still a stretch to R3 (S3) on the subsequent day, this is indeed a strrrrrrrrrrreeeeetched price! :wink:

Looking to enter a reverse position at those levels is not only a “sell high - buy low” strategy but also doing it at extreme points with a high probability of being at current exhaustion levels.

Was this something to do with today’s high v. high from 2 days previous or something? (or is my memory failing nowadays…)

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But I would be concerned about doing this against a clear, strong trend. I just looked at the daily USOil chart and it would be fighting a losing battle in the contra-trend extremes, it seems. Why not only buy the <25 RSI on uptrends and only sell >75 on downtrends?

Does this look right to you? :

You have the system (at least what I’m presently doing anyway) exactly right. For now that is. Not brave enough yet to relax a bit on the levels. R2 and S2 get reached for more frequently obviously so it does get frustrating to with and watch. And sometimes R3 or S3 is J-U-S-T missed. But so far I’ve manged to sit on my hands and not jump in. Maybe with some for confidence in this it will come.

Suppose the short way of describing it is that you wait for RS(2) to close above or below 75 or 25 and then you start the next day. And as long as RSI(2) stays above those levels then you just keep going.

And you do have a good memory. The MF is indeed today’s close minus the close of the day before yesterday. But he has rules in place. Will post them after I’ve finished doing dinner.

Thus far I’ve only taken short trades with this thing though (as that’s what my core system is waiting for i.e. a tank in the markets).

Interesting point(s). I’ll look into that.

I suppose one could apply the filter that the standard as advertised version of my core system has and that’s the 200-day SMA (which I’ve done away with in lieu of now using mental stops based on my risk based position sizing). Only long above it and only short below it. Must admit that trading without it feels sort of “naked” as it were. And had I not done away with it I’d sure not be paying my backside off in interest as I am doing now on these shorts. But it’s a funny thing. The moment you add it back then you sit and stare at missed trades.

I reckon there’s something here. I really do. My problem with pivots is two fold. I just cannot stomach getting stopped out. So I’d rather trade with smaller lot sizes and no stops. It’s simply one of those things i.e. trade what suits you. Stops mess with psyche. And the other thing is the direction as you know. This seems to give at least a modicum of clearly defined rules which I can follow if that makes sense.

Back to the MF (jumping around a bit).

My idea is that you only buy or sell based on the MF AND where RSI(2) is as noted above. And it could also even end up by going in at market if everything is aligned (which is how his system works anyway i.e. long or short at the close at market). Then again I suppose I’d be trading his system then come to think of it. Cannot for the life of me remember why I lost interest in it as I sit here and type this. It think it was because it became a ball ache doing the calcs. every night on a spreadsheet for it. I do remember that in the short time I was able to muster the energy it was pretty accurate. Small profits, wide stops, and about a 70% accuracy.

Oh how that brings back memories! :joy::joy:

When I first started in the bank trading room as a novice, Wilder’s book was the first one I came across and it started me on my TA “career”. In those days, I was considered bit of an eccentric, calculating all kinds of hocus pocus numbers in spreadsheets and then drawing coloured lines manually every morning on pieces of A3 graph paper and pinning them on the dealing room wall. But it wasn’t actually very long before other traders started wandering over to check them out! :smirk:

But, I tell you, those hand-drawn charts engraved a far greater impression into my mind than any screen does nowadays!

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From the book:

The momentum factor is the difference between the close price today and the close price two days ago.

It is important to note that we always take today’s close first and subtract from it the close two days ago.

This means that the difference may be either plus or minus.

Go long on the close today when the MF today is a higher number than the MF for either of the previous two days.

Go short on the close today when today’s MF is a lower number than the MF for both of the previous two days.

(Fortunately I touch type!!! LOL!!!).

I think his concepts were, and still are, brilliant.

It was also the very first book I bought on this.

As I stated years ago though: it’s one of those books where if you miss a single word you’re stuffed i.e. no fluff in this book that’s for sure!!! LOL!!!

It’s never far from me I’ll tell you that.