New Concepts in Technical Trading Systems - Wilder

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davkell

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Friday, February 04, 2005 - 12:28 pm:

Has anyone read "New Concepts in Technical Trading Systems
by Welles Wilder"? I've really found the Directional Movement system to be very beneficial, and it really lends itself to trading stocks as advocated by Weinstein. But the book is $117 so it's a considerable outlay. With the vast amount of info regarding his tools (Directional Movement, RSI and Parabolic SAR) I'm wondering whether it will be of any use to a developing trader with a minimum trading account!

"Trade Your Way To Financial Freedom"

chart_rider

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Tuesday, April 19, 2005 - 01:22 pm:

Davkell

Did you end up buying this book? I too have taken an interest in the DM system and would be interested in feedback about Wilder's book.

Chart Rider

davkell

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Tuesday, April 19, 2005 - 04:03 pm:

No not yet. I've corresponded with Dawn Bolton-Smith a contributor to Your Trading Edge about the DM system as she focusses on it quite often. I got a pretty good response from that, and thorougly recommend you read her bi-monthly contributions in YTE.

I've hinted to family that I would like the Wilder book for my birthday, which is mid-May, so hopefully I'll get it then. Will let you know what I think if I get it.

"Trade Your Way To Financial Freedom"

chart_rider

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Tuesday, April 19, 2005 - 06:46 pm:

davkell

Thanks for the info - I've just recently subscribed to yte and will check out that side of things.
A little more time to psych myself up and I'll probably become an owner of the book anyway. - just can't resist.

CR

chart_rider

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Thursday, April 21, 2005 - 01:10 pm:

Dav
One particular review states the following:

The book is heavily oriented towards illustration of the calculations necessary for implementing the systems (including manual worksheets). This information (probably half the book) is superfluous today to those with analytical software. Limited guidance is offered on the interpretation and use of the indices. The systems are treated as stand-alone mechanical systems, rather than as tools for market evaluation and interpretation. The markets chosen for illustration of examples 'with large up and down price moves with little prolonged congestion (non-directional). Very little is given in terms of systems testing results. All ideas are, however, clearly explained and illustrated, and including difficult concepts such as momentum and directionality.

check out http://shop.store.yahoo.com/stockcharts/newcointean.html

CR

davkell

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Thursday, April 21, 2005 - 01:23 pm:

Thanks Chart Rider, interesting take on the book... considering it's price I'm wondering whether it would actually give you anything more that you can reall obtain for free on the web.

A short response from Dawn Bolton-Smith on the ADX use:

I believe Directional Movement is a wonderful backup to any trading system. It is worth fully understanding how it works and understanding all facets of the ADX – a powerful indicator that tells you when a market is becoming extremely high-risk. Different markets have different levels but generally I watch the +50 area carefully. Ideally, the ADX is between the +DI and -DI when the market is trending, but when it goes above both DIs and then turns down, Wilder says it is time to take some profits. Usually the Parabolic Stop will take you out of the trade at a very satisfactory level. When the ADX is below both DIs it is best not to use a trend-following system. A market can still be trending with the ADX flattening but still rising.

Sometimes it is hard to explain, but generally speaking this system will make you money and capture the really big trends for you. The harmonic 5/15/30 EMAs combine well with Directional Movement. After the ADX has been falling and then flattens and goes sideways around the +15 level, the DIs cross over and then the ADX starts to rise about 3 to 5 days later. It is considered that +25 is a trending market and once above +30 a strong trend is getting under way. However, if you identify a proper bottom, getting in at +15 levels captures a bigger part of the move. You will find doing a point and figure chart on whatever you are trading will also confirm the direction.

Interesting?

Using ADX on weekly charts has been very profitable this year, but curious how it will go now. The markets have all topped out, and are in negative DM territory now. Probably can use the system for shorting, but I want to get the Long side of things down pat first before trading the short side.

Thanks for your comments. Hope the Dawn comments are interesting for you.

Cheers.

"Trade Your Way To Financial Freedom"

chart_rider

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Thursday, April 21, 2005 - 02:58 pm:

Dav
I was thinking the same - with half the book outlining calculations that are now-a-days done in a millisecond by charting packages.

Since being knocked out of the market a few days ago, I've been making use of the enforced rest period to run mock trades in training mode, using EMA's, ADX and RSI. So far the results are showing some improvement from my previous approach of using only the EMA's. The RSI I intend to use mainly for identifying divergences and thus signs of trend weakness and trend turning points.
Initial indications also show that had I used this approach earlier, I probably would have avoided some recent losses.

Anyway, my watchlist of shorts is on standby, ready and waiting, depending upon which way the market eventually decides to go.

CR

davkell

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Thursday, April 21, 2005 - 03:31 pm:

Agree with you.

I've never really been able to completely understand divergences, nor see them when they're there. I'm leaning towards the DM System, and 2 or 3 EMA's, looking for Weinstein type opportunities.

Shorter term trading, (I'm testing on the ASX game), by trading a rising ADX whilst still below the DI+ seems pretty good, but after that damn market turnaround and losing all my profits, I need to establish a better stop profit regime.

This is fun isn't it!!! lol.

"Trade Your Way To Financial Freedom"

chart_rider

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Thursday, April 21, 2005 - 03:50 pm:

dav

Take a look at the XAO daily chart with a 14 period RSI. Prior to the correction, you will see a series of higher highs on the price action, but corresponding series of lower highs on the RSI - indicating a loss of steam. Opposite applies for downtrends - lower lows on price but higher lows on the RSI could signal an impending recovery.

CR

davkell

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Wednesday, May 11, 2005 - 06:36 pm:

Hey Chartrider;

I got a copy of New Concepts from an inter-library loan. Not a bad read, but wouldn't want to spend the $100+ for my own copy though. It's pretty old, so lacking in a lot of modern information.

The calculations of the methods was quite interesting, a side you don't usually see in other technical descriptions. And being his description is good too.

I learnt a few 'ideas' for trading the system, but nothing extraordinary compared to what I already know.

Anyway, that's that!

Cheers.

"Trade Your Way To Financial Freedom"

chart_rider

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Wednesday, May 11, 2005 - 08:11 pm:

Thank's for the tip Dav, I'll keep my eyes open around the libraries. Im actually cutting back a little on the book reading in an attempt to channel energy into developing my own style. But I'll make this book one of the exceptions, since it's aligned to the system I use.

CR

davkell

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Wednesday, May 11, 2005 - 09:17 pm:

No probs.

Keep in touch, am curious as to your ADX approach developments. Will convey the same to you if you wish.

Cheers.

"Trade Your Way To Financial Freedom"

chart_rider

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Thursday, May 12, 2005 - 07:31 am:

Yep, no worries