Gartley and Wolfe Waves
March 26, 2006
Brent brought up Gartley and Wolfe Waves a couple of days ago as a way of predicting where price is heading and when it will get there. I started to read the sparse amount of information out there but from what I have read, it’s pretty interesting stuff. For a quick overview, visit http://www.investopedia.com/articles/trading/05/040405.asp
Here’s a comment and recommended links from Brent:
According to my research the gartley and butterly patterns have an 80% success rate.
http://www.moneytec.com/forums/showthread.php?t=17228
http://www.forex-tsd.com/suggestions-trading-systems/1093-harmonic-trading-12.html
http://www.harmonictrader.com/
http://www.forex-tsd.com/metatrader-4/885-price-patterns-gartley-butterfly-bat-2.html
Popularity: 6%
Mechanical versus Discretionary Systems
March 22, 2006
After finally importing 2 more years of intraday data, my Dooku trading system has failed to backtest well using 4 years of intraday data. Where does this leave me? In a word, LOST.
I need to investigate furthur the recommended methods to backtest a trading system. Of course I realize that past results don’t guarantee future results but I need to understand it more. 1 question I need to ask myself is: Will my system will be totally mechanical or a discretionary system?
Here are some good pros and cons of both:
| Mechanical systems |
|
Advantages Disadvantages |
| Discretionary systems |
| Advantages 1. Discretionary systems are easily adaptable to new market conditions. 2. Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success. Disadvantages |
Popularity: 3%
Amibroker is great and cheap
March 16, 2006
As I’ve written in the past couple of weeks, I’ve been doing a lot of backtesting. I’ve used esignal (my data provider), metastock, and now amibroker to automate the backtesting process. If you ask any experienced and successful broker, they will say that you are absolutely crazy to not back test and forward test your system before going live with it. Here’s a quote from an experienced trader, chaffecomb:
I’ve absolutely no idea how some people can trade without first backtesting, however that’s just the way I’m wired! …
Check out his website. He tracks multiple trading systems that he developed and basically trades on autopilot. http://users.bigpond.com/morleym/index.htm
Out of the 3 systems I’ve used for backtesting, I really think that amibroker is the best and it’s the cheapest. Here are the pros and cons I’ve noticed for each:
Esignal
Pros: Nice reports and graphs post-backtest; the ability to backtest already written custom indicators with minor modifications
Cons: Expensive; no ability for optimization
Metastock
Pros: Full featured suite of already made trading systems
Cons: I found the entire product very confusing and I’m a programmer; Expensive
Amibroker
Pros: Intuitive user interface; fast; ability to optimize backtesting
Cons: they don’t provide data so you need to download free data or use your currency provider (esignal plugin)
The most important backtesting functionality is the ability to optimize your trading systems. For example, what if you wanted to backtest a moving average crossover. With esignal, you would have to manually change the moving average periods you want to test which would require an individual backtest for each moving average pair. With amibroker or metastock, you can use variables and have the program go through an entire range of moving averages all in one shot. It really is a powerful feature.
I’m using amibroker now and I don’t see how I would ever use anything else. In addition the full version was only about $250.
Popularity: 4%
A Forex Trader Speaks His Mind
February 25, 2006
I’m posting an email I received from a fellow participant of Raghee Horner’s webinars today. He has been utilizing Raghee’s methods for the last year and goes into the successes and failures he has had with them. Keep in mind that he is a beaten down trader who started out with $30,000 and now has $3000 left. I don’t necessarily agree with everything he says. I don’t think because 1 person is unsuccessful at something that no one else has a shot. One of his final sentences is "Do not think you’re going to realize your dreams by day trading." I don’t believe this and won’t believe this. I feel like his story will be beneficial:
I would say her setups happen quite a bit if you scan all the pairs. I am not good at position trading or sitting on trades, so I found it really hard to utilize the large time frames. I like to be in and out, a day trader. Her system is like any system, it gives you a method for entries and exits. Each entry has 50% chance of moving in your direction and her method gives you a slight edge or helps you gain a higher probability of being on the winning side. No trading system is consistently profitable, your either on the winning side or your not. The key is to get in when your system tells you to, act on your systems signals, utilize stops or get out as soon as the trade tells you it’s not going in your direction.
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Popularity: 4%
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