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Dear Paul:
You raised several subjects beside ADX. May I touch those first before
going to ADX?
1. Being "net loser". People who make profit over some period of time and
then loose it all and some more, called "plungers" (I guest). I am one of
them and if I am not net looser it is only a meter of luck, meaning roller
coaster did not get me yet. But there are no indicators that could save us,
only money management. We have to learn, understand and adapt a "sound"
money management scheme (optimal or not who cares) that allow us to be a
"net winner". To paraphrase a famous Chinese book "making money depends on
the market, not loosing depends on you". Or to put it another way, after
you enter the trade you can not control how much money you will make, it
depends on how much market will go in your favor, but you can and must
control your loses. Without it we would not make any money even tomorrow
newspaper will be delivered to us daily.
2. Testing a system "real time with no money". May I suggest (if it is
possible) to test your system with real money. Try to find a trading
vehicle that allow you to trade with minimum capital (if it is futures Mid
American Exchange maybe, or mini something, or 100 lot for stocks, or
options). Because the trading has "friction" that is not reflected in any
system design. You can approximate the friction" with generous slippage and
realistic commissions, but it would not include missing trades because busy
telephone signals at your broker place and busy telephones on the floor,
failure of the data feed, your computer problems, etc. And of cause the
real trading includes you with all yours "hiccups".
3. As of ADX. I noticed that very few people interesting and using that
indicator. I am very "young student" of ADX and completely confused (my
normal state). I made a spreadsheet for ADX (from an article in SC) and
plot ADX for DJIA. The chart starts at the end of 1996. I put it up in hope
to notice something useful. So far I could not. If I adapt you idea to
wait for ADX moving bellow 20 to enter the position then from 1996 it was a
single case and the end of the move (are we looking at the same ADX?). Then
my tops and bottoms in ADX are complex (almost all of them) so it is hard
for me to understand did ADX turned or not.
4. I too would like to discuss ADX with some one who uses it in trading (on
the list or off the list). I would definitely benefit us as I do always ask
the "hard" questions and test the indicators over long period of time
(usually over 125 year history of the DJIA).
Permanently confused Alex.
At 05:23 PM 9/12/99 +0200, artman@xxxxxxx wrote:
>
>RT'ers
>
>I would like to discuss a system I am developing using the ADX. As an
>introduction I should explain that I have been trading the markets, Futures
>and Options since 1985. I have traded in a variety of manners, mechanical,
>discretionary, directional, non directional. I have traded profitably for
>extended periods throughout that time using a variety of styles, but am a
>net loser over the extended period.Thats excluding the thousands of hours I
>have spent in research. It has taken me years to discover what I condsier
>to be my prefered trading style.Its been a question of trial and error.
>
>I particularly feel at ease with trend following systems that really tell
>you when a trend really is trend and not just the likelyhood of the
>beginnings a trend followed by a whipsaw. Trading with ADX seems to me to
>offer this. An excellent overview of Trading with ADX is offered by Chuck Le
>Beau in his book "Computer Analysis of the Futures Markets".
>
>Question: Does anyone know if the further research that Chuck speaks of
>regardin ADX was ever published anywhere.
>
>I have been dry running a simple system which uses a rising ADX over 20 as
>an indicator to enter the market. Whether you go long or short depends on
>the DMI. For short term day trading, I have used this on the E-Mini, using
>5 min charts and a 14 period ADX. A signal is gven just after the first
>hour of trading.
>
>Using the ADX, the trend is well established before you climb on board. The
>analogy that I give is that the train has left the station, you climb on
>board for a few stops and get off before it reaches its final destination.
>I.E You try to take something out of the middle of the trend.
>
>Question: I remember something being posted about trading real time, with
>no money. I would like to test my system real time using such a method.
>Anyone any idea how this can be done?
>
>For longer term strategies, I prefer the use of options and have some need
>for help here in testing the system.
>
>Again using the rising ADX greater than 20 I add a simple moving av
>crossover method (18,9) to signal entry. When the ADX turns down , exit is
>signalled.
>
>I prefer to use options sold against the direction of the trend (short
>call/put spreads) or straight purchases(long call/put spreads) with the trend.
>
>I need help in testing this system as I need some software/package that
>once a signal is given to enter the market will allow me to decide which
>series of options I need to purchase. The criteria will depend on the
>contract month, volatility, how long the trend is already underway, is it
>just begginning or already well underway, the price of the option etc. Is
>there any software which can do that ? Alternatively is there any software
>which could allow me to test the results of buying the closest to the money
>call/put?
>
>I need also to know how to handle the question of the large data files with
>all the closing option prices for one day - all strikes, puts and calls
>(where I can I get these files ?) over a period of say ten years.
>
>
>Lastly, any help from other traders with regard to ADX trading would be
>appreciated. Experiences, good points, bad points.
>
>Regards
>
>Paul Langham
>011 32 477 411664
>
>
>
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