A Technical Breakthrough!

[TraderNumber7]

Boom! Another one bites the dust.

You are all familiar with the work of J. Welles Wilder, Jr., no doubt. It is called the Parabolic SAR and many of you have tried it. Most of you have come to realize that its potential as a Trade Termination Tool, outweighs its status as a Trade Entry Tool. I'm was no different........ until now!

I just created the theory for eliminating the "Whip-sawing" action normally found in non-trending markets where the Parabolic SAR is used verbatim for Entry. I'm calling it the Parabolic SAR Event Horizon. I don't have it implemented yet, because I have not yet fully developed the mathematics behind it, but the theory is sound. In short, simply follow the Parabolic SAR out to its Event Horizon with "another" (not to be disclosed) Parabolic SAR Event Horizon, which leads to the Trade Entry location (thus far) 100% of the time.

Now, I am fairly confident that with enough back and forward testing, this 100% successful trigger point for Trade Entry will not continue to stand. But, the fact that it has yet to fail to provide a near optimal trade entry location for 100% of the tests that I've conducted thus far, tells me that the final trigger accuracy ratio should be in the mid to high 90% range, which will qualify the new signal for system integration validation testing - a very rigorous process of proofing and optimization before inclusion into the Signal Engine.

Very cool!

It is proprietary.
It is not for sale.
I cannot divulge how it works.
I am not a guru Forex Trader.
I do not do 1-v-1 mentoring of any kind.
I am a real Trader/Money Manager - I don't play one on T.V.
Mathematics RULES!

I just thought I would drop this bombshell of a news bulletin here on T2W - for the heck of it. Horizontal market problems are now (in theory) a thing of the past. The beauty of what Wilder was able to create, is an Always-In methodology for trading the markets. I've always wanted an Always-In trading system that was also highly accurate and not subjected to severe stop loss incursions. Well, this just might fit that bill, finally.

Make note of it: Parabolic SAR Event Horizon. It is an actual location in space and time that joins multiple Parabolic SARs into a singular Event. That's about as much as I am willing to divulge.

To the Newbie:

I LOVE you guys! I was once a Newbie just like you. I remember what it was like to be wide-eyed and totally clueless and I remember just how important that phase of my trading career was to me. It was necessary to believe in the impossible - just to keep me motivated and naive enough to believe that impossible things can happen and to keep me pushing to go the extra mile - even when there were countless numbers of times where I felt like giving up and moving on. Keep pushing, Newbie. Your time will come. The dawn of a new day in trading only comes to those who refuse to quit and refuse to take no for an answer. Study, read, test, analyze, re-test, look at the problem from as many different angles as you possibly can, but don't ever give up. Breakthroughs don't come easy, but they DO come, if you hang in there and be as creative in your thinking as you possibly can be.

To the Naysayers:

You have no idea - none whatsoever. You shut your mind down and cling to every ounce of convention that you can grab onto. You kill creative thinking and you stifle growth, progress and thus opportunity. You hinder productive work and cast doubt on imagination. You packed your bags, folded up your tent and move out of the land of possibility a very long time ago. You lack vision and the ability to contemplate a reality that you create for yourself. You are unable to visualize the paradox that you set-up for yourselves. You make life harder on yourself and on others who dare to dream. You will never truly know what is possible, because you refuse to consider the impossible as plausible. A life of trading mediocrity awaits you - enjoy it - you've earned every ounce of it.

Rock-On Newbies! One Love! And, Blow Past the Competition!

Time for a Fly-By! (turn up the speakers)

[youtube]Wa_KrNNebzU[/youtube]

 

[LittleKnown]

I like the positive talk for us newbs

 

[TraderNumber7]

I like the positive talk for us newbs

Keep pushing it up!

 

[TraderNumber7]

Update:

Wow. With a little more work today on the SAR Event Horizon, I can now see how on some occasions it will be possible to set the actual Trade Entry out into the future - thus far, by up to 12 hours or less.

I never knew that this would yield a "time-based" entry level, but the more I test it, the more I see this as being a routine behavioral trait of the signal. That's far more than I ever expected, but much more testing is necessary.

On several occasions during back-testing, I could see the signal being staged for a trigger, but also see that the current trading session would not have enough time remaining to confirm the trigger - sure enough, it did not trigger AND the actual signal reversed direction, keeping me out of what would have been a hefty loss.

I really like it, but trying not to get too excited, too early - been there, done that before. But, right now, it is uncanny and strangely scary to watch unfold. It is almost as if Price must simply, obey the projection.

There has got to be something 'else' driving the uncanny aspect - sooner or later, I'll find it. Causality can run, but it cannot hide. I want to know what makes it tick - simply knowing that it works tremendously well - is not good enough.

Thus far, manual back-tests = 88. Losses equal a fat Zero and the pips range between 37 up to 133. Triggers that I could see coming but not having enough time to be confirmed with the production of an Event Horizon Signal within the same session total 4 out of the 88.

I hate to say this, but it is almost like watching the future unfold several hours before it happens. Freakish. Two SARs come together to produce a future event - who would have thunk it.

And, I stumbled across this while playing around with some old Fractals. Funny, how the mind works to connect the dots sometimes. When you least expect something new, then BOOM - there you have it - a new idea.

Back to testing.... It has to break down somewhere along the line.

 

[rathcoole_exile]

Funny, how the mind works to connect the dots sometimes.

literally !!

 

[trendie]

hi TN7:

congrats on your PSAR revelation.

could you contextualise your test results?
when you say, pips are between 37 and 133, are you saying average returns per day?
what time-frame did you conduct your tests, and which instrument?

zero loss is pretty much exceptional, leading to a bet-the-farm money-management for each trade (!!!), but thats conditional on how much breathing space you give your trades.

your breakthrough is specifically related to the whipsaw part of trading?

good luck when you go live with real money. (I was joking about bet-the-farm)

 

[leovirgo]

good luck when you go live with real money.

that's the key point. this looks like a mathematical method, but not sure if it is 'mechanical' enough in money/trade management to exclude emotions when going live. Good luck with it TN7!

 

[TraderNumber7]

literally !!

No kidding! It is so easy once you actually see it, that it is almost embarrassing to talk about.

 

[TraderNumber7]

hi TN7:

congrats on your PSAR revelation.

Thanks!

...when you say, pips are between 37 and 133, are you saying average returns per day?

That was the ABS Range seen through 88 manual back tests. The new ABS Range through 150 samples is now 30 to 211. So, most of the expansion has been seen to the upside with little downward movement, which is a very good sign.

My entire system is inside Excel, so I don't have the luxury of of doing automated back testing on newly created indicators or signals. I mean, I could create an automated test bed, but doing so at this stage would be an extremely time intensive task, not really worth the pay-off. So, I still do lots of one-off testing by building individual test beds inside Excel. Excel is quick and dirty - which means I can make code changes instantly without re-compiling lots of code and see results across the entire system quickly. At this point, there really is no need to convert the entire system into an OOP model - maybe one day, but not now.

what time-frame did you conduct your tests, and which instrument?

Daily Bars, thus far. But, I've done many visual confirmations from Monthly down through M5 bars and the net effectiveness of the signal is virtually unchanged. Apparently, the larger the Bar of data, the more "sense" the whole thing seems to make, as would be the case, given the mathematical structure behind what Welles created. The smaller Bars get more "choppy" but applying the Event Horizon (visually), it seems to remove the "Whip-Sawing" action, even down in the smaller time-intervals!

I'll have to go through a massive number of Step and Maximum Ratio changes to see what effect that has, but in general, I can already see that the Event Horizon becomes more acute with reductions in the Step and Maximum Ratios - which seems to provide both good and bad news, for reasons I cannot talk about. So, finding the right Step/Max Ratio Range, appears to be something that will be very important to optimize the Event Horizon.

zero loss is pretty much exceptional, leading to a bet-the-farm money-management for each trade (!!!), but thats conditional on how much breathing space you give your trades.

I've been working on producing a Zero Failure system for years and have never found it - so I am very skeptical about this from the word go. However, after 150 samples, I don't have a single trade that would have lost money and that is scary. It has to break-down at some point. I'm sure that when I start tweaking with the Step/Max Ratio Range, I'll start to see apparent failures. Right now, I seem to have landed on a particularly nice Step/Max Ratio tweak, that works out very well.

Again, I'm using a Daily Bar, so 30 pips on the low end of EURUSD is typically only about 30% of its normal daily range (just about). So, I'm not surprised to see 30 pips as the ABS low of the net pips range. Average Draw Down is riding under 27 pips, which is stellar for this particular time-frame. If average Draw and the lower end of the average net pips range start to diverge from each other, THEN I'll know that I've got a problem - until then, I'm rolling with it.

your breakthrough is specifically related to the whipsaw part of trading?

Parabolic SAR is notorious for producing high volume Whips during non-trending market conditions. This removes the Whip altogether and replaces it with a smooth, laminar flow of trade entries and exists, in non-trending conditions. Very Cool - or - Very Drool. Take you pick. Right now, I'm drooling.

I'm trying to break it - that will tell me a lot. I'm sure it will break, like a volcano eruption. That's when the real lesson begins - at point failure.

good luck when you go live with real money. (I was joking about bet-the-farm)

Not my style, but Accuracy to Target does have a net positive impact on Risk. Risk mitigation is the name of the game. If I can empirically prove that risk is lower, then I can empirically prove that increases in cost basis per trade are warranted, within certain limits. I don't want to cancel the reductions in Risk, by increasing the cost basis too much - which is the same as simply increasing Risk overall. So, for every 1 unit of Risk that I can mitigate with any new tool, cost basis can only increase by some value less than 1 and greater than 0. This will always keep my Risk Curve in its proper disposition, regardless of how improved the trading system becomes.

A loss will occur at some point - so Risk needs to be tailored to maintain consistent capital growth over time - regardless of Accuracy to Target. A healthy respect for Draw Down spikes, regardless of system accuracy, will quickly snap the Trader back to the reality of having proper money management strategy in place at all times.

 

[episteme]

How about a few live calls then - just so we can drool over your brilliance?

 

[Black Swan]

How about a few live calls then - just so we can drool over your brilliance?

one of thre best one liners I've read on 'ere for ages, anyway, GTF, you'd probably go and fooking *break* it...

 

[TraderNumber7]

that's the key point. this looks like a mathematical method, but not sure if it is 'mechanical' enough in money/trade management to exclude emotions when going live. Good luck with it TN7!

Thanks!

The overall system was created to deal with the emotions. I am a proven failure at pure discretionary trading. So, if this new signal passes certification and evaluation, after I am done proofing, it will be fully integrated into the signal engine the given its proper weighting. If it has the highest accuracy rating (a composite of multiple performance values/inputs), then it will have higher weighting within the engine. Right now, the highest rated signal inside the system is producing 92.7% accuracy (a decrease from 94.6% accuracy last month). I don't allow any signal to provide input to the Brain of the Engine if its rating falls below 80%, which is frighteningly low for me, personally. A 20% chance of failure is painful to work with and I'd simply rather do something else that day or week.

Right now, this is still in the very embryonic stages of testing and I have not even produced a final test-bed, nor have I even given it "Indicator" status. It has to go through a long process of certification before it earns "Signal" status and "Weighting." Once it earns "Weighting," then it becomes a real player within the system - earning the right to call shots. Making it into the system and receiving "Weighting" is like the NASA Astronaut selection process. There are many applicants, but only the elite ever truly make it in.

The difference here is that this one seems to provide the added dimension of Always-In. Something that I have "always wanted," LOL!

It will be a nice early Christmas present if I get "Always-In" from this thing as certification won't be concluded until end of April or possibly end of May, 2010. This has to be vetted in a number of different ways. But, she looks 5 by 5 so far!

 

[trendie]

thanks TN7 for such an expansive reply to my queries.
(you have a piloting slant to your terminology)

Dailies? When I mused over this PSAR conundrum, I was using 5, 15, 30mins as a template to eyeball PSAR viability. Didnt look at dailies. In fact, only looked at GU. So, your tests were on EU. An average drawdown of 27 pips from a daily is pretty good.

I thought about how to minimise the chop, and applied my own reasoning to try to unravel this great secret of yours; maybe a big rudder/tailplane to help ride out turbulence?
But, I still felt it was easier to accept losses, than to scale/average a potential loser. I am making assumptions that you average into losing trades, while waiting for reversals.
Equally, I am impressed if you are genuinely Always-In. My preference is to not to fly if weather/visibility is bad.

good luck.

 

[TraderNumber7]

How about a few live calls then - just so we can drool over your brilliance?

In total, I would have to say that the net has more than 200 trades of mine, scattered around the planet in bits and pieces - from my Stock Option trading days, to the Currency markets - not including the live-chat room trades. From NOC to EURUSD and many in between - been there, done that - don't do it anymore.

On this forum, somebody called me out, thinking that I would not place a single trade. So, I placed 17 of them on this forum simultaneously within minutes of being called out. You've already missed the 17 [simultaneous] lives calls the last time somebody asked for it here. You also missed the $300K+ that was generated as a direct result of those 17 live calls - simultaneously and that was a fairly normative week.

Been there and done that before. Today, I'd really rather bash companies like FXCM (they have earned it) and help to inspire Newbies to keep reaching for their goals. On occasion, I talk about breakthroughs, if I think they are worthy of some minor discussion - again, to hopefully inspire the Newbie to higher heights. I trade for a living and typically not for show.

Of course, a $300K+ 17 pair trade profile, really goes a long way in shutting up the professional Naysayers. Sorry you missed it - it was like a nuclear bomb going off in here. You could have heard a pin drop - no more Naysayers after that. They now start threads and make oblique, non-direct comments about me - but that's ok, too. I know the real deal when I see it.

 

[trendie]

How about a few live calls then - just so we can drool over your brilliance?

live calls? is that all??

re: "Wow. With a little more work today on the SAR Event Horizon, I can now see how on some occasions it will be possible to set the actual Trade Entry out into the future - thus far, by up to 12 hours or less."

We should expect predictions upto 12 hours in advance!

 

[chilltrader]

show me the money!

All the best with your PSAR's

 

[episteme]

In total, I would have to say that the net has more than 200 trades of mine, scattered around the planet in bits and pieces - from my Stock Option trading days, to the Currency markets - not including the live-chat room trades. From NOC to EURUSD and many in between - been there, done that - don't do it anymore.

On this forum, somebody called me out, thinking that I would not place a single trade. So, I placed 17 of them on this forum simultaneously within minutes of being called out. You've already missed the 17 [simultaneous] lives calls the last time somebody asked for it here. You also missed the $300K+ that was generated as a direct result of those 17 live calls - simultaneously and that was a fairly normative week.

Been there and done that before. Today, I'd really rather bash companies like FXCM (they have earned it) and help to inspire Newbies to keep reaching for their goals. On occasion, I talk about breakthroughs, if I think they are worthy of some minor discussion - again, to hopefully inspire the Newbie to higher heights. I trade for a living and typically not for show.

Of course, a $300K+ 17 pair trade profile, really goes a long way in shutting up the professional Naysayers. Sorry you missed it - it was like a nuclear bomb going off in here. You could have heard a pin drop - no more Naysayers after that. They now start threads and make oblique, non-direct comments about me - but that's ok, too. I know the real deal when I see it.

I'm not really sure what this thread is all about then. Yes well done - I am really thrilled that you have made your breakthrough - but I we will never have any way of finding out if it does actually work I'm left with the feeling that it's all a bit of pointless posturing.

Could you point me to those live calls btw - I have searched all your posts and can only find some results claiming wins - no actual real live open trades.

I'm starting to think you just like to blow your own trumpet but are just all mouth and no trousers. Happy to be proved wrong though.

 

[TraderNumber7]

An average drawdown of 27 pips from a daily is pretty good.

That's where the Event Horizon takes care of the "Whip" most of the time. Draws on the smaller intervals have visually all been tiny - which is again, a leading indicator of just how good this "can be" after certification.

The way I trade and manage my own money, is that I need to walk away from the table with added value from each sitting. I really don't care if I only break-even on any one particular trade, because I'm a high volume trader. That's why accuracy to target is so important to me. Strike targets and profitability takes care of itself.

So, the testing of this new PSAR Event Horizon, will ultimately tell me where the sweet spot resides in terms of the target area. As long as that target allows me to grow my capital at a rate that fits my goals, then I don't need to squeeze out every single pip available in the move. Ruthlessly striking targets trade after trade after trade, is what builds and protects capital.

I thought about how to minimise the chop, and applied my own reasoning to try to unravel this great secret of yours; maybe a big rudder/tailplane to help ride out turbulence?

Well, it is really no secret at all. Just plot the PSAR, use the default Step/Max Ratio, look at the Parabola itself the answer should jump out at you. It is right there on screen. I think I am adept at spotting these kinds of things simply because I've spent years learning how to spot patterns in raw data. So, my eye has become accustomed to seeing things that others clearly don't see on occasion.

Put a College Quarterback under Center in the NFL and you will scare the pants off the guy. Why? Because, he's not familiar with reading professional defensive schemes. He has no idea whether the Safety is coming on a blitz from the weak side, whether the strong side of the field is Zone in the secondary with Man on the weak side - or whether or not the left inside Linebacker will drop back into coverage underneath, cutting off the Tight End's crossing route. He's clueless, until he spends the necessary time studying and understanding professional defensive schemes. Most people have no idea how complex the NFL really has become over the decades.

It is the same with the Trader. Drop the new Trader into the Currency markets and then ask him/her to interpret: A) The Indicator -and- B) The Market itelf, and you will scare the pants off the Trader! The Trader won't know whether or not the EURUSD is on a blitz from the weak side, or whether the JPY against all of Europe is falling back into zone coverage, while AUD and NZD step-up into Man coverage against the USD.

Pattern Recognition matters. The stronger the Trader's ability to properly read and interpret patterns, the higher the survival rate of that particular Trader. A Quarterback in the NFL that fails to adapt to reading and interpreting new and complex professional Defensive schemes, will not survive.

The NFL, stand for "Not For Long," when players fail to perform because they fail to make the transition from easy to read schema to difficult to read complex schema.

[ not necessarily for you, but there are many Newbies reading these forums ]

But, I still felt it was easier to accept losses, than to scale/average a potential loser.

Pyramiding Losses is one of the typically classical errors that many people make. I could spend hours writing about this problem - as it has inherent flaws that only get worse over time. This works just beautifully, when one is inside a horizontal market. But, once the horizontal nature of the market's momentum is transformed into the vertical, things can get quite ugly when trying to recapture losses by dollar cost averaging their way to recovery.

I was once in a trading competition on-line with someone who did this while trading the GBPJPY. I could see that the GBPJPY was not demonstrating horizontal roots and that a massively larger move to the upside was imminent, yet this trader kept "dollar cost averaging" their way into oblivion. When all was said and done, he was upside down some 800 pips total and I felt sorry for the guy. Long-term, unless you can distinguish with great clarity, the horizontal nature of the market, this method of money management and position size management can be very disastrous.

I am making assumptions that you average into losing trades, while waiting for reversals.

Nope! Absolutely, not. Been there, done that, ain't going back. I have high enough accuracy to target, where I don't have to worry about cascading losses. Black Swans don't exist where I trade. Maybe little Black Ducklings from time-to-time, but no full grown Black Birds exist where I live.

Take the loss - move on - that my motto. Losses will happen. I get over it - typically on the very next trade.

Equally, I am impressed if you are genuinely Always-In. My preference is to not to fly if weather/visibility is bad.

I hope it becomes "Always-In." I would LUV that. For me, that is the Grail Cup, Always-In with continually growing revenues - it does not get much better than that. But, that is also very hard to do with high levels of accuracy to a specified target.

I always thought that VFR in complex airspace was a sever pain in the neck. So, I'd rather depart VFR and then file IFR on-top. However, there are some departures that really do require an IFR clearance. The biggest problem, however, is getting stuck VFR in IMC before the approach. This typically happens when somebody did not check the weather at the destination before departure, to determine the destination forecast ceilings, so that a determination could be made as to whether or not VFR minimums were even plausible.

If I can, I like to stay away from the lower altitudes and stick to high-altitude IFR. You get better fuel economy, direct routing, smoother air and good visibility. On the approach, I like instrument precision to the MDA and if necessary, I'll shoot CAT I through III depending on the equipment and conditions.

Always-In would be like Always-IFR with no Holds - every time.

 

[leovirgo]

I have a strange feeling that you've been here before and TN7 is your latest reincarnation. who are you really? I am asking this because I can't bear to read above post #18 till the end. good luck with your breakthrough. bye!

 

[TraderNumber7]

show me the money!

That's what I'm saying. Can't rush it, however. C

Certification is a must - been burned by "rushing good ideas" before. Been there, done that, ain't going back.