Trader Vic's Trend Change Example

Written on 17-04-2009 6:43 pm by Craig

Why Default Indicator Settings Suck For Swing Traders

I don't know who came up with the default settings for technical indicators but sometimes you have to ask, "What were they thinking?". They certainly didn't have swing traders in mind!

Take a look at this chart of the S&P 500...

Williams %R 14

This sucks!

The market has been rallying for weeks and if you were a follower of Williams %R with the default setting (14)...well...let's just say that you haven't been trading much! Not one "oversold" signal. The market has taken off without you.

This makes the default setting pretty much worthless.

But, look at what happens when you change the "14" to a "3"...

Williams %R 3

Sooooooo, much better! This setting is calling short term swings like a pro! Ok, it's not perfect but it sure is light years ahead of that crappy default setting.

Now, lets look at another popular technical indicator, RSI, with the default setting...

RSI 14

Total suckfest!

I don't know how anyone can possibly use this indicator with this setting. But, look at what happens when you change that "14" to a "2":


Can anyone say, "Holy Grail"? Just kidding! But this lower setting with the RSI indicator works so much better.

I can't even fathom how much money has been lost to using these default settings on technical indicators.

(actually I can't imagine how much money has been lost to technical indicators - period. But, that's another story!)


Written on 18-04-2009 2:25 pm by Craig

9 Things Learned From Millionaire Trader Friend...

There is a great article over at Trading Markets by Walter Peters titled, What I Learned From the Best Trader I Have Ever Known that I thought you might enjoy reading.

I have been lucky to know my Millionaire Trader Friend and I have reaped many benefits from incorporating the lessons I have learned from him into my own trading.

Here are the 9 lessons:

  1. Do One Thing, and Do It Well
  2. You Can Have An Extremely High Win Rate
  3. Patience is Rewarded
  4. The Best Time for A Trade is When Everyone Else Disagrees
  5. Being Wrong is Not a Bad Thing
  6. Let the Trades Come To You
  7. Create Your Own Trading Style
  8. Keep Learning
  9. Everyone Has a Bad Streak

Written on 21-04-2009 4:49 pm by Craig

Trader Vic's Trend Change Example on S&P Hourly Chart

How do you tell if a trend is going to change? Use Trader Vic's rules for a trend change...

  1. A trend line is broken
  2. The trend stops making higher highs.
  3. Price falls below prior low.

Here is an example of these rules on the hourly chart of the S&P 500:

chart of Trader Vic's trendline trick

The first rule has been met. There has been a trend line break. Now we are watching for the "retest" of the previous high (top highlighted area). If it fails to move above that area then rule #2 will be met.

Then, if it falls below the prior low (highlighted area), it will be a confirmed change in trend. From the book...

Either of the first two conditions alone is evidence of a probable change in trend. Two out of the three increases the probability of a change in trend. And three out of three defines a change in trend.

Get the book here.

I really, really want this market to pull back a little more!

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