Comparison CEGJ+ to other parabolic systems

I developed trading system for Forex without looking back on «authoritative opinions», trying to improve the SAR indicator (parabolic). The effective Forex trading system was necessary for me, allowing to work confidently on the market. After finishing it the desire to compare results of the work with results of activity of other authors, who’s trading systems are based on SAR indicator has appeared. During the work it was necessary to solve huge amount of problems. How authors of other similar systems did it?

Let's try to allocate characteristic features of “stop and reverse” parabolic trade systems for Forex and look at their background to determine specific features of trading system CEGJ+:

1. The various attitude to a “stop and reverse” principle.

The idea of turnaround trading system consists in that fact, that to receive the greatest profit it is necessary to open and close positions at levels close to points of a turn of the graph of the price (i.e. to carry out a revolution of a position). In a point of closing of a position the following position in the opposite direction opens.

But rules of some complex Parabolic systems in the certain cases provide deviation from the given principle.

In trading system CEGJ+ it is not always necessary to open position in an opposite direction when the position on the separate tool is closed.

Specific feature of application ADX in system CEGJ + is applying three indicators ADX with different parameters on one tool at the same time. Such use of ADX allows to filter SAR signals more effectively.

The used principle of a coordination of signals in a direction and in time allows to filter individual fluctuations of the price of separate tools (so also signals of indicators on which they are imposed) and by that to define revolution points of all tools. The purpose: definition of the periods of the coordinated trend which are optimum for work on Forex.

I recommend to remind Dave Landry’s statement:

«The question: What process you pass before making choice of the certain market and certain market tool, which would be worthy to trade?

Dave: All these things were mentioned above. Whether a market evolves a trend, or I trade in the tool which can be traded irrespective to the general condition of the market?»

FOREX MAGASINE, February 2006№107/07

2. Basic used SAR indicator (parabolic).

The basic indicator should be mentioned the indicator which signals are the basic source of the information for making trading decisions.

In this plan, СEGJ + does not differ from other complex Parabolic trading systems on Forex.

3. Combination with additional indicators.

The purpose of combination with additional indicators: elimination lacks of SAR. In all systems this reception is used in case when advantages of the basic indicator essentially exceed its lacks.

Wells Wilder (the author of SAR indicator) has created the indicator capable to grasp the most part of the profit on the trend market. And this is the advantage of the indicator. But it has serious lack: low efficiency of work in correction. By means of additional indicators authors try to reveal only those signals which specify the beginning and end of a trend.

The set of used additional indicators is various: ADX, RSI, MACD, Strips of Bollinger, Stochastic, an index of the directed movement (DMI), etc. Certainly, each of similar systems has the merits and demerits.

In СEGJ+ together with SAR MA is applied, but the purpose of it’s use – is only smoothing fluctuations of the price up to the certain limits. And here the problem of definition trend movements is solved by comparison of signals proceeding from SAR of all tools of trading system. Some functions, which carry out additional indicators, (for example, definitions of points of increase in a position) are solved by applying several parabolic (2 up to 4 - "fast" and "slow") on each tool.

Usage ADX for a filtration of signals is not less important. Butt in CEGJ+ it considerably differs from its application in other complex parabolic systems.

4. The necessity of the different timeframes.

Overwhelming majority of complex Parabolic systems assume work on day time and week schedules. The big scale timeframes smoothens fluctuations of the prices and so makes system more reliable. But, on the other hand, work on big timeframes considerably reduces profitableness of system. Authors of all highly remunerative systems during development of the system solve the main task on search of a golden middle between high profitableness and stability of its profit. In my opinion, the least scale of timeframe which allows to use trading system effectively, testifies its quality.

Recommended СEGJ + worktable includes the following candle graphs: М15; Н2; Н3; Н4. The choice of scales of operating graphs is based on specially developed principles. Other timeframes it is inexpedient to use.

5. Additional trading rules.

Key rules determine work of the basic indicator, and these additional trading rules solve the most various problems

• signal filtration of the basic indicator;
• Definitions of points of increase a position., etc.

In my opinion, individuality trading systems is fully shown in the contents of additional trading rules.

Perry Kaufman's trading system have the next contents:

«1. Use 14-day's DMI.
2. If DMI ascending movement signals, accept only long Parabolic positions. If DMI falls, accept only short positions.
3. Enter into the positions only in case all systems are coordinated. If they clash, do not trade .
4. Use the Parabolic stop only for exit, instead of turnaround.»

Presence of the mentioned rules shows complexity of trade system. CEGJ+ has its own additional rules.

6. Parameters of trade system have greatest value.

Sources of birth of all complex Parabolic systems lay in experiments with parameters of the basic indicator. It is necessary to say that Parabolic author has determined default values of parameters, with which it approved to be effective to work with all tools (step = 0.02; AFmax = 0.20). But on the other hand, Wells Wilder repeatedly wrote that it is not necessary to be afraid to individualize parameters SAR. An amazing effect of optimization does not give rest to traders since 1978.

There are opposite opinions on this question. Someone prefers to work with "classical" parameters (and advises it to do to others). On various timeframes it is expedient to optimize parameters. But as this process is extremely labour-consuming, it is preferred to work on parameters recommended the author. (therefore to be content with low profit). Fortunately authors of complex Parabolic systems have other opinion. But I did not meet the differentiated approach to optimization of parameters among other trade systems.

During the experiments with optimization of parameters the idea to differentiate parameters of trading system has appeared. Differentiation is carried out by means of the computer program "CEGJ-optimization". The principles incorporated in the program allow the system to be on a pique of efficiency (not allowing it "to be unset" similarly to a musical instrument).
Practice has shown efficiency of optimization on the long periods (we inform on necessity of such optimization to traders,).

7. High profitableness.

High profitableness is a main objective of creation of similar systems. Usually these systems are capable to provide profit about 10000 points a year. But it is necessary to remember distinction between potential profitableness of trading system and real profit of the trader (which depends on individual workstyle). For turnaround trading systems it is important to not miss a signal (as misstimely closing - opening of a position conducts to losses). And it is especially important "to grasp" a trend.

It is necessary to note, that the information on highly profitable trading systems is extremely limited. In published materials there is not enough data on the most important questions. For example, about optimum timeframes, parameters of SAR and other used indicators, additional trading rules, etc.

Creation of highly profitable trading system for Forex is result of a hard work. Will any one reader agree to work free-of-charge? A large industry is set up to provide services on Forex. While reading articles about highly profitable trading systems, do not hope that there is a reliable instrument to work on Forex. At the best case, the accessible information will be a reliable starting point for your own experiments (duration and results of them are unknown).
Try to ask in any dealing centre, engaged in training, with the request: «I want you to teach me to work with highly profitable trading systems, for example, turnaround Parabolic. Analyze the reaction of the employees of dealing centre. And if to happens someone will agree - evaluate their learning material, basing on the information submitted in this article.

Look at the world really. Work with Forex demands serious relation.