A sad sad day to announce the passing of Welles Wilder April 18 at the age of 85 in Christchurch New Zealand. Welles commuted between Greensboro NC ,home base of the Delta Society, and New Zealand. Perry Kauffman ran the Delta Society when Wilder was away and I imagine alongside Wilder’s son David.
Most would know Welles Wilder as the inventor of RSI, Average Directional Index, Average True Range, and Parabolic SAR. Author of New Concepts in Technical Trading Systems, 1978, The Delta Phenomenon, Or, The Hidden Order in All Markets, 1991
I interviewed Welles Wilder for Stocks and Commodities magazine in 2008 and had a few conversations. particularly as I not only live close to Wilder but also to John Hill where Wilder visited 1000’s of times. The giants of giants of markets met and hung around John Hill’s 60 acre compound in Hendersonville NC over decades. John Hill is my buddy, a good man and a giant of markets over the past 60 years. John Hill wrote the forward for Inside the Currency Market.
Wilder’s market expertise among many was calling perfectly market turning points, reversals. He was a master of reversals.
Surviving The Test Of Time
J. Welles Wilder
J. Welles Wilder is an author, market technician, and inventor of indicators and trading systems that have become classics over time. Without Wilder’s contributions to technical analysis, it would be hard to imagine what we would have in the field, considering so many of the basics are derived from his work — relative strength index, average directional movement index, directional movement index, average true range, parabolic stop & reverse… and there’s more that will influence traders for many years to come. Wilder also founded Delta Society International, expounding the theory of the delta phenomenon in the 1980s, about what he refers to the perfect order of the markets.
Wilder is the author of four books: The Delta Phenomenon; Wisdom Of The Ages In Acquiring Wealth; Adam Theory Of Markets; and his most famous work, New Concepts In Technical Trading Systems.
Stocks & Commodities contributor Brian Twomey conducted this interview in July 2008.
There is so much technical analysis out there that it is not easy to come up with something different anymore!
Earlier interviews alluded to your degree in mechanical engineering from North Carolina State University and your prior work as a real estate developer before your career in trading. Were you born and bred in North Carolina?
I was born in Norris, TN, in the middle of the Great Depression. My father, who had a master’s degree, worked on a Tennessee Valley Authority coffer dam with a pick and shovel. In my first three years, we moved from state to state before we ended up in Greensboro, NC. And that has been my home for the last 70 years. Since 1986, I have also had a home in Christchurch, New Zealand.
Using work from your book The Delta Phenomenon, could you expand on the perfect order of markets in relation to movement and time? What does this say about today’s market watchers and technicians?
All markets have a perfect order in five different time frames. The shortest time frame is intraday or a four-day series. The longest time frame is 19 years. There are only two markets with enough data to solve for the super long-term delta order. Those are the Treasury bonds and the stock market.
Each perfect order relates to two things. First is the number of turning points in the series for that particular market, and second is where the inversion comes. The inversion always comes at point 1. For example, let’s say that a market has 10 turning points. From point 1 to point 10, there is a high/low order or a low/high order that this particular market follows.
This order of the markets is the number of points and at which point the inversion can occur. This order is perfect, and once it is discovered, it will never change. Although the delta points have a perfect order according to these parameters, the exact placement of the points is not perfect.
The way we handle this is to take 10 series of turning points for a certain market. The placement of the turning point is the average of the placement of the 10 points. In a strong market move, we would expect the next turning point to come late because of the momentum. If a market is moving sideways, we can expect the turning point to be very close to its average position.
Regarding movement, the biggest moves often come on either side of point 1. There are intermediate-term points, the medium-term points, and the long-term points. The distance between these three sets of points increases with each set. When you get two or three different turning points coming at the same time, high or low, most of the time this will be a significant high or low point.
…Continued in the March issue of Technical Analysis of Stocks & Commodities
Excerpted from an article originally published in the March 2009 issue of Technical Analysis of Stocks & Commodities magazine. All rights reserved. © Copyright 2009, Technical Analysis, Inc.
Sadly, I cannot access the remainder article nor can I find in my records due to Stocks and Commodities paid access.
Here are the questions written and a few were submitted by traders at the Market Technician’s Association chapter in Charlotte NC.
1. Earlier interviews alluded to your degree in Mechanical Engineering from North Carolina State University and prior work as a real estate developer before your career in trading. Are you born and bred in North Carolina?
2. From your 2001 book the Delta Phenomenon, would you expand on the perfect order of markets in relation to movement and time. What does this say to today’s market watchers and technicians.
3. Would you also expand on your founding of the Delta Society in 1984. What is the purpose and functions, products and services offered.
4. Your classic 1978 book New Concepts in Technical Trading Systems gave us standard indicators used today such as Relative Strength Index, Average Directional Index and Directional Index, Average True Range and Parabolic Stop and Reverse. You were light years ahead of your time. Can I ask what you saw in 1978 that helped you develop these indicators that survived the test of time. Was your main focus on prices, market volatility, trends, market behavior.
5. Because these indicators are so popular today, are markets any different today than in 1978. If so how.
6. Regarding these classic indicators, do you have a favorite? Any one you like above all others. One that has really withstood the test of time.
7. Do you still believe these indicators should be used as stand alone indicators or used in conjunction. And which ones.
8. From New Concepts, I notice your Volatility System and Volatility Index with the use of the Parabolic time/price system. I know this is your methodology for trading. Has your system for trading not changed over the years. How do you trade today with your systems.
9. Would you expand on the Parabolic Stop and Reverse indicator. What is the basis for its reliability.
10. Before writing New Concepts in Technical Trading Systems, how long were you trading and how successful were you.
11. What books would you recommend to read for today’s markets that would help traders become more proficient.
12. If you were starting out today as a new trader, what indicators would you recommend and what methodology would you recommend . How would you advise a new trader to approach today’s markets.
13. Any advice for the trader today not trading with a system.
14. Can you expand on the three classes of traders. Who are they.
15. From New Concepts. We all know you gave us accurate and time tested indicators. Did New Concepts also introduce trading systems for the first time. How has trading systems changed over the years.
16. Today nobody appears to have invented a new and time tested indicator. Rather many are using old indicators and playing with parameters and settings to adjust to their particular market. Any comment regarding this phenomenon.
As I find the remainder Interview, it will post.