Wormald Grid

[coyotte]

Ref: Bill Wormald's book " Trends & TripWires "

A purely Trend Line trading metholodogy , Bill's work ( 2001) seems to me to be a continuation of Anderson's (1960) who picked up where Babson left off during the 1930s .

They all talk about Indexs/ Comd /Stocks trading in a series of Parallelograms .

Where Bill has added the idea all stocks fit into a set of predetemined angles but that each stock has it own set of fixed trading angles -- long and short term.

This is where the Wormald Grid and the Wormald Trend Tracker come in :
They are both clear 4A sized, clear rigid plastic sheets that have the predetemined trend lines finely printed on them --- the sheets can be used either for Paper or Moniter Graphs,--- I find graph paper easier to work with and more accurate though.

The book and the overlays are both needed to understand and apply the method : --- in the book he gives a short list of Ozz stocks and their L/T angles --- on his web site he goes into detail of how the method is applied .


The first chart in this series is a Andrew's Chart --- note NO indicaters of any kind --- pure PRICE ACTION .

I have added the D-G-H Line here to demonstrate the parall with the A-C Line
which is part of the original chart --- note the Median Line , this is similar to what Wormald calls the Spline Line .

Cheers

 

[tech/a]

Coyotte.

There has been much work over the years by many authors on channels and trends by degrees.
Andrews pitchfork is one which is very similar and may form the basis of the grid.

There are many more
Linier Regression Channels
Raff Regression Channels
Standard Error Channels
Standard Deviation Channels
Speed Resistance lines.
Fibonacci and Gann Fans.

And of course Trend Channels.

To name a few.

From observation the best and longest lasting trends tend to conform to near enough to 45 degrees.


With all of these the problem is trading them in a practical manner.

You have said you trade them. What sort of set up do you look for?

Would be interesting to run a few live trades here to get a feel.

 

[ducati916]

tech/a

From observation the best and longest lasting trends tend to conform to near enough to 45 degrees.

Added to this 45 degree dominant line we can add our freind and mentor, Gann.

Now intrestingly I had never really looked at the previous trend lines in this context, but the Gann dominance of the 45 degree line had intrigued me, viz. what rational explanation, if any, was there?

For the answer, we need to refer back to Keynes, and his General Theory of Employment, Interest & Money here we find the theory of Economic equilibrium which is expressed in alebraic form;

PE = C + c[1 - t]Y + I + G + NX

PE = Planned Expenditure
C = the amount of output consumers wish to consume
c[1 - t] = consumers disposable income [after tax]
I = the amount of capital investment via business
G = Government investment in capital goods
NX = net exports
Y = total expenditures/total income

Once the eqation is solved via inputing the necessary values, you are left with PE = Y which if plotted graphically, represents a 45 degree angle.
This = equilibrium.

The stock market has subscribed to equilibrium theory since almost the year dot, and if used correctly can become a very useful and profitable tool.
Statistically, equilibrium theory carries a high probability level, with a 95% confidence level and standard deviation of 2.

jog on
d998

 

[tech/a]

Duc

So a trend rising and falling while following approx a 45 degree dominant angle of trend is likely to continue.
Trends which rise or drop at angles greater than 45 degree angle,particularly very sharp angles are likely to return to the mean.
Further violent swings beyond 2 standard deviations are again those which are likely to be pulled back to equilibrium quickest.

Was aware of Gann's 45 degree observations.

 

[danc]

Re live trade,current low and hier dbtm SBM .trend lines collide.on weekly off 6/01/03 and 19/09/05 and off 8/10/01 and 4/02/02 cross and hit directly on low and hier dbtm lo.also we see btm came on fibbo numbers 50% of all time major called low and 50% of 2nd major r called hier dbtm,also spiked candle pattens on these points, hi obv good fundies , have taken a position based on all this.

 

[ducati916]

tech/a

So a trend rising and falling while following approx a 45 degree dominant angle of trend is likely to continue.
Trends which rise or drop at angles greater than 45 degree angle,particularly very sharp angles are likely to return to the mean.
Further violent swings beyond 2 standard deviations are again those which are likely to be pulled back to equilibrium quickest.

Was aware of Gann's 45 degree observations

.

As with any statistical study, the Law of Large Numbers dominates the probabilities. Therefore, in descending order of probability;
*the entire market
*index [DJIA, NASDAQ, S&P500]
*sector [semiconductors, housing, oil, tobacco, etc]
*individual stocks

The variability [standard deviation] will increase as you descend.
The confidence differential will decrease as you descend
The coefficient will decrease as you descend

Therefore, should you follow your assertion, you could suggest a strong correlation with added diversification, reducing as you approach single stocks if utilizing a purely technical approach and a return to equilibrium.

The joker, is the element of time this is of course where Gann adherents claim specialized knowledge. In essence Gann time was primarily related to seasonal patterns [harvest] of wheat, cotton, etc.

While industrial and technology have seasonal patterns, they are not as strong as patterns occuring in nature.

Here are the S&P500, XHB [housing] & TOL as comparatives to volatility;


jog on
d998

 

[Staybaker]

Maybe I'm being obtuse, but how on earth can you specify the angle of a line (e.g. "45 degrees") when the scales on the two axes are in different units, namely, time on the horizontal axis and price on the vertical axis? It simply doesn't make sense (to me anyway) ...

Cheers, Staybaker.

 

[BSD]

Maybe I'm being obtuse, but how on earth can you specify the angle of a line (e.g. "45 degrees") when the scales on the two axes are in different units, namely, time on the horizontal axis and price on the vertical axis? It simply doesn't make sense (to me anyway) ...

Cheers, Staybaker.

Exactly...

How can a theory work if you can simply alter the scale to fit your call?

Imagine - charting theories being able to offer both a sell and a buy call.

Sounds like a broker's dream!

Just another bunch of excuses to get around doing your homework

 

[Kauri]

Coyote...
I see he has released another book updating your grids... good choice of publisher...


Description:

RANDOM ? NOT RANDOM - HOW TO BEAT TRADING COMPUTERS AT THEIR OWN GAME. Author Of Trends and Tripwires 1 (Wright Books -an imprint of John Wiley 2001),lecturer and media commentator Bill Wormald reveals in remarkable detail how readers can easily track the major players in world financial markets using a unique chart overlay tool designed by the author. Enjoy a much greater understanding of financial price movements, improve timing and execution of trades. Trends and Tripwires (2) includes around 50,000 words and a hundred example images and presents the results of almost seven years of extreme full time analysis. More than 10,000 global financial instruments were exhaustively tested with the overlay and all were found to align within its printed guide lines. (The overlay may represent a common software grid or perhaps a dominant algorithm in automated trading systems).World financial markets are not as random as they appear to be and now almost anyone can track them.

Preview this book (MS Word)

Product Details:

Printed: 216 pages, 6.00" x 9.00", perfect binding, black and white interior ink
ISBN: 1-4116-6121-4
Publisher: Lulu.com

 

[tech/a]

Exactly...

How can a theory work if you can simply alter the scale to fit your call?

Its simply an observation from me not a theory.I certainly dont use it as a trading tool,but am aware of it when in a trend.

Just another bunch of excuses to get around doing your homework

Ive always hated homework.
And I like nothing more than passing with flying colours when Ive done bugger all.

Imagine - charting theories being able to offer both a sell and a buy call.

Imagine that.
To most thats all it is Voodoo.(Mind you most of Gann IS VOODOO).
To some its as natural as day and night,as clear too.
I do it all day Monday to friday and get it just as right as the Fundies.


One of the big differences is that I know what to do when I get it wrong---most fundies believe they cant possibly have it wrong!

 

[BSD]

Gold
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[coyotte]

Coyote...
I see he has released another book updating your grids... good choice of publisher... :

I picked up a used copy from Amazon a couple of weeks ago for $us 25 , List $us 75 --- still in the the mail.

Along with other considerations ,the initial angles are determinded over a specified time period -- Bill explains about moniter distortion on his web site and how to over come it --- this is NOT simple trend line trading


Cheers

 

[Kauri]

Coyote...
I see he has released another book updating your grids... good choice of publisher... :


I picked up a used copy from Amazon a couple of weeks ago for $us 25 , List $us 75 --- still in the the mail .

As they say... cheap at half the price...

 

[BSD]

Ive always hated homework.
And I like nothing more than passing with flying colours when Ive done bugger all.

The Australian Dream!


Relax Tech

My beef is with specific angles and shapes, not with you, your methods, your results etc.

Anything that creates a different result when you print in landscape or portrait is dumb.

Similarly dumb - some people use dividends and PEs to value companies with limited lifespans. Some refuse to invest in a company with no current earnings, despite massive forecast earnings in future years because they cant work out the current ROE, ROA, PE, EV/EBITDA etc

Technical or fundamental - plenty of dumb things out there.

Dumb is dumb

 

[tech/a]

My beef is with specific angles and shapes

At best these things are amusement value.To adopt as a trading methodology is folly.---those who attempt to will (eventually) understand.

Dumb is dumb

Normally recognised through experience. Those gaining the experience cant be classified as dumb unless they fail to learn--or worse refuse to accept what is learnt from experience.

 

[It's Snake Pliskin]

Is there any more discussion on this wormald stuff?

 

[Gazzer]

I just picked up a copy of his second book. Is there any software out there to do this automatically?