Understanding the Felton Trading System

[Roger Felton 10]

I'm starting this thread to share some of the many things I've learned over the years about market behavior and how technical analysis can help bring that behavior into "focus" and prepare the trader for what's about to happen next. The fewer the surprises, the fewer the mistakes, right?

 

This thread is solely for educational purposes. It is my belief that, in trading, knowledge is essential but useful only when tempered with experience and a good dose of common sense.

 

Some Basic Stuff -

 

Let me start off by stating a personal opinion that might be helpful to you based on many years of extensive study:

 

"Most Technical Analysis indicators found in platforms, books, magazines and the Internet are worthless."

 

They lurk in trading-cyberspace like black holes. Once created and popularized, they live forever and feed on ignorance. The more time, effort and possibly money that's invested in them, the harder they are to escape. And they multiply like rats on steroids.

 

At any given time, somebody somewhere is cooking up a new bowl of trading mush to feed to the unsuspecting...and they may be doing it with the best of intentions. If you don't keep an open mind, you'll never learn. If you don't remain skeptical, you'll learn the wrong things.

 

Before we get started on our study of the Felton System, there's something else that's vitally important for all traders to understand:

 

"There is absolutely no trading method or system in the world that, by itself, will ever make you a dime."

 

Uh, oh. I think I just lost half my readers here....but, come on guys, think about it. Put aside what you've been chasing for the past umpteen years and be brutally honest with yourself. Does anyone actually believe that a trading system exists that you can buy or build in a day and be making money tomorrow? Or next week? Or next month?

 

Why not? What else would a trader possibly need?

 

It's Knowledge and Experience. They come from Training and Practice. All trading systems and methods are merely tools...like a golfer's clubs or a carpenter's saw. Their income generating value only manifests itself when they are placed in the hands of someone skilled in their use.

 

Before any trader can begin to experience success through consistent goal achievement, they must master what I call the "4 M's of Trading". These include:

 

Method - Success will remain elusive until a method is found that fits and works consistently because it's based on sound, proven trading principles. No single method will ever work equally well for all traders who use it.

 

Market - A good system used in a bad (or incorrect) market usually doesn't go well. Whether you're a scalper or a trend trader, choose a market best suited for the way you trade.

 

Mastery - You can have a super method applied to a great market and still lose if you lack having total mastery. Mastery is not confined to your method alone. You must have mastery of Market Behavior, mastery of your Platform, and you'll need one more mastery that is so important I'll list it separately:

 

Mindset - You need mastery of your emotions. Until traders rise above and learn to control their feelings of impatience, anger, frustration, panic, desperation and anxiety, they will never enjoy any degree of lasting success. No trader can remain focused at the level necessary and make good sound trading decisions while in a state of mental turmoil.

 

With that fully understood and out of the way, let's begin our study of the Felton Method. Please realize that teaching by text is one of the most difficult ways to educate and many questions may result. So, please let me know if anything isn't clear and needs further elaboration.

 

Lesson 1 - The Felton Charts

 

As a Method Developer, my goal has been to create market entries that enable traders to find profitable opportunities in trending, sideways, choppy or even congested market conditions. The best way I have found to accomplish this is in my chart type selection. In cases where the chart type I wanted didn't exist, I created it.

 

The reason chart type matters can be demonstrated in a simple illustration of some various charts. I will include some of the signal types that I use (many that I've created) so that you can see the tremendous difference it makes by the chart type we choose.

 

Chart A is a 15-min in gold (GC). A few signals were generated and easily filtered by some "with trend" settings but the market itself wasn't ever smooth. It would go from choppy/congested to violent volatility and then into a coma. Tradeable, yes...but not much fun.

 

Chart B is a 987 Tick chart showing the same day's activity in GC. Although Tick charts are generally more "in tune" with what the markets are doing than time-based charts, this example shows little improvement with so-so entries and sloppy turns.

 

We could gain some smoothness maybe if we tried Heiken Ashi or perhaps a Range chart, but we'd still have a mess of constantly opposing bars and market mishmash. It was only when I started putting Price in a "channel", of sorts, that I started to see the clarity of true price direction.

 

In Chart C, the trader can easily see that, when Price changes direction, it tends to stay in that direction...especially when going with a trend. Notice the computer generated signals that warn and fire at most of the turns. Trend direction re-entries occur often...such as the ones shown with the orange arrows. These identify bars we call "Rockets" and they make a terrific opportunity to take additional profit in a trend. The reason for this can be explained later in the lesson on Signals.

 

Nice 10 to 20 ticks or more profit can often be taken counter to the trend, also. Weak turns can often be spotted and filtered for avoidance using a momentum or simple oscillator. This chart looks like a traders dream...except for one thing. The bar data is incomplete and back testing is not possible.

 

To solve this pesky problem, we created the Felton Renko Supreme, shown here in Chart D. The OHLC of every bar is shown in real time. Now I can use this powerful Renko chart to not only convert it into any other type of Renko Bar, but I can also perform all the back testing of various filters, signal entries and strategies I want. Although I don't rely on back testing much, it does tell me quickly if an idea might have legs.

 

So, don't be afraid to get out of your comfort zone and experiment with other markets and bar types that might make your job as a trader much easier and more profitable. Be sure to make changes to your system only after a reasonable amount of forward testing. And remember, perfection is not possible but improvement often is.

 

In Lesson 2, we'll be studying some of my favorite signal entries as well as some filters I use to enhance their accuracy.

Edited July 1, 2012 by Roger Felton

[MightyMouse 12]

 

Let me start off by stating a personal opinion that might be helpful to you based on many years of extensive study:

 

"Most Technical Analysis indicators found in platforms, books, magazines and the Internet are worthless."

 

They lurk in trading-cyberspace like black holes. Once created and popularized, they live forever and feed on ignorance. The more time, effort and possibly money that's invested in them, the harder they are to escape. And they multiply like rats on steroids.

.

 

You are certainly entitled to your opinions. But, if you are going to use verbiage like "extensive study" and conclude that all old indicators are worthless when, on any given day, we can observe an indicator performing exactly as it was intended to perform, then I would suggest that your analysis is severely flawed or intentionally flawed to suit your purpose which I suggest is to play on the emotions of the gullible and vulnerable trader and present your indicators.

[Roger Felton 10]

You are certainly entitled to your opinions. But, if you are going to use verbiage like "extensive study" and conclude that all old indicators are worthless when, on any given day, we can observe an indicator performing exactly as it was intended to perform, then I would suggest that your analysis is severely flawed or intentionally flawed to suit your purpose which I suggest is to play on the emotions of the gullible and vulnerable trader and present your indicators.

 

Hello MM,

 

I think you are completely aware that I never said "all old indicators are worthless". Never happened and you missed the point entirely. If all old indicators were worthless, much of my system would be in trouble.

[MightyMouse 12]

Hello MM,

 

I think you are completely aware that I never said "all old indicators are worthless". Never happened and you missed the point entirely. If all old indicators were worthless, much of my system would be in trouble.

 

Sorry for using the wrong qualifier. I said all, you said most. Which, then, are worthless. I am sure that information will be useful to the community.

[Roger Felton 10]

Sorry for using the wrong qualifier. I said all, you said most. Which, then, are worthless. I am sure that information will be useful to the community.

 

The easiest way to demonstrate the point would be to take every indicator you can possibly find and put them all on your trading chart. Learn the principle and mechanics behind each one and then try to make money. You won't.

 

There's a new indicator I found on a website for sale that measures the gravitational differential between the moon at high and low tide. This, is plotted in a wave form that tells you when to be long or short in any market. Personally, I think it's bunk but you might love it. There are a couple hundred more I could list but you might get the idea.

 

The point is, what works for one trader will often not work for another. If there were one indicator that worked all the time in all markets for all traders, then everyone would be using it, right? The list of the most universally used indicators common among traders is relatively short. There's a reason.

 

Every trader must objectively sort through the maze of indicators and find what works for them based on what and how they trade (style). I can assure you, the list won't be very long for most traders. If an indicator has no value for the way you trade, then, for you, it's useless.

 

If you are having success running most of the hundreds of TA indicators on your charts, then congratulations. We all must find our own way.

 

A good well-known book on TA that clearly explains why most traders get little to no benefit from the majority of indicators out there, is "Technical Analysis - The Complete Resource for Financial Market Technicians" by Charles D. Kirkpatrick and Julie R Dahlquist.

 

If you disagree, MM, that's fine. My opinions are based many years of study and experience as a Technical Analyst. Your conclusions may differ. But, if most indicators have good profit value for everyone, as you seem to believe, then why do most traders fail when using them?

[MightyMouse 12]

If you disagree, MM, that's fine. My opinions are based many years of study and experience as a Technical Analyst. Your conclusions may differ. But, if most indicators have good profit value for everyone, as you seem to believe, then why do most traders fail when using them?

 

I do not know if traders fail because of their indicators. I have my suspicions why they fail and it has a lot to do with items and issues not found on a chart.

[Roger Felton 10]

I do not know if traders fail because of their indicators. I have my suspicions why they fail and it has a lot to do with items and issues not found on a chart.

 

Good point. But, in addition to poor money management, risk control, mental aspects and weak or bad training, etc., trying to master a complicated system of ineffective indicators usually doesn't go well.

 

The paths to failure are many and they stay well worn.

[BearBullTrading 10]

....

 

This thread is solely for educational purposes....

 

So every indicator, chart type , entry signal etc you mention or show in this thread is freely available for everyone who has a desire to be "educated" by you, correct.

 

You cant "educate" a class if you don't provide the "textbooks" for everyone.

[onesmith 10]

Would someone summarize what we learned in lesson 1 besides most indicators don't work?

 

In Lesson 2, we'll be studying some of my favorite signal entries as well as some filters I use to enhance their accuracy.

[MadMarketScientist 11]

So,as long as he doesn't mention classes he can call a thread "Understanding the Felton trading System" and in no way is that an advert for his business?

So,first trash just about every indicator ever invented but then tell everybody you have invented some wonderful indicators yourself,.....and the value to the community here is what exactly?

I hope my comment isn't off topic,because as far as i can see the topic is Felton promoting Felton...as usual.

 

That is correct - he is sharing details of his trading system. In our eyes, it is educational content. He is not putting any backlinks or soliciting sales. In the spirit of sharing, I've asked Roger to detail the method behind the indicators he is referring to. If he doesn't, then we will shut this thread down as an advert. Let's give him a chance.

 

What is the value to the community? Well why don't we let the community decide that for themselves? If you don't like the thread please don't participate in it. Everyone sees value differently.

 

And yes the last part of this post is getting off topic so I will leave my reply for a day or so and then I will delete it so we can get back to discussing Roger's method.

 

thx

MMS

[Roger Felton 10]

So every indicator, chart type , entry signal etc you mention or show in this thread is freely available for everyone who has a desire to be "educated" by you, correct.

 

You cant "educate" a class if you don't provide the "textbooks" for everyone.

 

As I've stated several times in previous posts, I'm here at TL to freely share knowledge, indicators, charts, and anything else traders interested in learning want me to provide. The first post was intended to just basically be an intro to some basics and demonstrate that chart choices can matter. It was just the first in a planned series of lessons on Signals, Market Behavior, Trade Management, Some Psychology, and anything else traders wanted to discuss.

 

I stated clearly in the first post that, anyone having any questions about anything could simply let me know and get clear complete answers.

 

If there appeared to be any member interest, charts & indicators would be posted as soon as someone showed me where they go.

 

Instead, all MMS got were complaints. So, my apologies for the effort. MMS has informed me the thread will be taken down.

[wrbtrader 10]

...Nice 10 to 20 ticks or more profit can often be taken counter to the trend, also. Weak turns can often be spotted and filtered for avoidance using a momentum or simple oscillator. This chart looks like a traders dream...except for one thing. The bar data is incomplete and back testing is not possible.

 

To solve this pesky problem, we created the Felton Renko Supreme, shown here in Chart D. The OHLC of every bar is shown in real time...

 

Hi Roger,

 

How can I get access to the "Felton Renko Supreme" or you're going to post the code/configuration and tell us what software to apply the code too ?

 

I use to use Renko charts a long time ago and would like to see if there's a different way of looking at Renko charts.

[Roger Felton 10]

Hi Roger,

 

How can I get access to the "Felton Renko Supreme" or you're going to post the code/configuration and tell us what software to apply the code too ?

 

I use to use Renko charts a long time ago and would like to see if there's a different way of looking at Renko charts.

 

Hello wrbtrader,

 

I think you'll really like this Renko bar. Would like your feedback, if possible. I had planned on posting the FT Renko Sup over the holidays along with the other Lessons in the series plus some indicators.

 

But some members consider my posts to be adverts....?? I'm not sure of the future of the thread so, to avoid any more possible animosity, PM me your email address and I'll get a Renko copy to you. Let me know if you have any questions....

 

Thanks,

 

Roger

[DbPhoenix 42]

Hello wrbtrader,

 

I think you'll really like this Renko bar. Would like your feedback, if possible. I had planned on posting the FT Renko Sup over the holidays along with the other Lessons in the series plus some indicators.

 

But some members consider my posts to be adverts....?? I'm not sure of the future of the thread so, to avoid any more possible animosity, PM me your email address and I'll get a Renko copy to you. Let me know if you have any questions....

 

Thanks,

 

Roger

 

In order to avoid the appearance that all of your assurances that your only goal here is to "contribute" something amount to nothing more than harvesting email addresses, why not just post it?

 

Db

[Roger Felton 10]

In order to avoid the appearance that all of your assurances that your only goal here is to "contribute" something amount to nothing more than harvesting email addresses, why not just post it?

 

Db

 

Thanks Db. No intent in "harvesting" whatsoever was ever intended. As you know, whenever I post anything, it is immediately criticized and labeled as advert. At this point I have no idea if the thread I started will continue. Presently, the thread appears to have only served to create more animosity towards me and I really don't feel any need or particular member appreciation for it's continuance. Just being honest.

 

My plan was to post the "Lessons" in stages and upload indicators and chart types when appropriate explanatory information could accompany it. This would help prevent confusion and numerous questions caused by posting material ahead of the information necessary in explaining how to use it.

 

The only TL member expressing any interest in the Renko Supreme Bars is wrbtrader. If he wants it, I'll give it to him for free. If he feels I am harvesting emails he should definitely not respond. Astute traders are fully aware of the damage that an unscrupulous vendor like me can do with one email address.

 

I have no interest in posting anything here that I have a considerable time and financial investment in just to be criticized and insulted and have many hours of my work taken down because various members here deem it to be advert. I'm sure you understand.

 

Hope you have a super 4th...stay safe!

[DbPhoenix 42]

Thanks Db. No intent in "harvesting" whatsoever was ever intended. As you know, whenever I post anything, it is immediately criticized and labeled as advert. At this point I have no idea if the thread I started will continue. Presently, the thread appears to have only served to create more animosity towards me and I really don't feel any need or particular member appreciation for it's continuance. Just being honest.

 

My plan was to post the "Lessons" in stages and upload indicators and chart types when appropriate explanatory information could accompany it. This would help prevent confusion and numerous questions caused by posting material ahead of the information necessary in explaining how to use it.

 

The only TL member expressing any interest in the Renko Supreme Bars is wrbtrader. If he wants it, I'll give it to him for free. If he feels I am harvesting emails he should definitely not respond. Astute traders are fully aware of the damage that an unscrupulous vendor like me can do with one email address.

 

I have no interest in posting anything here that I have a considerable time and financial investment in just to be criticized and insulted and have many hours of my work taken down because various members here deem it to be advert. I'm sure you understand.

 

Hope you have a super 4th...stay safe!

 

So you've decided not to contribute anything after all because you haven't been sufficiently appreciated? Perhaps you'd be appreciated more if you went ahead and made the contribution rather than bask in the satisfaction of having announced that you plan to make it.

 

You began by making a number of claims which were unsubstantiated and, understandably, prompted skepticism. You then elected to insist that demands for any such substantiation were unreasonable. This prompted reactions that were considerably more hostile. Throughout you played victim, harassed and persecuted, when all you wanted to do was contribute to TL, and at no cost to members.

 

Well, here it is. The rubber meets the road. And you decide not to contribute anything after all because somebody might be mean to you and hurt your feelings.

 

This has been one hell of a performance, and I applaud MMS' patience and tolerance. Perhaps worthwhile lessons have been learned all round.

 

Db

[Obsidian 10]

...My plan was to post the "Lessons" in stages and upload indicators and chart types when appropriate explanatory information could accompany it. This would help prevent confusion and numerous questions caused by posting material ahead of the information necessary in explaining how to use it.

 

The only TL member expressing any interest in the Renko Supreme Bars is wrbtrader. If he wants it, I'll give it to him for free. If he feels I am harvesting emails he should definitely not respond. Astute traders are fully aware of the damage that an unscrupulous vendor like me can do with one email address....

 

You could really be helpful if you had spent time on posting your lessons, instead of wasting time on 1on1 debates..The thing I don't understand is why you spent so much of defending-explaining yourself...Share your system and let it defend itself...I check your posts and can't see anything useful for beginners...You do not need to prove yourself or reply to every post against you, if you really want to share something...just do it, nobody can stop you...imvho

[Roger Felton 10]

You could really be helpful if you had spent time on posting your lessons, instead of wasting time on 1on1 debates..The thing I don't understand is why you spent so much of defending-explaining yourself...Share your system and let it defend itself...I check your posts and can't see anything useful for beginners...You do not need to prove yourself or reply to every post against you, if you really want to share something...just do it, nobody can stop you...imvho

 

Nobody wonders why I wasted my time more than me.

[pitrader 10]

I would be intrested in applying your Renko indicator to my own work to see it has any merit. If you like you can email me the TS indicator at pitrader@295.ca If it works well I will let you know and thank you accordingly. If not then I will continue to use what I currently implement.

 

Pi

[Roger Felton 10]

I would be intrested in applying your Renko indicator to my own work to see it has any merit. If you like you can email me the TS indicator at pitrader@295.ca If it works well I will let you know and thank you accordingly. If not then I will continue to use what I currently implement.

 

Pi

 

At this point, the indicator has not been coded by us in TradeStation, just Ninja. The concept is fairly simple but getting the true back-testable OHLC in a Renko was somewhat tricky. Check the TS forums. Someone may have done something similar.

[onesmith 10]

At this point, the indicator has not been coded by us in TradeStation, just Ninja. The concept is fairly simple but getting the true back-testable OHLC in a Renko was somewhat tricky. Check the TS forums. Someone may have done something similar.

It's not difficult to track the real OHLC (within the context of rules based on a simulated OHLC).

 

Post the rules for the 'renko supreme system' and I will post the code for the TS EasyLanguage strategy that can backtest it.

[zdo 20]

good lord ppl ! which is worse in here ? vendors or vendor ‘haters’?

 

the vendors have a tiny niche and help a tiny few.

and yes, the vendors hurt a tiny few.

and … vendor bashers ‘rescue’ a tiny few.

Meanwhile TL gets trashed down to the level of ET or worse with pages and pages of drivel !!!

 

It’s not worth it !!!

Rather than bang away at vendors and what they should post and exactly how they should post it, why not let the ‘market’ / the click count decide?

Let it be. If someone is attracted to what a vendor has to say, let them explore in a noise free place.

 

I have probably spent more money than anyone else in this forum on ‘vendors’ and the fault, if there was any, was all MINE. The methods and approaches and material I needed to move through as a beginner were the methods and approaches and material I needed to move through. No one could have or should have warned or 'rescued' me… and it didn’t matter if they were truly concerned or if were more in it to ‘exploit or even if they were full blown sociopathic cons… neither their intent nor their 'style' / personality nor their content ultimately had any impact at all on what I gained / learned / benefited / extracted from them…

ie the only person you are ‘helping’ when you run one of them dam vendors off is yourself

 

imo… the posts challenging the vendor in this thread so far are as self serving as the worst vendor ever

imo, ‘debunkers’ should ‘debunk’ at ET – even the 'holy', even handed ones… TL is ultimately not improved at all by even the most excellent debunking.

[wadams 10]

Roger, please continue posting your lessons.

 

You can't let criticism get to you. If you do, then regardless of the actual merits of your system, you signal to others that you're not confident in the what you're doing. It looks like you're seeking approval and validation from others. Stop that. Be your own kind of awesome instead.

[hapster 10]

Didn't even realize this was still alive over here if it wasn't for the auto-"there's a new post in the Felton thread" that I received in my email this morning. Forgot I even had that set up. Kudos, Rog, for gaining that whole week or two of your time back by keeping yourself quiet. One week at a time LOL.

 

Roger, just let 'em come over to "our" sandbox if they're interested in checking your stuff out. What's the point when most of the people over here are only interested in slamming your system that they really haven't a clue about?

 

Sorry. I know you can make your own decisions on this, but you know my opinions on this. Guess I'm too close to it LOL.

 

Hap (an obviously satisfied Felton student)

[steve46 12]

Read zdo's comment with interest.....certainly true that many here pursue "debunking" in a misguided fashion.....and with a bit too much zeal...

 

I can tell you from experience....when I started to take applications for my first class, all of the students had been TL members....however (and I think this is important) few of them had posted on the website (as I recall only one)...what they all shared in common was that they were self directed professionals with a history of previous success, and one might expect, they indicated that they made decisions independent of what they read (both pro & con).

 

As regards Mr. Felton...I still have concerns about any vendor unwilling to trade a real account, about comments with regard to "upselling", and at the end of this thread where the gentleman promises to provide a part of the system for folks to try out...apparently that never happened.

 

These and several other issues raise "red flags" for me but the bottom line is that people seem to read and consider what others post, but in the end, make up their own minds before patronizing a vendor....I would hope that part continues.