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Welles Wilder’s Long-Term Strategy

Welles Wilder is the biggest figure in the world of modern trading. He actually “digitized” the existing technical analysis tools, and also developed a large number of new indicators. There are dozens of developed solutions credited to him. In Binomo’s range of tools,  there are 5 indicators from Welles Wilder. In this article, we will look at a simple two-line strategy for beginners Moving Average Welles Wilder.

Overview of the indicators used

There are hundreds of different types of Moving Averages. The calculation formula has the same basis, but different implementation. Therefore, the actual values of different indicators may differ from each other in a fundamental way. The Moving Average lines from Welles Wilder, as compared to the Simple MA and Exponential MA, are distinguished by their improved smoothing of values. The curve has no sharp corners and cannot make rapid reversals. That’s why the signals have a short delay. However, given the long-term expiration, that does not matter.

Trading terminal setup

One of the main advantages of the Binomo platform is the possibility to do short-term trading without compromising the accuracy of the signals. Decreasing the chart period usually results in lower forecast accuracy. However, in the Binomo terminal, there are special assets with a high level of volatility, which are suitable for full-fledged technical analysis on second charts.

How to set up the Binomo terminal — step-by-step instructions:

  1. We open the terminal and select a profitable asset;
  2. We set up a candlestick chart with an interval of 5 seconds;
  3. We add two Moving Average lines with the desired settings.

The period of the first line is 50, and the fill is red. The period of the second line is 25, and the fill is yellow. In the drop-down list for the “Type” field, we select “Welles Wilder” for both Moving Averages.

For this strategy, it is especially important to choose an asset that has fairly high activity on the chart. You should evaluate the amplitude of fluctuations and the appearance of Japanese candlesticks. If you observe empty elements or gaps on the chart instead of a full-fledged price bar, you should look at other assets from the list of the most profitable ones. In this case, the CRY IDX asset will work; it provides a full-fledged candlestick chart even on a 5-second interval.

Trading signals on the strategy

The strategy is considered long-term only from a relative point of view. In fact, the duration of the trade will only be 1-2 minutes. But taking into account the fact that the market analysis will be carried out on a 5-second chart, each trade operation will take about 12-24 candles. On the usual scale, that ratio is quite large.

How to trade on the strategy:

  • signal for an increase — the yellow line intersects with the red one and is in the upper position;
  • signal for a decrease — as a result of the convergence of the WWMA curves, the fast yellow line should be in the lower position.

The combination of indicators used only reacts to intense and long-term trend movements. Short-term price correction in most cases does not have time to lead to convergence of the WWMA curves. Strong trends have a sufficient level of inertia, which ensures successful closing of the trade with a profit.

If the issue of time spent on trading is not fundamentally important, you can increase the chart interval. This will slightly improve the success rate of the indicator forecasts. On a 1-minute chart, trend inertia is slightly higher than on a 1-second interval. A good choice would be to set up a 30-60-second chart and 5-15-minute trades.

Caution! This article is not intended to be investment advice. No strategy can guarantee 100% correct trading results. A successful trading result in the past is not a guarantee that it will be repeated in the future. Any information contained in this article is for informational purposes only.

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