J. Welles Wilder: RSI, ATR, ADX and Parabolic SAR
In one book Wilder created several of the most used indicators in the world: RSI, ATR, ADX and the Parabolic SAR.
Trade a real day like J. Welles Wilder Jr.
A real market day with the date hidden. Run the checklist on the chart, then buy, sell or stay out: the real candles answer.
Check every point of the list before you decide. Stay out if the setup is not there.
Who they were
J. Welles Wilder Jr. was a mechanical engineer who moved into real estate and then commodity trading. In 1978 he published "New Concepts in Technical Trading Systems".
That book introduced the Relative Strength Index, the Average True Range, the Directional Movement System (ADX) and the Parabolic SAR, all designed to be calculated by hand.
Principles and rules
1. Measure volatility
The Average True Range measures how much a market moves, including gaps.
2. Measure momentum
The RSI compares recent gains and losses on a 0 to 100 scale.
3. Know if there is a trend
ADX measures trend strength regardless of direction.
4. Stops that follow price
The Parabolic SAR is a stop that accelerates with the trend.
Key lessons
- Indicators are tools for specific questions: volatility, momentum, strength.
- ATR-based stops adapt to each market.
- A trend filter avoids many losses.
Strategies from this method
How to practise it
RSI and ATR are built into Candlemind. The Parabolic SAR and ADX strategy pages explain how to use the others, and ADX can be written in My indicators.
Frequently asked questions
What indicators did Wilder create?
RSI, ATR, ADX (Directional Movement), Parabolic SAR and others, all in his 1978 book.
Why is the RSI set to 14?
Wilder used 14 periods in his original book, and it became the standard.
Summaries and paraphrases of public books and interviews, for education. Not investment advice.