Technical Analysis of STOCKS & COMMODITIES
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Article Archive For Giorgos E. Siligardos, Ph.D.
DownloadThe Edge In Chart Patterns, Part 2
ARTICLE SYNOPSIS ...Part 1 of this article showed how you can use a trading system to define the edge that a chart pattern gives you. This concluding part will elaborate on three practical issues relating to this subject: market frictions, sample populations, and capital restrictions...
The Edge In Chart Patterns, Part 1
ARTICLE SYNOPSIS ...When you see a chart pattern forming, most likely, others will see it too. What gives you an edge when you trade a chart pattern? This two-part article will help answer that question...
Averaging Reward-To-Risk Ratios
ARTICLE SYNOPSIS ...You need to know the reward/risk profile of your trading system, but how do you figure out which system is better than another? Here's one method you may not have thought of using...
Filtering Price Movement
ARTICLE SYNOPSIS ...Here is an alternative to the classic zigzag indicator, which may prove useful to visual technical analysts and chart pattern researchers...
Moving Averages: Some Finer Properties
ARTICLE SYNOPSIS ...What is the difference between the 10-period of a five-period moving average and a 15-period moving average? Does the sum of moving averages equal the moving average of the sum? How does the smoothing of a ratio differ from the ratio of smoothing? How can you algorithmically calculate the weights of a smoothing procedure? Find the answers to such technical questions here....
When The Smart Money Fails
ARTICLE SYNOPSIS ...The Commitments Of Traders aggregated report is a handy tool for watching the moves of the most significant players in the markets. But what happens when the "smart money" fails? You may be able to gain some insights from the reports. Find out ho...
Evaluating Algorithmic Trading Signals
ARTICLE SYNOPSIS ...Are you using an objective, unbiased, and globally applicable method to evaluate the performance of your algorithmic trading signals? If not, then this article may be your cup of tea....
Static Option Income Strategies: Do They Work?
ARTICLE SYNOPSIS ...If you're trading options, you've probably heard of static option income strategies. They promise low but almost riskless profits every month by selling premiums in up, down, or sideways markets, and you don't have to make any predictions about the direction or the volatility (implied or actual) of the underlying. Sounds too good to be true, doesn't it? Here's what you need to be aware of before you start trading them....
Understanding The Yield Curve, Part 1
ARTICLE SYNOPSIS ...In this two-part series, you'll get a comprehensive review of yield curve analysis and how it can be applied to making decisions in the stock market. In this first part, we'll look at basic theory as well as some guidelines for how discretionary investors can use it to gauge the investing landscape....
Head & Shoulders, Algorithmically, Part 2
ARTICLE SYNOPSIS ...In part 1, we looked at how to find important milestone points in a head & shoulders formation. In this, the second article of a two-part series, we present an algorithm that will let the computer find the formations for us....
The Average Age Of Averages
ARTICLE SYNOPSIS ...Have you ever considered why you use 2/(n+1) as a smoothing parameter when using exponential moving averages? Here you will find a simple explanation....
Understanding The Yield Curve, Part 2
ARTICLE SYNOPSIS ...Last month in part 1, we presented the basics of yield curve analysis. Here, we review its historical performance in various countries through the use of yield spread indicators....
Head & Shoulders, Algorithmically, Part 1
ARTICLE SYNOPSIS ...Ever wanted to use a simple mechanical recognition algorithm in your favorite software for spotting head & shoulders patterns? If yes, this two-part article is for you. Here's the first part....
Buying The Optimal Moneyness
ARTICLE SYNOPSIS ...The market is ready to make a move. You feel it. You see it. It is time to buy options. What moneyness will you choose? In, at, or out? Here's part 1 of 2....
Choosing Optimal Moneyness
ARTICLE SYNOPSIS ...In his previous article, Giorgos Siligardos demonstrated how the movement of the underlying, the implied volatility changes, and the passage of time all affect the price of options. This time, he shows how a simple computerized approach to the problem of choosing the optimal moneyness could be what you're looking for....
The Cat's Ears Pattern
ARTICLE SYNOPSIS ...Here's a rare but reliable bearish formation: the cat's ears. A visual hybrid of double-top and failed-cup formations, the cat's ears formation occurs during downtrends, predicting further price decline with a price target....
Applying The Sector Rotation Model
ARTICLE SYNOPSIS ...Two simple tools can help you incorporate the macro perspectives of the stock market in your technical analysis: the sector rotation model and the yield curve. Both are based on macro fundamentals, both have a technical application, and both have signals that usually precede major market reversals and highlight signals from classic technical analysis. In this article I will explain the logic of the first, the sector rotation model, and present a simple indicator to monitor its waves....
Identifying Cup Formations Early by Giorgos Siligardos
ARTICLE SYNOPSIS ...Here's a simple mechanical recognition method for identifying possible emerging cup formations. In my article "Identifying The Cup (With Or Without The Handle)," which appeared in the February 2006 Stocks & Commodities, I introduced a simple mechanical algorithmic method for identifying cup formations (also known as rounding bottoms) in their late phase. The core part of the algorithm was based on the idea of using a virtual grid on the chart. Since then, I have been asked by technical analysts to provide an algorithm for identifying possible cup formations in their early phase. This time I...
Debit or Credit? by Giorgos E. Siligardos
ARTICLE SYNOPSIS ...Debit or Credit? by Giorgos E. Siligardos That is the question. If you are confused about which vertical spread to use, find out here. Are vertical credit spreads better than their counterpart debit spreads? In this article I will discuss their main and subtle differences (and similarities) with an emphasis on the income-generating strategies. Now that trading direct derivatives is open to retail traders, both experienced professionals and novices engage in complex option positions like spreads, butterflies, condors, and so on. Among these advanced positions, the vertical spreads (referred ...
The Pivot Detector Oscillator, Simplified by Giorgos Siligardos
ARTICLE SYNOPSIS ...The Pivot Detector Oscillator, Simplified by Giorgos Siligardos See how you can use a simplified version of the Pid oscillator to improve your timing by leaps and bounds. A coherent unification model for trend indicators and oscillators is to technical analysis what a unification model of the microcosmos and the macrocosmos is to physics. Although both models may still be far from being constructed, there is nonetheless a way of using trend indicators and oscillators to derive virtually instantaneous signals. Here I will describe a simplified version of the pivot detector (Pid) oscillator an...
Leader Of The MACD by Giorgos Siligardos
Jokes Of (Trading) Wisdom by Giorgos E. Siligardos, PhD
Building A Trading Template by Girogos Siligardos
ARTICLE SYNOPSIS ...Building A Trading Template by Girogos Siligardos A template makes things so much easier for so many things, trading included. What should you build into yours to manage your trading? roper trade management and money management are a must for all types of market participants. Even though there are many tradingrelated software packages, few, if any, provide a template for monitoring trades based on trade management (TM) and money management (MM) rules not related to mechanical trading methods. In this article I will discuss the main parts of such a template that can be implemented in Microsof...
Building Automatic Trendlines by Giorgos E. Siligardos, Ph.D.
ARTICLE SYNOPSIS ...Stocks & Commodities V. 24:11 (36-44): Building Automatic Trendlines by Giorgos E. Siligardos, Ph.D. Here's a simple mechanical method for automatic trendline construction using monoparametric trendlines. Despite the continuing evolution in technical analysis tools, almost all of the earlier forms of charting techniques are still being used, in exactly the way they have been used for decades. Though the implementation of trendlines by chartists has been around a long time, an algorithmic approach to trendline construction is not yet available. For the mechanical construction of trendlines I ...
Identifying The Cup (With Or Without The Handle) by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...Stocks & Commodities V. 24:2 (36-42): Identifying The Cup (With Or Without The Handle) by Giorgos Siligardos, Ph.D. Here's a mechanical identification formula for the rounding bottom, one of the most rewarding formations for traders. The rounding bottom? (also known as the cup) is one of the basic and most-familiar bullish charting formations. In this article I will present a simple yet powerful and flexible algorithm to identify cups that can be implemented in almost all technical analysis software and in all time frames. The typical cup formation can be seen in Figure 1. The price decline...
Spike Up The Volume by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...Stocks & Commodities V. 23:6 (30-37): Spike Up The Volume by Giorgos Siligardos, Ph.D. A long spike appearing in the volume histogram usually catches your attention. But how do these spikes in volume really affect indicators and prices? Volume can be considered to be the fuel of the markets. When the daily trading volume of a security is extremely high compared to its average daily values, that means it's attracting a large number of buyers or sellers. Oftentimes, this huge rush leads traders awry. In his article "A Tale Of Two Indicators," Andrew Tomlinson gave an interesting example of two...
The Decomposition Method by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...V. 22:9 (22-29): The Decomposition Method by Giorgos Siligardos, Ph.D. You never know what you might find by studying high, low, and closing prices separately. In this article, I will introduce the decomposition method of price information, and show how the reverse engineering concept discussed in my previous articles can be expanded to complement this method. THE IDEA BEHIND DECOMPOSITION Price data for one day consists of the open, high, low, and close of that particular day. Though these four components are correlated, it can also be useful to study them independently. When the results ...
Sidebars: Mathematical formulas, and MetaStock code by Giorgos Siligardos, Ph.D.
Sidebar: MetaStock Code For TPR Explorations by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...V. 22:3 (24-38): Sidebar: MetaStock Code For TPR Explorations by Giorgos Siligardos, Ph.D. METASTOCK CODE FOR TPR EXPLORATIONS Use the code below as a filter to identify TFs that last up to 60 trading days and produce retracements of no more than 50%. In column A, write exactly the same code, but in the last line substitute "TPR>0" with "TPR." You may also name column A as "TPR." The code works with daily charts and requires the zz(20%) to have produced at least four swings in chart history to function properly....
Mechanically Recognizing Triangular Formations by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...V. 22:3 (24-38): Mechanically Recognizing Triangular Formations by Giorgos Siligardos, Ph.D. Patterns such as triangles, pennants, and wedges (hereafter referred to as triangular formations, or TF) are some of the first things to which an aspiring chart analyst is introduced when he or she begins to study technical analysis. The chart formations in this category are characterized by an oscillating movement of price toward an equilibrium point. They all have two things in common: They usually take place during strong trends and they provide good trading opportunities with clear stops and, most...
Reverse Engineering RSI by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...Reverse Engineering RSI by Giorgos Siligardos, Ph.D. Can the inverse of an oscillator help you to forecast closing prices? Reverse engineering is a mathematical procedure that takes the inverse of an oscillator. In this article I will illustrate this process using J. Welles Wilder's relative strength index (RSI). The reverse-engineered RSI, or RevEngRSI for short, can help determine the following time period's closing price using the value of the oscillator. ...
The Concept Of Equivalence by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...The Concept Of Equivalence by Giorgos Siligardos, Ph.D. Try this to avoid using two indicators that are equivalent. Let me present an objective, mathematical way to determine when two indicators are equivalent with respect to divergence. Knowing when two or more indicators are equivalent will allow you to watch only one of them for divergences, saving you time. Further, by using appropriate functions, you can convert a normalized (bounded) oscillator into a denormalized one and preserve its performance with respect to divergence. This lets you create indicators as compositions of normalized ...
Divergence Bias by Giorgos Siligardos
Reverse Engineering RSI (ll) by Giorgos Siligardos, Ph.D.
ARTICLE SYNOPSIS ...Reverse Engineering RSI (ll) by Giorgos Siligardos, Ph.D. The Revenge Of The Indicators - Reverse Engineering RSI (II) I Simplify price projection and get a clearer visual representation with these three indicators. In the June 2003 STOCKS & COMMODITIES, I introduced the RevEngRSI indicator and showed how it could be used to project support/resistance levels for the price. In that article, I also showed that the curve of this indicator is a transformation of a horizontal line from the relative strength index (RSI) graph to the price graph, which carries the support-resistance attributes of ...
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