ARTICLE SYNOPSIS ...Determining Capital Amounts for Trading by Ajay Jani Last month, Ajay Jani covered several topics crucial to developing a comprehensive trading plan, including the importance of portfolio level simulations and the ability to use risk-reduction strategies to increase profitability. This time, Jani discusses a method to logically determine the amount of capital necessary to begin trading and provides guidelines for developing the mental discipline for trading. Determining the amount of capital required to begin a trading system is usually an afterthought, relegated to the ""unpleasant but nec...
BY: Ajay Jani
ARTICLE SYNOPSIS ...Martin Zweig Of The Zweig Forecast by Thom Hartle Martin Zweig may be a familiar name to you, and that would not be surprising, considering how many different hats he wears: one as editor of The Zweig Forecast newsletter, one as chairman of the Zweig Fund and one as the head of the Zweig Total Return Fund not to mention one as panelist on the popular TV show Wall $treet Week, on which he has appeared since 1974. Zweig, who has $9 billion under management currently, has spent the past 32 years developing his market indicators and models. Stocks & Commodities spoke with Zweig on a variety of to...
BY: Thom Hartle
ARTICLE SYNOPSIS ...On Profit-Taking by Perry J. Kaufman Taking a profit should be so easy, but it never seems to be. Why is that? Veteran market analyst Perry Kaufman explains the whys and hows and also explains how profit-taking has advantages over straight trend-following. If you were to ask a trend-follower, "How do you trade successfully?" the answer would be, "Let your profits run and cut your losses short." That seems to be the philosophy underlying trend-following programs. One of the most stunning examples is gold, which in January 1980 skyrocketed from $100 an ounce to $850 an ounce. During the period...
BY: Perry J. Kaufman
ARTICLE SYNOPSIS ...Optimizing Momentum by Anthony W. Warren, Ph.D. Longtime readers may remember the body of written work from Stocks & Commodities contributor Anthony W. Warren during the early days of this magazine, in particular Fourier transform and triple exponential smoothing (TRIX). More recently, he has written about data filtering for trend channel analysis. This time, Warren explains how to identify the cyclical component to price data and tuning WAMI, a momentum indicator that he has designed, to indicate buy and sell points. One of the oldest and most popular technical anal ysis methods is using a...
BY: Anthony W. Warren, Ph.D.
ARTICLE SYNOPSIS ...Options In Trading Ranges by David L. Caplan Options have a natural appeal due to the limited risk aspect for the options buyer, but there is a tradeoff: Because of the time decay factor, options lose value. However, as David Caplan, publisher of the Opportunities in Options newsletter, points out, you can take advantage of the time value decay characteristics. Here's how. Option purchases and futures trades are only successful if the market moves in the direction predicted (without the trader being stopped out first, naturally). In addition, option buyers have to worry about time value dec...
BY: David L. Caplan
ARTICLE SYNOPSIS ...Preprocessing Data And Fast Fourier Transform by Thom Hartle Preprocessing data is a popular buzzterm today, but what is it and why do we do it? Well, here's an explanation of data preprocessing and a tutorial on using fast Fourier transforms (Fft). Ffts are used to measure the power and frequency of the cycles within data. As Stocks & Commodities Editor Thom Hartle explains, knowing the cyclical nature of your data can be very helpful for selecting parameters for your favorite indicators. Every day, technicians process price data. If you use a moving average of the price, then you are smoot...
BY: Thom Hartle
ARTICLE SYNOPSIS ...CYCLES, POWER AND PHASE by Technical Analysis, Inc. Cycle length is the term most traders use when they refer to cycles. For example, two cycles are plotted, each with two different cycle lengths in sidebar Figure 1. The first cycle has a length of 64 periods; that is, a complete cycle occurs every 64 observations. This period could be hours, days or weeks, depending on what time domain you are working in. The second cycle plotted has a cycle length of 16 periods, meaning a complete cycle occurs every 16 periods. The frequency of a cycle is a measurement of change -- that is, how much the cyc...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...DERIVATION OF EQUATIONS FOR WAMI SPECTRUM by Technical Analysis, Inc. The equations here have been included for researchers who may want to study and modify WAMI. Simply, the WAMI power and phase spectrum is obtained by using Z transform theory to obtain a WAMI transfer function and then evaluating filter response as a function of frequency....
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...EXCEL FAST FOURIER TRANSFORMS, DECEMBER COPPER DATA by Technical Analysis, Inc. Here is the layout for preprocessing data and running a fast Fourier transform (FFT) in Excel. Column A of the spreadsheet (sidebar Figure 8) is the date column. Our first date beginning with cell A4 is July 8, 1993, and the last date is November 18, 1993. The total number of periods is 95, which is entered into cell B3. Column B represents the daily closing prices. Column C is a counter beginning with 1 and ending with 95. This column is needed for other calculations. Column D is the trend calculation, the linear...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Indicators by Technical Analysis, Inc. Below are descriptions and formulas for the indicators mentioned. These are usually included in most technical analysis packages. For a more detailed discussion, refer to the references cited....
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...WAMI SPREADSHEET by Technical Analysis, Inc. The spreadsheet (seen in sidebar Figure 5) provides a way to evaluate the WAMI power and phase spectrum as a function of the WAMI parameters L, M and N. The first column starting with A5 contains the frequency values to be evaluated. Columns B, C, D, E, F, G and H are intermediate results needed to create the spectra, and columns I and J contain the power and phase spectra at each cycle frequency. To set up the calculations, first, I input values into A2, B2, C2 and D2: These are the input parameters. The value placed into A2 is the frequency incr...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...WHAT IS A FAST FOURIER TRANSFORM? by Technical Analysis, Inc. There is an intuitive appeal in the concept that cycles are apparent in price data. The cycles do not appear to be consistent, but more of a combination that are longer- and shorter-term cycles added together. This creates a market of upward movements with countertrend declines and downward movements with countertrend rallies. Now look at an ideal example of this process. In sidebar Figure 1, the line labeled A+B+C is a composite or a summation of waves beginning with the trend (labeled C) and the two wave forms labeled A and B. I...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Zweig's Super Model by Technical Analysis, Inc. Zweig's Super Model combines the monetary model and the momentum model to create the Super Model for identifying favorable stock market conditions. The monetary model is a collection of three indicators, each of which is assigned a numerical score that will then provide a composite reading on monetary conditions. The first indicator is the prime rate indicator, which has either a value of +2 or a value of zero for the monetary model. A +2 is awarded if the prime rate peak is above 8%, there is a decline of 1% or there are two consecutive cuts i...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Traders' Tips by Techniceal Analysis, Inc. MICROSOFT EXCEL The feature article this month, "Optimizing momentum," presents custom formulas for the Warren momentum indicator (WAMI) for use in Equis MetaStock. Here are the custom formulas for a Microsoft Excel spreadsheet (Figures 1 and 2) using the parameters L = 4, M = 13 and N =13. Column A is the date, column B is the closing price of December 1993 copper futures and column C is the one-day difference in price....
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Using Indicators In Trading Ranges And Trends by Bruce C. Kramer Traders use indicators for generating buy and sell signals in a market. But what indicators should you use and when? Here's one private trader's technique for recognizing trends and trading ranges. One question that must be considered in selecting indicators for market analysis is whether the market in question is trending or in a trading range. This is important because certain indicators are more effective in different types of markets. Oscillator-based indicators, such as the stochastic indicator, are generally used for tra...
BY: Bruce C. Kramer