ARTICLE SYNOPSIS ...Balance Of Market Power by Igor Livshin Who's in charge, bulls or bears? It doesn't take higher-order math to get a good reading. The balance of market power (BMP) indicator measures the strength of the bulls vs. the bears by assessing the ability of each to push price to an extreme level. I deliberately developed BMP not to be a rangebound indicator, so it is as sensitive at extreme points as it is at other levels. Every day, bulls and bears compete with each other in the marketplace. The idea behind the BMP calculation is to assign a score for both bulls and bears based on their daily per...
BY: Igor LivshinSUBJECT: Indicators
ARTICLE SYNOPSIS ...KST Revisited by Christopher Narcouzi You know there's a trend out there -- but is it too late to get in on it? Here's a look at Martin J. Pring's KST indicator, which can give valuable trading insight into trend maturity. Bull and bear markets go through various stages, and how your investments fare will depend on the stage in which you start investing. Investing in the early stages of a bull market will result in the largest profit. Investing in the middle stages of a bull market will be profitable, but not as profitable as the early stage. Investing in the late stages of a bull market will...
BY: Christopher NarcouziSUBJECT: Indicators
ARTICLE SYNOPSIS ...Letters To S&C EISENSTADT INTERVIEW Editor, Thank you for the wonderful, clear-structured interview with Samuel Eisenstadt of Value Line in the May 2001 issue. Above all, two important keynotes stuck in my mind. These keynotes are excellent guidelines for any rational work in the field of technical or fundamental analysis of the markets. First, Eisenstadt stressed that only exact, discernable, and known information must be rationally arranged and operated on to predict trustable guidelines of future market behavior. Second, he emphasized the importance of intersubjectivity, an important fac...
BY: Technical Analysis, Inc.SUBJECT: Letters To S&C
ARTICLE SYNOPSIS ...Novice Trader's Notebook -- The Double Top Consider a security or a futures contract that is in an uptrend. The price reaches a point at which all of the buyers' demand is met, and the sellers, whether traders taking profits or aggressive short sellers, enter the market and overwhelm the buyers. That price level will become known as major resistance, as the level establishes a point at which the supply is significantly greater than the demand (point A)....
BY: Technical Analysis, Inc.SUBJECT: Novice Traders' Notebook
ARTICLE SYNOPSIS ...Q&A by Don Bright PAIRS TRADING I read Stéphane Reverre's article "Pairs Trading" in the March 2001 issue, and I have a few questions. Do your traders employ this strategy? How is it best implemented? How do you pick the two stocks to trade? How do you determine which one to buy and which one to sell? -- Matt, Las Vegas We have been employing this strategy in one form or another for decades. We try to find two stocks in the same sector or group (such as tech, oil services, airlines, and so on). We then overlay the two prices back about six months to see the actual price differential. Actual...
BY: Don BrightSUBJECT: Q&A
ARTICLE SYNOPSIS ...The Iron Condor by Jesse Chen Being neutral on the market is different from being unsure. Here's a strategy to take advantage of your view. Neutral options are a sound strategy in options trading. They combine a balanced risk and reward ratio with a high probability of profit and wide profit zone. Neutral options come in three main flavors: short strangles and straddles; butterflies; and iron condors. These positions are appropriate to use when you expect the market to go nowhere or, if the market does go in some direction, the strategy will be able to take advantage of the movement. I'm go...
BY: Jesse ChenSUBJECT: Options
ARTICLE SYNOPSIS ...Timing The Move by Lorne W. Rae All traders want to know in advance how long a price trend will last. Try predicting it with this technique. A note in Robert Edwards and John Magee's Technical Analysis Of Stock Trends states, "Volume is of the utmost importance in all technical phenomena," but then Edwards and Magee add, "... the exact number of shares traded is not important." Over the half century since this work was first published, not a lot of attention has been paid to absolute volume, but it's time to take a closer look at this concept. We might just find that the number of shares tra...
BY: Lorne W. RaeSUBJECT: New Techniques
ARTICLE SYNOPSIS ...Trade Crude Now by John L. Momsen Don't brush aside a straightforward futures trade just because you think it's too risky. Try combining seasonals with options -- you might be pleasantly surprised. A simple option spread combined with a seasonal trade can not only increase the potential for a profit but also improve the risk/reward ratio of your trade. It can also open up the possibility of participating in trades you might have otherwise considered too high-risk for your trading account. In the February 2000 STOCKS & COMMODITIES, I described a simple method of transforming a good seasonal t...
BY: John L. MomsenSUBJECT: Seasonal Trades
ARTICLE SYNOPSIS ...Traders' Resource -- Data Services If you thought brokerages have had to face a new world, think of data services. The advent of the Internet has made available many pieces of software with dedicated access to securities data maintained by the software vendor. This gives you, the buyer, fewer choices when you buy the software, and it is now a key issue to sort out when investigating software, particularly web-based software. On the one hand, all the data maintenance hassles are taken out of your hands; on the other, the vendor may be too casual for your tastes in how they maintain the data you...
BY: Technical Analysis, Inc.SUBJECT: Traders' Resource
ARTICLE SYNOPSIS ...Traders' Tips Here is this month's selection of Traders' Tips, contributed by article authors from this issue and by various developers of technical analysis software, all to help readers more easily implement some of the strategies presented. This month's code includes: Igor Livshin's balance of market power (BMP) indicator in TradeStation EasyLanguage, MetaStock for Windows, NeuroShell Trader, Investor R/T, TradingSolutions, Wealth-Lab, Wave Wi$e, Byte Into The Market, and SmarTrader; John Momsen's crude oil trade in TradeStation EasyLanguage, MetaStock for Windows, Neuroshell Trader, and ...
BY: Technical Analysis, Inc.SUBJECT: Traders' Tips
ARTICLE SYNOPSIS ...Trading The Turtle System On Currencies by Guy Brys, Anja Struyf, and Luc Van Hof The system was developed two decades ago on the basis of a bet, but since then, it's been a proven winner. The Turtle system was developed on daily data but it has some promising real-life results when used with intraday data, in this case currencies. We tested the infamous Turtle system in intraday trading on foreign exchange markets, using a large database of historical rates. We examined all four components of the system (entry, exit, trading size, and money management) and developed parameter values through...
BY: Guy Brys, Anja Struyf, and Luc Van HofSUBJECT: Trading Systems