ARTICLE SYNOPSIS ...Alpha-beta trend-following revisited by Anthony W. Warren, Ph.D. In the June and December 1985 issues of Technical Analysis of Stocks & Commodities magazine, I presented a new method for trend-following based on the use of alpha-beta filtering for trade timing and buy, sell, hold market decisions. This method is similar to the use of moving averages for trade timing, but has two primary advantages over moving averages: 1) The method utilizes an uncertainty band about current prices to eliminate many of the false alarm trading signals given by conventional moving averages. 2) The method iden...
BY: Anthony W. Warren, Ph.D.
ARTICLE SYNOPSIS ...Assessing risk on Wall Street by Thomas A. Rorro We have discussed the Random Walk theory as a philosophy of investing and its technical implications. This final article in the series presents the framework for spreadsheet implementation of the concepts presented thus far. Any electronic spreadsheet program can be used. How can the Random Walk theory be applied to determine the worth of an investment before it is made? Three indicators are used: - Probability of a Profit (PP)--the risk to the initial capital investment; - Expected Profit (EP)--a measure of the expected rate of return; and -...
BY: Thomas A. Rorro
ARTICLE SYNOPSIS ...Computerized RSI programs by Technical Analysis, Inc. The Relative Strength Indicator (RSI) has proven itself over the past eight years to be a consistent overbought-oversold indicator as well as an effective trading tool. A change in price direction has often been observed subsequent to a divergence between price and the RSI. Because of this, the RSI is published in numerous chart services as well as software programs, either online via telephone or in stand-alone programs such as the CompuTrac system....
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Cycle Analysis à la Peter Eliades By Melanie Bowman Perhaps best known in recent months for his Number 1 standing in Timer Digest rankings, Peter Eliades approaches the stock market from a combination of cyclic and technical analysis. Eliades divides his cycle analysis into two categories--time cycles which identify time periods for potential bottoms and price cycles from which price projections for the popular averages are derived. Technical analysis confirms or contradicts the cycle analysis. Eliades is a Harvard College graduate in the physical sciences, a graduate of Boston University Law...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Evaluting the COMMODEX(R) System by Ronald R. Goodis The COMMODEXÒ System-- practically every futures trader has heard of it. Most serious traders subscribe to it. It remains the only daily futures system published in the world and is internationally circulated through the TYMNETÒ computer network and over Telerate. Yet, few have ever really followed the ""pure"" COMMODEX system and it has been the subject of popular controversy since it began in 1959. In fact, there was even an ""Anti-COMMODEX System"" article published in the July/August 1984 issue of this magazine. In our age of ""new"" an...
BY: Ronald R. Goodis
ARTICLE SYNOPSIS ...Investigating chart patterns using Markov analysis by Curtis McKallip, Jr. Most traders, at one time or another, have utilized elementary price patterns such as trendlines, triangles, gaps, and flags. The identifying characteristics and measuring properties of these patterns are well known. Patterns also have predictive components and are usually divided into two classes: continuation patterns and reversal patterns, depending on their most frequent chart positions. This article tabulates a large number of transitions from one pattern to another and identifies the ones which are statistically ...
BY: Curtis McKallip, Jr.
ARTICLE SYNOPSIS ...Letters to S&C by Technical Analysis, Inc. No Tar Brush Editor, I want to congratulate you on the recent improvement of your magazine. It is developing into a valuable resource for technical analysts. Your magazine's October 1986 issues carried a broadside at systems vendors (I sell no systems and have no personal interest in this matter). I object to the flippant comments (""junk mail"", ""peddling"", etc.) indiscriminately applied to a list of systems developers that included Vilar Kelly. Mr. Kelly is a man of knowledge and integrity. After having been a cryptoanalyst in the military and...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...SIDEBAR: Markov analysis by Technical Analysis, Inc. A natural process which has a random element but also shows the effects of previous events influencing subsequent events is a Markov process. Markov models lie in the spectrum between fully deterministic models (such as y = 3 * x) and independent events models (where the probability of a system being in a particular state is not affected by previous states). They lie somewhere between the beliefs of random walk theorists and those who explain the markets using deterministic equations. Although they do not allow one to pin down exactly what ...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...The Relative Strength Index by J. Welles Wilder, Jr. The Relative Strength Index (RSI) is a tool which can add a new dimension to chart interpretation when plotted in conjunction with a daily bar chart. Some of these interpretative factors are: Tops and bottoms are indicated when the RSI goes above 70 or drops below 30; Chart formations which often show up graphically on the RSI may not be apparent on the bar chart; Failure swings above 70 or below 30 on the RSI scale are strong indications of market reversals; Support and resistance often show up clearly on the RSI before becoming appare...
BY: J. Welles Wilder, Jr.
ARTICLE SYNOPSIS ...The n-method by Clifford J. Sherry, Ph.D. Are large increases or decreases in the price of a given stock or commodity evenly distributed throughout the trading day? The trading week? The trading month? Or are there detectable patterns in these price changes? I recently demonstrated that, for soybean meal, a large price increase is more likely to occur on the first day of a trading week than on any other day. I used the triggered price change histogram (described in detail in Stocks & Commodities, June 1986) to find this pattern. The histogram is shown in Figure 1. Now, you can take this find...
BY: Clifford J. Sherry, Ph.D.
ARTICLE SYNOPSIS ...Wyckoff method of trading stocks part 8 Trendlines: Refinements in charting by Jack K. Hutson Like any complex activity, chart interpretation includes some aids to the process. Trendlines are one of these aids that help Richard D. Wyckoff analysts visualize what is occurring in their Vertical and Figure charts. The rationale behind Trendlines is straightforward. When a stock is being accumulated, it is storing up the force of demand which is the power for an ensuing upward movement. The force of demand gives price a certain momentum to carry it higher until demand is diminished or a new forc...
BY: Jack K. Hutson