ARTICLE SYNOPSIS ...Beat the market with no-load mutual funds by Gary Zin, Ph.D. In the past, I have invested in mutual funds based on their long-term performance, typically requiring that a fund's five-year history exceed the compounded return of Standard & Poor's 500-stock index (S&P 500). In general, a diversified portfolio based on this criteria will do well, perhaps slightly exceeding and rarely falling far behind the stock market. But, the portfolio generally does not substantially exceed the returns of an index fund representing the broad market. There is substantial evidence to support the premise that ...
BY: Gary Zin, Ph.D.
ARTICLE SYNOPSIS ...Can you draw a straight line? by Ron Jaenisch The stock market has reached record highs and the markets are dominated by large financial institutions with vast computer systems to aid them in their decision making. If the average investor turns to the experts who write newsletters, varying opinions will be found. These days, if one doesn't have a personal computer, one supposedly isn't managing his or finances properly. Even with all this technology, the question often remains: Is this the end of the move or will it go further? Now, the investor with even the most sophisticated computers can...
BY: Ron Jaenisch
ARTICLE SYNOPSIS ...Do stock prices reflect Fibonacci ratios? by Herbert H.J. Riedel The claim has been frequently made that Fibonacci ratios occur in stock market data. A Fibonacci ratio is the ratio between any successive numbers of the Fibonacci sequence -- the Fibonacci sequence 1,1,2,3,5,8... produces the ratios 1, 1/2, 2/3, 3/5, 5/8.... After the first four numbers in the Fibonacci sequence, the ratios approximately equal 0.618, known as the Golden Ratio or phi (f). Comparing one number in the sequence to the next lower number (8/5,5/3, 2/1. . .) produces ratios that approximate 1.618, the inverse of the G...
BY: Herbert H.J. Riedel
ARTICLE SYNOPSIS ...First through the even by Grant Noble A few years ago I had the privilege of working with a former specialist, a broker's broker, on the New York Stock Exchange. He told me how fellow specialists borrowed unlimited funds at 4%, how they used ""inside days"" to tell where the market was headed, the importance of the ""two-step top."" But by far the most profitable advice he gave was ""first through the even."" In January 1980, this specialist was approached by a large local making millions (open profits) from thousands of long gold contracts. Understandably nervous, the local asked, ""When do...
BY: Grant Noble
ARTICLE SYNOPSIS ...Gann analysis on point and figure charts by Douglas Arend Of the many analytical techniques attributed to W.D. Gann, perhaps none is more widely followed than the so-called geometric angles. Although applied generally to historical and intraday bar charts, this method also can be used with point and figure or, as they are sometimes called, reversal charts. In this case, the emphasis is on price alone rather than the combination of price and time. P&F basics Constructing daily point and figure (P&F) charts starts by determining the scale of the box (number of price ticks per square) and reve...
BY: Douglas Arend
ARTICLE SYNOPSIS ...How to evaluate a commodity trading system by Kent Calhoun The percentage of profitable trades, the average profitable trade, the average losing trade, the maximum consecutive losing trades, the average profit per closed trade, the largest winning and losing trades, the number of profitable buys and sells, the average number of days in losing and winning trades, and the equity return on margin are not what I use to determine whether a commodity trading system can be traded. Just because a system ""makes"" money doesn't guarantee you will make money. I tested 60 systems that ""made"" more tha...
BY: Kent Calhoun
ARTICLE SYNOPSIS ...Listen to the market by Thom Hartle Technical analysis encompasses a myriad of approaches and, in the face of the trend toward high-tech, I admit to being less of a computer system trader and more of a traditional chartist. I actually prefer to state that I analyze the bond futures market as an interaction of supply meeting demand and determining price. That may sound decidedly low-tech, but behind the most exotic computer program ever developed for trading it is still the forces of supply and demand that present the trading openings. If demand appears to be stronger than supply then bonds s...
BY: Thom Hartle
ARTICLE SYNOPSIS ...Option premiums by Arthur Merrill Can we derive useful information about the future direction of the stock market from option statistics? I've found one item of data that has a good prediction record--the ratio of the premium on puts to the premium on calls. (Premium is the strike price plus the cost of the option minus the current price of the underlying security.) The basic data, weekly average put and call premiums, are calculated and published by the Options Clearing Corporation, 440 LaSalle, Chicago, IL 60605, and the weekly ratio is published by Technical Trends, P.O. Box 792, Wilton, C...
BY: Arthur A. Merrill, C.M.T.
ARTICLE SYNOPSIS ...Analysis and moving averages Definition of terms used by the author when discussing indicators in the article ""Volume percentage ratio"". In interpreting any charted indicator, it is only the relative position of the plotted line that is important. ......
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Tactical stock trading by Hugh L. Logan Peter Eliason's stock trading technique (""Tactical stock trading,"" Stocks & Commodities, March 1989 and ""Volatility analysis and simulation used in tactical trading,"" Stocks & Commodities, July 1989) sounded so interesting I immediately sat down and began experimenting. Others have questioned the consequences of using the technique on a downtrending stock (see Letters to the Editor, Stocks & Commodities, May, July and September 1989) although Eliason has repeatedly cautioned users to use strategic techniques (as distinguished from tactical technique...
BY: Hugh L. Logan
ARTICLE SYNOPSIS ...Trade like a cheetah by Hans Hannula, Ph.D. The cheetah: an endangered species who's survived against the odds. It has survived by using a simple set of two rules: be faster than anyone else, and be smarter than anyone else. Sound like a good trading principle? At a recent Market Technicians Association (MTA) conference, in a discussion with Dr. Van Tharp, a trading psychologist, I learned something about top traders that I thought was unique to my own style of trading. What I learned was that many top traders use animals and hunting as a mental metaphor to guide their thinking when they 're...
BY: Hans Hannula, Ph.D., RSA, CTA
ARTICLE SYNOPSIS ...Trading options volatility by Andrew J. Sterge Options are much more than a hedging vehicle or leveraged way of participating in spot or futures markets. Indeed, options create strategies that did not exist before in trading an option's underlying instrument. These strategies are known as volatility trades and the benefit is that you usually don't have to pick market direction, something always tough to do. Instead, you bet on whether an option's volatility is cheap or rich, in other words, undervalued or overvalued. The term volatility is used with abandon in discussions of options, this on...
BY: Andrew Sterge
ARTICLE SYNOPSIS ...Volume percentage ratio by Mike Burk Volume is best used as a confirming indicator for general market trends and, in developing stock market indicators, I've found a trio of volume calculations that work well in anticipating cycle tops and bottoms. My basic volume indicator (Figures 1 and 2) is an exponential moving average of total volume with a 0.04 smoothing constant. It is plotted on a normal Y scale, that is, high values are the top of the scale. Although I have chosen the Dow Jones Industrial Average to represent prices in these charts, broader indices such as the New York Stock Exchan...
BY: Mike Burk
ARTICLE SYNOPSIS ...Weekly high/low moving average by Peter Aan Most moving averages of price are based on the closing price (see ""Simple moving average crossover,"" Stocks & Commodities, June 1989), but the weekly variation computes moving averages of the weekly highs and lows, based on the most recently completed calendar week. This is a very simple system; you only have to compute the average high and low once a week (Figure 1) and if, for instance, your current position is short, you will be concerned only with the high average. Both the high and low averages are plotted on a weekly bar chart (Figure 2). ...
BY: Peter Aan
ARTICLE SYNOPSIS ...What volume is it? by Richard W. Arms, Jr. Markets often seem unpredictable and erratic. They give the impression of being disorganized because they do not always behave as we think they should. We live by clocks and schedules, yet all too often prices do not behave in such a manner as to meet our schedules. Therefore we think they are illogical, even irrational. Perhaps, however, it is our own lack of perception into the market that is the cause of our frustration. Maybe we are trying in vain to impose on the market our world of clocks and calendars. Could it be that a better measure of the...
BY: Richard W. Arms, Jr.
ARTICLE SYNOPSIS ...Wizards: minds over markets by Van K. Tharp Jack Schwager, commodity trader and confessed system skeptic, has been a familiar name in commodity trading for a number of years. His 1984 book, A Complete Guide to the Futures Market, laid out most tested techniques along with other methodologies. His latest book, The Market Wizards: Interviews with Top Traders (Simon & Schuster, New York) might be considered a companion to his technical tools book. Wizards brings home some of the more important, and often, overlooked elements of successful trading--not magical systems, but the beliefs that have m...
BY: Van K. Tharp, Ph.D.