ARTICLE SYNOPSIS ...Charting Equity by Joe Luisi Technicians apply technical analysis to charts for trading decisions. This technician applies similar techniques to his trading system results. When asked what the key to long-term trading success is, successful traders always reply that money management is foremost. Professional traders often advise trading hopefuls that 70% of their time should be spent on money management and 30% on searching for low-risk, high-profit trading opportunities. Sounds reasonable, right? It does, but there's a flaw in this reasoning. Information on money management, what it is and ...
BY: Joe Luisi
ARTICLE SYNOPSIS ...Event Trading In The Bond Market by Ben Warwick The financial markets frequently react with large price movements after the government and private agencies release their economic reports. Are there any reliable patterns to the way a market reacts to the news? One money manager decided to find out, and here, he shows how monitoring the reaction to those reports can be a profitable endeavor. Markets are driven by the fundamentals. Stock traders look at earnings reports and commodity traders look at crop estimates. Bond market participants track economic reports, issued by government and privat...
BY: Ben Warwick
ARTICLE SYNOPSIS ...LETTERS TO S&C The editors of S&C invite readers to submit their opinions and information on subjects relating to technical analysis and this magazine. This column is our means of communication with our readers. Is there something you would like to know more (or less) about? Have you run across trading techniques, services or products that have proved useful? Tell us about it. Without a source of new ideas and subjects coming from our readers, this magazine would not exist. Address your correspondence to: Editor, STOCKS & COMMODITIES, 4757 California Ave. SW, Seattle, WA 98116-4499. Letters ...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Living The Dream: Trader Gary Smith I always dreamed of trading for a living and I finally have achieved that, but never in the way I had imagined. I always envisioned myself as one of these Jesse Livermore-tape reader types, but it's been very different. - Gary Smith In this day and age of computers and high technology, trader Gary Smith is certainly an anomaly, as he uses no computer, disapproves of mechanical systems and simply uses the data off CNBC with which to trade. How does he do it? How has he done it? His recently published book, Live the Dream By Profitably Day Trading Stock Futu...
BY: Thom Hartle
ARTICLE SYNOPSIS ...Presidential Parties And The Stock Market by Dave Dorgan Is there a relationship between the Presidential party in power and the subsequent performance of the stock market? Before you take a guess, here are the facts. Conventional wisdom would have one believe that the stock market should perform better under a fiscally conservative (Republican) US President than under a socially liberal (Democratic) US President. Now that we are in yet another Presidential election year, I wanted to know if the political affiliations of the President had a long-term impact on the stock market's performance....
BY: Dave Dorgan
ARTICLE SYNOPSIS ...Real-World Option Pricing by Lawrence D. Cavanagh Option models calculate premiums or the prices of options on the assumption that volatility is a constant. Here's how stock and index price changes are distributed in the real world and how the market prices options. Are the prices of options accurately reflected by option models? Let's contrast the distribution of stock index movements with the log-normal distribution postulated in most option models. We can attempt to understand the way prices actually move, and also why the market has a tendency to price options so that those struck farthe...
BY: Lawrence D. Cavanagh
ARTICLE SYNOPSIS ...COMPARISON BETWEEN ACTUAL PRICE CHANGES AND NORMAL DISTRIBUTION The average weekly natural log changes in the Standard & Poor's 500 index from April 1986 through December 1995 was measured and the standard deviation of these changes calculated. The results show an average weekly log change of 0.19% (annualized to 9.88% by multiplying by 52) and a weekly standard deviation of these changes of 2.0% (annualized to 14.42% by multiplying by the square root of 52). The entire range of price changes was then normalized by creating a series in which the mean is equal to zero and the standard deviatio...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...MONTE CARLO SIMULATION Let us assume we have a specified string of profits and losses -- for example, the 1985-89 string of profits and losses for the 25-market portfolio used in the article. The Monte Carlo simulation is the technique we use to determine the probability of losing a specified number of dollars when trading this string of profits and losses before reaching a specified profit goal. The technique simulates how a trader would fare if he were to sequentially place trades that were randomly selected from the specified listing of profits and losses....
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...STATISTICAL PRIMER Two samples are used in the analysis of event-driven breakouts: Sample 1: Market returns with event-driven breakouts removed Sample 2: All event-driven breakouts. To determine if sample 2 yields consistently higher returns than sample 1, a two-sided t- test is used:...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...The Gold And Silver Bond Fund System by Dennis Meyers, Ph.D. Building on his previous Gmi system article, this Contributing Editor develops a system using the Philadelphia Stock Exchange daily gold and silver stock index to trade a long-term government bond fund. Last month, I examined the relationship between Barron's Gold Mining Index (GMI) and the 30-year Treasury bond rates. A system was developed to predict the weekly direction of the 30-year T-bond rate using the GMI. One of the problems encountered in developing that system was that the GMI is only available from Barron's on a weekly ...
BY: Dennis Meyers, Ph.D.
ARTICLE SYNOPSIS ...The Volume Indicators by Bruce R. Faber In spite of its importance, much less is written about volume than about price. Here's an introduction on the subject for the novices and a refresher for the veterans. To technical analysis, volume is as important as price. Some analysts would even claim that volume is more important of the two. But price without volume is like Standard without Poor's; by itself, price represents only half of the necessary information. At the very least, what volume is doing in relation to price should always be taken into consideration when making trading decisions. ...
BY: Bruce R. Faber
ARTICLE SYNOPSIS ...TRADERS TIPS Do you have a custom formula, solution or user tip for your software that you would like to share? Have you ever pondered a trading question that you'd like to share with other readers? Have you ever contemplated a question for a while and come up with a solution that you'd like to share with others? Or are you still stuck without a solution? Send your formulas, solutions, tips and questions to Traders' Tips, STOCKS & COMMODITIES, 4757 California Ave. SW , Seattle, WA 98116-4499. Please send a hard copy and, if possible, the information on a disk in unformatted ASCII along with ...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Trading With A Variable Position Size by Tom O'Malley Once a position has been put on, some traders will hold it at a constant size throughout the life of the trade, while other traders will vary the size. Which is better? Once a trade has been initiated, some traders maintain a constant position size throughout the life of the trade, while others believe they can enhance returns by varying their position size according to predefined rules. One philosophy dictates that a significant price move in the profitable direction indicates a smaller likelihood of further profitable price moves and th...
BY: Tom O'Malley