Article Archive For
APR1988
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Consensus indicators by Arthur A. Merrill
ARTICLE SYNOPSIS ...Consensus indicators
by Arthur A. Merrill
There are scores of indicators and, at the same moment, some present an optimistic picture of the
future while others are predicting trouble. Which indicator should be watched most carefully? When two
indicators disagree, which one is the most likely to be right?
How can you gauge the past performance of indicators? Can it be put into numerical form to simplify
comparison? Can indicators be combined into a consensus or model?
Market analysts usually consult the same battery of indicators but their conclusions are often quite
different. I exchange my...
AUTHOR: Arthur A. Merrill, C.M.T.DATE: APR1988
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Correlations: serial and auto by Clifford J. Sherry, Ph.D.
ARTICLE SYNOPSIS ...Correlations: serial and auto
by Clifford J. Sherry, Ph.D.
Suppose you are testing a pricing pattern to see what relationship it has to future price movement. Or,
you are testing an indicator's correlations with price movement. In each case, you need a definitive test to
tell you if there exists a statistically significant relationship.
Again, much of the early work testing the various forms of the efficient market hypothesis utilized either
serial or auto correlation techniques. (See for example, P. Cottner's Random Character of Stock Market
Prices, M.I.T. Press, Cambridge, 1964). Unfortuna...
AUTHOR: Clifford J. Sherry, Ph.D.DATE: APR1988
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Finding reliable trading strategies by Steve Kille
ARTICLE SYNOPSIS ...Finding reliable trading strategies
by Steve Kille
Developing a trading strategy over historical data has become common practice among traders in
recent years. The proliferation of micro-computers in our industry has spurred the trend to the point
where nearly every system sold or used has been developed with a computer using past data.
The focus of most research projects has been to develop trading strategies which produce the highest
level of profit over historical data. This is understandable since accumulated wealth is the ultimate goal
of every trader. Unfortunately, most technicians ar...
AUTHOR: Steve KilleDATE: APR1988
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Kaufman on commodity trading
ARTICLE SYNOPSIS ...Kaufman on commodity trading
Perry Kaufman's first book, Commodity Trading Systems and Methods, was probably the second book I
read on trading. I later discovered it to be a classic and it's been an indispensable reference ever since,
particularly around the offices of Stocks & Commodities, where ""new"" trading ideas make recurrent
appearances.
When the revised version came out late in 1987 it stimulated S&C to track down Perry and get a ""state of
the trader's art"" report directly from him. After more than the usual thrashing around we finally tracked
him down in the sunny climes of Bermu...
AUTHOR: Technical Analysis, Inc.DATE: APR1988
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OVR - a new indicator by Fred Purifoy
ARTICLE SYNOPSIS ...OVR - a new indicator
by Fred Purifoy
On-balance volume (OBV) has two generally recognized goals: to serve as a filter for trending and
non-trending markets, and to anticipate reversals by divergence from the price trend. (OBV, recall, is the
cumulative sum of volume where volume is added on up days and subtracted on down days.)
However, coupling price and volume may not be the only path. If we accept that vertical (or bar) chart
action is a function of volume and open interest (i.e., the activity of the market's participants), there
should be an indicator that would reflect that relationshi...
AUTHOR: Fred PurifoyDATE: APR1988
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On-balance volume by Tom Aspray
ARTICLE SYNOPSIS ...On-balance volume
by Tom Aspray
On-balance volume or OBV is one of the early technical tools developed by the well-known market
analyst, Joe Granville. With the advent of new, and supposedly more sophisticated technical tools, it is
used less often. Many analysts feel it is not useful, but I would disagree. I find it a very useful and simple
technical tool.
While it is much faster and easier to calculate this indicator by computer, it is very easily calculated by
hand for individual stocks, market indices or commodities. Here is how you calculate it by hand: 1) Pick
an arbitrary starting vol...
AUTHOR: Tom AsprayDATE: APR1988
Opening position by John Sweeney, Editor
AUTHOR: John SweeneyDATE: APR1988
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Peaking of a grand supercycle by Robert J. Prechter Jr.
ARTICLE SYNOPSIS ...Peaking of a grand supercycle
by Robert J. Prechter Jr.
For 13 years, A. J. Frost and I have made the case that a great ""fifth wave"" bull market--the
termination phase of a longer term uptrend--was in force and that it would be followed by a bigger crash
and bear market than those of 1929-1932.
From this perspective, October 19,1987 was not an anomaly in the stock market. Certainly, it has entered
the history books as the largest down day in Wall Street history, and one of the broadest. But it was
typical market behavior, the normal resolution of a pattern wave analysts have observed hundred...
AUTHOR: Robert J. Prechter Jr.DATE: APR1988
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Price reactions within a trend by Bill McLaren
ARTICLE SYNOPSIS ...Price reactions within a trend
by Bill McLaren
I have, in the past decade, taught trading techniques to many students. Recently, most of my students
have entered the markets after purchasing a personal computer and a technical analysis software package.
These tools can be quite helpful but they are not the Holy Grail. A majority of my students' losses are
related to one major weakness: little understanding of basic price movement.
Understanding price movement is the foundation of profitable trading and all else must be built on that
foundation. Very simplistically, both stock and commodity m...
AUTHOR: Bill McLarenDATE: APR1988
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Programming the true range in Wilder's DMI system Part 4 by Jim Summers, Ph.D.
ARTICLE SYNOPSIS ...Programming the true range in Wilder's DMI
system
Part 4
by Jim Summers, Ph.D.
The March column described the fundamentals of macros. The February column detailed some major
points about Wilder's DMI and the system based on it. This time the action gets underway in earnest.
While the material is still relatively elementary now, veteran Lotus programmers should at least skim this
material. Some of the techniques appear in none of the five books I own on using Lotus. One of them is
critical to successful processing of large amounts of data such as technical analysis requires.
True Range
Funda...
AUTHOR: Jim Summers, Ph.D.DATE: APR1988
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Quick-Scans
ARTICLE SYNOPSIS ...LETTERS TO S&C
Data Transfer?
Editor,
I am a subscriber to your Trader's Magazine, which I consider very good and most interesting. I wonder
whether you could advise me regarding (1) the cost of the complete Wyckoff Method series, and (2) the
availability of a good software program to transfer stock data from one program to another, e.g.,
CompuTrac to Market Maker and Technical Investor.
W.J. HOENEVELD
Epse, Netherlands
In answer to your first question, the Wyckoff series is not now available as a single publication. All these
articles are contained in S&C volumes 4 and 5 (1986-1987), av...
AUTHOR: Technical Analysis, Inc.DATE: APR1988
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SIDEBAR: Coefficient of Correlation
ARTICLE SYNOPSIS ...Coefficient of Correlation
Correlation is a measure of the degree of relationship between two series. When odd lot shorts are rising,
is the Dow usually rising? When odd lot shorts are declining, is the Dow usually declining? Or is the
reverse usually the case? Instead, is the relationship weak or nonexistent?
The correlation coefficient (r) varies between +1 and -1. If it is close to +1, the two series are in close
agreement. If it is close to -1 when one series is rising, the other is declining. If the coefficient is close to
zero, there is no evident relationship. Here is a suggested inte...
AUTHOR: Technical Analysis, Inc.DATE: APR1988
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SIDEBAR: What is Chi Square?
ARTICLE SYNOPSIS ...What is Chi Square?
If, in the past, records show that the market exhibited more rises than declines at a certain time, could it
have been by chance? Yes. If a medication produced cures more often than average, could it have been
luck? Yes. If so, how meaningful is the record?
To be helpful, statisticians set up ""confidence levels."" If the result could have occurred by chance once in
20 repetitions of the record, you have 99% confidence that the result isn't just luck. This level has been
called ""probably significant.""
If the expectation is once in 1,000 repetitions, you can have 99.9% ...
AUTHOR: Technical Analysis, Inc.DATE: APR1988
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The compulsive trader Part 2 by Van K. Tharp, Ph.D.
ARTICLE SYNOPSIS ...The compulsive trader
Part 2
by Van K. Tharp, Ph.D.
""When water passes over your head, it makes no difference if it does so by an inch or afoot. You're
drowning. You don't want to admit that it is easier to get out of a $100,000 debt than a million dollar
debt. You just go for it. When you get to that point, it really starts accelerating. Nothing matters
anymore. Nothing matters.""
--A compulsive trader, Stocks & Commodities, January 1988.
Compulsiveness, as illustrated by this quote, is deadly to investment success. Yet many traders have to
deal with it. In this second article on compulsiv...
AUTHOR: Van K. Tharp, Ph.D.DATE: APR1988