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• A Trend Channel Trade by Thomas Bulkowski

  ARTICLE SYNOPSIS ...A Trend Channel Trade by Thomas Bulkowski Here's a trade that combines fundamentals, trend channels, pattern recognition and volume. Selecting a stock to trade means more than just throwing darts. For my own trading, I use statistically positioned trend channels, a method that allows me to define the boundaries of a trend. When dealing with trend channels, you're faced with a declining stock that you still want to purchase. What makes you so sure that the stock will turn around and climb instead of plummeting? Here's a top-down approach to trading the trend channel, using market trend analys...

AUTHOR: Thomas BulkowskiDATE: APR1996SUBJECT: Real World

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• Learning Through Trial and Error: Mark Boucher by Thom Hartle

  ARTICLE SYNOPSIS ...Learning Through Trial And Error - Mark Boucher I started off totally technically based, opposite from what investors normally start off with. When I started, there was a lot more material on technical analysis than I could find on fundamental analysis. Most of it wasn't very good, but I liked technical analysis because you could test it. - Mark Boucher Hedge fund manager Mark Boucher would be the first person to tell you that you have to have control of your own investments. And of course, once you do have control of your own investments, how much more you have to learn about them. STOCKS &...

AUTHOR: Thom HartleDATE: APR1996SUBJECT: Interview

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• Letters to S&C

  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 ...

AUTHOR: Technical Analysis, Inc.DATE: APR1996SUBJECT: Letters To S&C

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• On Option Theta by Lawrence D. Cavanagh

  ARTICLE SYNOPSIS ...On Option Theta by Lawrence D. Cavanagh Options traders use various measurements to calculate an option's risk, the calculations of which are denoted by Greek letters. One example is theta, which is the measure of how much an option's price decreases for each day that passes. A nyone who has ever traded options quickly becomes aware that if all things remain equal, then over time, the price (or premium) of the option declines. Theta (q) is the Greek letter used to mark the decay of an option premium over time. This price decay is nonlinear (that is, it changes over time), and most of the tim...

AUTHOR: Lawrence D. CavanaghDATE: APR1996SUBJECT: Options Analysis

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• Predicting Major Market Moves by Gregory N. Hight

  ARTICLE SYNOPSIS ...Predicting Major Market Moves by Gregory N. Hight Here's a statistical method that compares the movement of the Standard & Poor's 500 index with the changes of interest rates. In addition, the author explains statistical tests that help validate the reliability of the relationships as well as a technique to identify anomalies, which may be used to anticipate changes in the S&P 500. Major trend changes may be signaled when market activity takes a distinct turn from a previous pattern. The relationship between changes in interest rates and changes in the Standard & Poor's 500 index can be moni...

AUTHOR: Gregory N. HightDATE: APR1996SUBJECT: Stastics

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• SIDEBAR: Converting Absolute Data to Change in Log of Price

  ARTICLE SYNOPSIS ...CONVERTING ABSOLUTE DATA TO CHANGE IN LOG OF PRICE Sidebar Figure 1 is a sample of weekly interest rate and S&P 500 index data and the formula used to convert absolute interest rate data to changes in logs. Formulas first calculate the log of price and then subtract the week-earlier value from the current week value. Change in log of interest rates and the S&P index is the data used throughout. ASSESSING STATIONARITY 1. Divide the range of data into five to 10 equally sized bins so that each observation falls into a bin. The two bins at the upper and lower extremes of the range should be de...

AUTHOR: Technical Analysis, Inc.DATE: APR1996

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• The Arms Index by Bruce R. Faber

  ARTICLE SYNOPSIS ...The Arms Index by Bruce R. Faber Here's the scoop on the Arms index, a stock market indicator that incorporates the number of advancing and declining stocks with the advancing and declining volume. The index is widely used as an indication of overbought and oversold conditions in the marketplace. In general, most stock market technical indicators use the closing and daily range prices of a stock or an index for calculations. However, some indicators use what may be considered internal measurements of market activity. This group of indicators is gauging the strength or weakness of the market ...

AUTHOR: Bruce R. FaberDATE: APR1996SUBJECT: Novice Traders' Notebook

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• The Benefits of Diversification by Lars N. Kestner

  ARTICLE SYNOPSIS ...The Benefits of Diversification by Lars N. Kestner The question of how to increase returns while decreasing risk has fascinated investors for decades; after all, the goal is of trading or investing is to maximize return per unit of risk accepted. Here's an introduction to the benefits of diversification. The first major progress in portfolio management was made by Harry Markowitz, 1990 Nobel Prize co-winner in economics. Some 40 years ago, Markowitz began asking questions on the nature of risk and reward. Looking at streams of cash flows, he attempted to quantify the relationship through mat...

AUTHOR: Lars N. KestnerDATE: APR1996SUBJECT: Money Management

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• The GMI Bond Market System by Dennis Meyers, Ph.D.

  ARTICLE SYNOPSIS ...The GMI Bond Market System by Dennis Meyers, Ph.D. This S&C Contributing Editor details a trading system for predicting Treasury bond yields that uses Barron's Gold Mining Index (GMI) to signal changes. He compares the performance of the trading system with his previous use of the S&P electric utility bond market system. In addition, he tests the GMI T-bond system for trading the Fidelity Government Securities Fund. The connection between gold and interest rates is well known; gold prices are often used as a proxy for future inflation. Today's perception of future inflation rates causes bond...

AUTHOR: Dennis Meyers, Ph.D.DATE: APR1996SUBJECT: System Design

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• The Lone Trader by Adrienne Laris Toghraie

  ARTICLE SYNOPSIS ...The Lone Trader by Adrienne Laris Toghraie The stresses built into the profession of trading isolates traders from their natural emotional supports. Here are some ways to ensure those pressures don't reach a boiling point. If you were to make a movie of this man's life, it would be filled with scenes of him surrounded by all the people in his life: his adoring wife and three children, his supportive parents, his many friends and associates and his wider associations in the community where he is regularly elected to head committees and organizations. That's why I was surprised when Jack confe...

AUTHOR: Adrienne Laris ToghraieDATE: APR1996SUBJECT: Trading Psychology

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• Timing Stock Buys with an Oscillator by Richard Goedde

  ARTICLE SYNOPSIS ...Timing Stock Buys With An Oscillator by Richard Goedde Use this oscillator to calculate buy points for a stock in an upward trend. Oscillators are most useful when prices fluctuate up and down within a horizontal or flat channel (two parallel lines that contain prices). When the channel is sloping upward as recommended for successful investing, it is more difficult to determine the point at which %R gives a valid buy signal. In investment analysis, an oscillator is a mathematical tool used to identify turning points in prices and is useful in timing the purchase and sale of a security. Here'...

AUTHOR: Richard GoeddeDATE: APR1996SUBJECT: Basic Techniques

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• Traders' Tips

  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...

AUTHOR: Technical Analysis, Inc.DATE: APR1996