Article Archive For
APR2002
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Books For Traders by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Books For Traders by Technical Analysis, Inc.
? Dave Landry On Swing Trading, by Dave Landry
? Dave Landry On Swing Trading, by
Dave Landry
? Fixed Income Securities, by Frank J. Fabozzi
? Girl, Get Your Money Straight:
A Sister's Guide To Healing
Your Bank Account And Funding
Your Dreams, by Glinda
Bridgforth
? Make Your Kid A Millionaire (302
pages, by Kevin McKinley
? Moving Averages Simplified, by Clif Droke
? Options On Futures, New Trading Strategies, by John F. Summa and Jonathan W. Lubow...
AUTHOR: Technical Analysis, Inc.DATE: APR2002SUBJECT: Books for Traders
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Do Momentum Indicators Follow Trends? by Clive Roffey, Ph.D.
ARTICLE SYNOPSIS ...Do Momentum Indicators Follow Trends? by Clive Roffey, Ph.D.
Do momentum indicators follow trends, or
are they independent of them?
The stochastic oscillator, relative
strength index (RSI), rate
of change (ROC), and moving
average convergence/
divergence (MACD) are
some of the most commonly
used indicators. It's not surprising to find
traders lumping them all together into the
generic category of "momentum indicatorsY´."
Although each indicator is recognized as having
its own distinctive characteristics, it is
often assumed, misleadingly, that they can be
interpreted in a similar fashion.
F...
AUTHOR: Clive Roffey, Ph.D.DATE: APR2002SUBJECT: Indicators
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Does The Head & Shoulders Formation Work? by Martin Boot
ARTICLE SYNOPSIS ...Does The Head & Shoulders Formation Work? by Martin Boot
Rarely will you come across a technique that detects an
imminent change in trend, but here's a method that can
help you do just that.
The head and shoulders pattern has
long been considered one of the most
reliable in technical analysis. That
should mean that more often than
not, every trader can make high
returns on their holdings.
Unfortunately, it's not that simple.
I am engaged in a major research project involving
statistical analysis of 8,513 New York Stock Exchange
(NYSE) and Nasdaq stocks over a four-year period. I
test well-k...
AUTHOR: Martin BootDATE: APR2002SUBJECT: Charting
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Equity Curve Analysis by Vladimir Stepnov
ARTICLE SYNOPSIS ...Equity Curve Analysis by Vladimir Stepnov
What can you expect from your trading system?
he random nature of the
markets can alter your profit
expectations, which is why you
must determine how your
system will perform in any type
of market. When you design a
system, the main parameters that characterize
its performance are the percentage of winners
(hereafter referred to as p) and the win/loss
ratio (hereafter referred to as alpha, ?). The
value of p is calculated by dividing the
number of winning trades by the total number
of trades during the test period, and ? is the
ratio of average winni...
AUTHOR: Vladimir StepnovDATE: APR2002SUBJECT: Trading System
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Frictional Costs In Futures Trading by Jesse Wolff
ARTICLE SYNOPSIS ...Frictional Costs In Futures Trading by Jesse Wolff
If we could trade in a perfect, cost-free world, there would be
many more systems that would exhibit profitable return profiles.
But we don't. So what can we do about frictional costs?
The futures market is not a zero-sum game, and
there is a level of friction -- that is, cost -- that
must be accurately reflected in the research
process and resulting profit/loss profile of any
system being developed. This cost will vary
depending on various factors, including the
contract size of the market traded, the trading
medium (electronic vs. floor brok...
AUTHOR: Jesse WolffDATE: APR2002SUBJECT: System Design
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How Accurate Is The A/D Line? by Lawrence G. McMillan
ARTICLE SYNOPSIS ...How Accurate Is The A/D Line? by Lawrence G. McMillan
Maybe not as accurate as you think. Here's
one way to get more realistic results.
For much of 2001 --
especially the first eight
months of the year --
market technicians
were often quoted as
saying that market
breadth was strong and, by inference,
that there was an underlying positive
tone to the market. The indicator often
used to demonstrate this was the
advance-decline (A/D) line -- the daily
difference between advancing and
declining New York Stock Exchange
(NYSE) issues. There were more
advances than declines for quite a few
days in tha...
AUTHOR: Lawrence G. McMillanDATE: APR2002SUBJECT: Indicators
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Interview: Terry Bedford of Bedford & Associates by Jayanthi Gopalakrishnan
ARTICLE SYNOPSIS ...Interview: Terry Bedford of Bedford & Associates by Jayanthi Gopalakrishnan
Technician Terry Bedford, president of the Bedford &
Associates Research Group, CNBC commentator, and MSN
Money columnist, developed an interest in the market early
on: at the age of 15, he pestered a local broker in Branford,
Ontario, until the broker recommended some classic texts on
technical analysis. Technical analysis stayed with him; in the early 1990s, he founded Bedford & Associates, which provides technical analysis research to institutional clients, and also manages hedge funds.
STOCKS & COMMODITIES Editor ...
AUTHOR: Jayanthi GopalakrishnanDATE: APR2002SUBJECT: Interview
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Letters To S&C by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Letters To S&C by Technical Analysis, Inc.
TRADERS' TIPS
Editor,
Thanks for putting out a great product
that brings us up to date on a lot of
trading issues. The articles are well
written and helpful.
I would like to see you include
TC2000 in your Traders' Tips column
so TC2000 users can more easily
implement some of the strategies
presented.
UDAY MEHTA, via e-mail
We've checked with Worden Brothers,
developer of TC2000. Custom programming
is not one of the program's major
features.--Editor...
AUTHOR: Technical Analysis, Inc.DATE: APR2002SUBJECT: Letters To S&C
Opening Position by Jayanthi Gopalakrishnan
AUTHOR: Jayanthi GopalakrishnanDATE: APR2002SUBJECT: Opening Position
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Post-Breakout Patterns by David Penn
ARTICLE SYNOPSIS ...Post-Breakout Patterns by David Penn
Look for these patterns to determine if breakouts
continue.
I
n technical analysis, one of the benefits
of focusing on chart patterns is that
practice trains the eye to spot emerging
chart patterns. This may enable a trader
to take a position before an actual
breakout occurs, thus increasing the
profitability of a correct call. When chart patterns
occur as part of an observable trend, the breakout (or
breakdown, in the bearish case) can become a place to add to a position, or to place a protective stop.
One of the biggest benefits to traders who study
ch...
AUTHOR: David PennDATE: APR2002SUBJECT: Charting
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Q&A by Don Bright
ARTICLE SYNOPSIS ...Q&A by Don Bright
REVERSE CONVERSION
In an article in STOCKS & COMMODITIES,
a practice called "reverse conversion"
was mentioned in relation to writing
options. Would you expand on this? --
Adrian
A reverse conversion, or "reversal,"
is simply a trade where you sell puts,
sell stock, and buy calls, thus doing the
opposite of a conversion. Reversals are
traded by floor traders who get full
interest on the short-stock valuation.
...continuded...
AUTHOR: Don BrightDATE: APR2002SUBJECT: Q&A
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Single-Stock Futures by Thomas L. Busby
ARTICLE SYNOPSIS ...Single-Stock Futures by Thomas L. Busby
Here's what every trader should know about
them.
Just recently, the Commodity
Futures Modernization Act of
2000 (CFMA) has lifted the 18-
year-old ban on single-stock
futures. While we have yet to
see just how this new kid on
the financial block will trade, there are certain
aspects of these new futures products that
every stock trader should know about and be
able to take advantage of.
While everyone will be trying to figure out
what all the hype is about, it is important to
realize that there are only a few key bits of
information you must possess t...
AUTHOR: Thomas L. BusbyDATE: APR2002SUBJECT: Real World
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The Commitment Of Traders Report by Jon Anderson
ARTICLE SYNOPSIS ...The Commitment Of Traders Report by Jon Anderson
The numbers reveal plenty about market participation.
There are two basic ways to analyze the futures
market: technically and fundamentally. Many
traders have a purely technical approach, with
total disregard for the fundamentals. While that
can be profitable, it can also allow you to be
blindsided by the market. It pays to know the
fundamentals, because they can help you anticipate which
direction the market will move.
But trading purely on fundamentals is also dangerous.
Fundamentalists calculate a value for a specific commodity
based on th...
AUTHOR: Jon D. AndersenDATE: APR2002SUBJECT: Basic Techniques
Traders' Resource: Courses And Seminars
AUTHOR: Technical Analysis, Inc.DATE: APR2002SUBJECT: Traders' Resource
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Traders' Tips by Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Traders' Tips by Technical Analysis, Inc.
TRADESTATION: Stop-and-reverse
In his article "Stay In The Market With Stop-And-Reverse"
in the Working Money section of this issue, Rudy Teseo
appears to have based his discussion and illustration on the
version of parabolic SAR included in SuperCharts, one of our
legacy products. Our current software, TradeStation 6,
includes a more powerful multiple-outputs version of the
parabolicSAR function, as well as several wrapper functions,
indicators, and trading strategies based on this underlying
function....
AUTHOR: Technical Analysis, Inc.DATE: APR2002SUBJECT: Traders' Tips
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Websites For Traders: TitanTrading.com by Jayanthi Gopalakrishnan
ARTICLE SYNOPSIS ...Websites For Traders: TitanTrading.com by Jayanthi Gopalakrishnan
TITANTRADING.COM
Where is the market going in the next
few days? We would all like to know,
and the new online market commentary
service from Titan Trading Analytics
may help us get an idea. In fact, looking
at its historical performance on the
Nasdaq Composite from June 2000 to
August 2001, it's evident the service has
often come very close to accurately
predicting short-term market movements....
AUTHOR: Jayanthi GopalakrishnanDATE: APR2002SUBJECT: Websites For Traders
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Working Money: Buy High, Sell Low by Edwin Polokoff
ARTICLE SYNOPSIS ...Working Money: Buy High, Sell Low by Edwin Polokoff
Nothing changes.
Everything changes.
Too many research departments, too
many money managers, too many
stock market "experts" do not perform up to
expected standards. My disillusionment began when
I was a young broker in the 1950s. Eager and gullible,
anxious to prove my mettle as a bright stock market
counselor, carrying none of the cynicism from
experience, I complained to my boss I was not getting
the kind of guidance either from our own research or
other research departments that could help me guide
my clients. Maybe I was frisky enough ...
AUTHOR: Edwin PolokoffDATE: APR2002SUBJECT: Investing
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Working Money: Commodity Channel Index by Amy Wu
ARTICLE SYNOPSIS ...Working Money: Commodity Channel Index by Amy Wu
How can you tell
when a new trend is
beginning?
The consensus is that the
markets have hit a bottom
and are starting to show
signs of recovery. To find out
whether this is true, you can
apply the commodity channel
index (CCI), an indicator
useful for determining the
beginning and end of a trend.
Introduced by Donald
Lambert in 1980, the commodity
channel index is a price momentum indicator that measures the degree of variance
of a security price from its statistical mean. Although
originally developed for trading commodities, the CCI can be
u...
AUTHOR: Amy WuDATE: APR2002SUBJECT: Novice Traders' Notebook
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Working Money: Forming A Dow Line by David Penn
ARTICLE SYNOPSIS ...Working Money: Forming A Dow Line by David Penn
Whether you are buying or selling, believe it or
not, it's good to wait in line.
One of the most common aspects of chart reading,
the notion of buying or selling breakouts from
congestion, has its roots in Dow theory --
specifically, in the part of Dow theory that
describes line formation.
In this context, a "line" is an area in which
prices neither advance nor decline by a significant amount
over a given period. This period may last anywhere from a
few weeks to several months, as the aggressiveness (or lack
thereof) of buyers is met with equal...
AUTHOR: David PennDATE: APR2002SUBJECT: Dow Theory
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Working Money: Stay In The Market With Stop-And-Reverse by Rudy Teseo
ARTICLE SYNOPSIS ...Working Money: Stay In The Market With Stop-And-Reverse by Rudy Teseo
If you hate being out of the market, you should
take a look at this system.
The parabolic time/price system indicator was
developed by J. Welles Wilder. Often referred to
as parabolic SAR or simply SAR (for "stop and
reverse"), the term comes from its appearance as
a parabola when viewed on a chart.
A SuperCharts help file describes SAR as "a system designed
to allow more leeway or tolerance for contratrend price
fluctuation early in a new trade, and then to progressively
tighten a protective trailing stop order as the tr...
AUTHOR: Rudy TeseoDATE: APR2002SUBJECT: Working Money
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Working Money: What Are Pivots? by Dennis D. Peterson
ARTICLE SYNOPSIS ...Working Money: What Are Pivots? by Dennis D. Peterson
More than just an alternative to indicators,
pivots can be used to better understand market
behavior.
The appearance of pivots on a chart suggests the
market has made a decision about price action.
Pivots are points at which the price changes
direction. In many ways, they are more useful
than indicators are. You will also find that pivots
are the basis of many technical articles, and
frequently part of trading strategies.
Simply put, pivots are turning points (Figure 1). If the
open-high-low-close (OHLC) bars before and after a bar have
...
AUTHOR: Dennis D. PetersonDATE: APR2002SUBJECT: The Chartist