STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For APR2002

  • 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...

  • 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...

  • 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...

  • 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...

  • 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...

  • 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...

  • 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 ...

  • 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...

Opening Position by Jayanthi Gopalakrishnan

  • 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...

  • 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...

  • 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...

  • 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...

Traders' Resource: Courses And Seminars

  • 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....

  • 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....

  • 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 ...

  • 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...

  • 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...

  • 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...

  • 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 ...








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