STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For AUG1988

  • Computing curved trendlines by Arthur Merrill

    ARTICLE SYNOPSIS ...Computing curved trendlines by Arthur Merrill Data sometimes shows a tendency to level off with a downward curve. A curved trendline, in these cases, would be more useful than a straight line. Quite often, the data rises more and more rapidly, like a skyrocket. If this is the case, a curved trendline would be more useful than a straight line. The upward curving tendency may be caused by the distortion of the arithmetic scale, which makes a given percent increase appear large at the top of a chart and small at the bottom. This distortion can be cured by using a logarithmic scale and then a s...

  • Contrary opinion by R. Earl Hadady

    ARTICLE SYNOPSIS ...Contrary opinion by R. Earl Hadady Facts are unimportant! It's what they are perceived to be that determines the course of events. That, in a nutshell, is what drives the principles of contrary opinion that are at work in various human activities, particularly the markets. A contrary opinion is simply the opposite of what the vast majority of people think the course of events will be. For example, the principles of contrary opinion indicate that if practically everyone believes there is going to be a shortage of crude oil and acts accordingly by buying small cars, restricting their travel an...

  • Defining directional movement Part 8 by Jim Summers, Ph.D.

    ARTICLE SYNOPSIS ...Defining directional movement Part 8 by Jim Summers, Ph.D. Given the old adage that ""the trend is your friend"" and that most trading systems follow trends, J. Welles Wilder's Directional Movement Index (DMI) lets you measure whether a trend is in effect and its strength. To develop DMI, we first measure the amount of daily directional movement (DM) within the true range (TR1) and record its direction (+ or -). As we found with the true range, exactness in definitions comes before programming. Directional movement is either up or down. Up days are those trading days in which the intraday hi...

  • Holt-Winter Channel: taking the formula one step beyond by Ichu Cheng

    ARTICLE SYNOPSIS ...Holt-Winter Channel: taking the formula one step beyond by Ichu Cheng October 19,1987 witnessed the biggest one-day drop in stock prices in history. The Dow Jones Industrial Average (DJIA) fell 616 points or 26% in a single day. The drop caught most investors by surprise. Are there any indicators that could have warned us about the impending crash? In Figure 1, two parallel lines run along the DJIA line and form a channel which I have developed and have called the Holt-Winter Channel. A week before the crash, the DJIA price lines crossed the lower parallel line. This is the sell signal for t...

  • Kroll on futures trading strategy by Dr. Alexander Elder

    ARTICLE SYNOPSIS ...Kroll on futures trading strategy by Dr. Alexander Elder Author: Stanley Kroll Publisher: Dow Jones-Irwin 1818 Ridge Road Homewood, IL 60430 Contents: 203 pages, hardbound Price: $29.95 Stanley Kroll is reputed to have taken seven-figure profits out of the inflationary markets of the 1970s. He also wrote two good market books in those days: The Commodity Futures Market Guide (with Irwin Shishko) and The Professional Commodity Trader. Kroll spent the next several years traveling in Europe and writing books on sailing. He returned to the U.S. and the futures markets in the mid-1980s. A n...

  • Letters To S&C

    ARTICLE SYNOPSIS ...Letters To S&C Insider trading Editor, Your article in the June issue, ""If the boss only knew technical analysis,"" by Vincent Cosentino, caught my eye for an obvious reason: We recently published a new book on legal insider trading, authored by the father of the system that tracks and interprets such buying and selling of securities, Ed Buck. Ed is publisher of Vickers Stock Research's Weekly Insider Report. His emphasis is on evaluating and interpreting insider transactions. I enclose a copy of The SIB Stock Market Ratio: Profiting from Legal Insider Trading for your consideration. You'...

  • MACD momentum Part 1 by Thomas Aspray

    ARTICLE SYNOPSIS ...MACD momentum Part 1 by Thomas Aspray In the fall of 1986, I completed work on a new indicator: the MACD Histogram/Momentum. As many of you are already aware, the MACD, or Convergence/Divergence, is an excellent indicator, but its signals often lag when run on weekly data. Convergence/Divergence was developed by Gerald Appel, who has created many excellent technical tools. I first presented my work on the MACD at a CompuTrac conference in 1984. At that time, very few analysts were aware of it, much less using it on the commodity markets. Now it is a widely used technical tool. I have done so...

  • Market entry with action/reaction lines by Ron Jaenisch

    ARTICLE SYNOPSIS ...Market entry with action/reaction lines by Ron Jaenisch Action/Reaction lines are a charting technique developed in the early 1900s by Roger Babson, who founded the Babson Business Institute in Massachusetts and believed Newton's laws of gravity affected the markets. At the heart of the Action/Reaction Method is the age-old physical sciences law that every action has an equal and opposite reaction. In its simplest form, the Action/Reaction Method shows a trader when and where to add on positions if a market is in a strong trend. This is accomplished by drawing peak-to-low Action/Reaction Li...

Opening Position John Sweeney Editor

  • Peak performance in volatile markets, Part 1 by Neal Weintraub and Susan Arenson

    ARTICLE SYNOPSIS ...Peak performance in volatile markets Part 1 by Neal Weintraub and Susan Arenson Man alone, of all the creatures of the earth, can change his own pattern. Man alone is the architect of his own destiny. The greatest discovery in our generation is that human beings, by changing the inner attitudes of their minds, can change the outer aspects of their lives. William James Peak performance can involve any activity where a certain level of achievement is being sought. It involves a sense of everything falling into place both mentally and physically. Dr. Jean Williams, a well-known sports psycholo...

  • Profit taking with Mendelsohn

    ARTICLE SYNOPSIS ...Profit taking with Mendelsohn Over the years, Lou Mendelsohn has been not only a persistent presence among trading system vendors, he's also stood out as one of the few who advocated complete disclosure of the systems being sold. Not content to disclose his own system, ProfitTaker, and its refinement, ProfitTuner, he's also written and spoken out publicly on the hazards of buying undisclosed trading systems. He's also one of the most realistic voices on the fad of optimization. With ProfitTaker now well established and his family comfortably ensconced in a Florida ranch, Lou's turned his att...

  • Real world technical analysis by Kent Calhoun

    ARTICLE SYNOPSIS ...Real world technical analysis by Kent Calhoun Simplicity and common sense trading methods summarize my approach to technical analysis. The purpose of this article is to educate traders to view price action from a more creative perspective, starting with a return to the basics of technical analysis. In over 20 years of trading, I have tested several hundred trading systems, using computers and manual methods. The common denominator for the most successful systems is simplicity. In this series, I will describe a number of systems, but any trading method or system presented here should be thoro...

  • SIDEBAR: Holt-Winter Channel Calculation

    ARTICLE SYNOPSIS ...Holt-Winter Channel Calculation The Holt-Winter formula estimates the three quadratic coefficients recursively as follows: Ft+1 = (l - a) (Ft + Vt + 0.5 At) + aCt+1 Vt+1 = (l - b) (Vt + At) + b(Ft+1 - Ft) At+1 = (l - c) At + c (Vt+1 - Vt) where Ct = Closing price on date t and a, b, and c are constants determined by the person performing the analysis. For simplicity, I use the Holt-Winter formula to forecast the next day's closing price. To determine the upper and lower boundaries of the Holt-Winter Channel, I use a comfort factor (T) value of l.0 as follows:...







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