Article Archive For
AUG1988
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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...
AUTHOR: Arthur A. Merrill, C.M.T.DATE: AUG1988
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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...
AUTHOR: R. Earl HadadyDATE: AUG1988
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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...
AUTHOR: Jim Summers, Ph.D.DATE: AUG1988
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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...
AUTHOR: Ichu ChengDATE: AUG1988
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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...
AUTHOR: Alexander Elder, MDDATE: AUG1988
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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'...
AUTHOR: Technical Analysis, Inc.DATE: AUG1988
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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...
AUTHOR: Thomas AsprayDATE: AUG1988
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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...
AUTHOR: Ron JaenischDATE: AUG1988
Opening Position John Sweeney Editor
AUTHOR: John SweeneyDATE: AUG1988
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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...
AUTHOR: Neal Weintraub and Susan ArensonDATE: AUG1988
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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...
AUTHOR: Technical Analysis, Inc.DATE: AUG1988
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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...
AUTHOR: Kent CalhounDATE: AUG1988
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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:...
AUTHOR: Technical Analysis, Inc.DATE: AUG1988