STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For AUG1992

  • Avoiding Bull And Bear Traps by Nauzer J. Balsara, Ph.D.

    ARTICLE SYNOPSIS ...Avoiding Bull And Bear Traps by Nauzer J. Balsara, Ph.D. Bull and bear traps are gap openings that are reversed the same day and that can cost a trader dearly. S&C contributor Nauzer Balsara presents his method of analyzing market history to calculate the proper placement of stops to avoid being caught in such traps. A bull or bear trap occurs when a market does an about- face after an extremely bullish or bearish opening, leaving a trader who entered a position at the opening price with a possible loss at the end of the day. Bullish expectations are reinforced by a sharply higher or ""gap-u...

  • Detecting Seasonality by Lewis Carl Mokrasch, Ph.D.

    ARTICLE SYNOPSIS ...Detecting Seasonality by Lewis Carl Mokrasch, Ph.D. Seasonal or cyclical patterns, whether real or only imagined, have been a popular topic among traders for years. Lewis Carl Mokrasch, continuing research published originally in his article in April 1991, presents this time a generalized method for detecting seasonal patterns. However, Mokrasch warns, there are certain caveats that the trader should be aware of, and he notes that the trader should take a good long look at the data involved for significant patterns before risking capital on so called seasonal trades. Here's how to figure it o...

  • Ed Seykota Of Technical Tools by Thom Hartle

    ARTICLE SYNOPSIS ...Ed Seykota Of Technical Tools by Thom Hartle Ed Seykota, whose thoughts and insights were chronicled in Jack Schwager's book Market Wizards, has been involved with trading commodities since the late 1960s. According to Market Wizards, Seykota's ""model account"" -- an actual customer account -- started with $5,000 in 1972 and to date has earned more than a 250,000% gain. Recently, in a new challenge, he purchased data and software vendor Technical Tools. S TOCKS & COMMODITIES Editor Thom Hartle interviewed Seykota in a series of written correspondence that took place over several months ending ...

  • Filtering Trades With A Moving Average Slope by Adam White

    ARTICLE SYNOPSIS ...Filtering Trades With A Moving Average Slope by Adam White Moving averages are attractive because they simply and reliably execute the ""cut your losses and let your profits run"" strategy. Moving averages also have drawbacks, however, in that they discard much of the information that the market offers. A simple moving average represents simple quantified information -- either prices are above it or below it. Can additional information, in this case the slope of the moving average, be put to use to improve trading performance? Adam White of the Technical Traders Bulletin shows you how. Despit...

  • Market Thrust by Tushar S. Chande

    ARTICLE SYNOPSIS ...Market Thrust by Tushar S. Chande An abundance of articles and letters concerning the Arms index, or the trading index (TRIN), during the past year was one proof of its popularity. The articles were concerned with both the uses and limitations of the Arms index. The two major problems with the Arms index, as characterized in the articles and letters, arose in constructing a long-term Arms index and with using the index in mixed markets. STOCKS & COMMODITIES contributor Tushar Chande proposes a way to measure market thrust and overcome the limitations of the Arms index. Richard Arms invented ...

  • Moving Average Crossovers by Arthur A. Merrill, CMT

    ARTICLE SYNOPSIS ...Moving Average Crossovers by Arthur A. Merrill, CMT Are moving average crossovers more effective than other indicators? More specifically, how about moving average crossovers applied to the Dow Jones Industrial Average? S&C contributor Arthur Merrill decided to research the question using weekly data for the last 24 years, checking out crossovers with a four-week exponential moving average and with 13-, 26- and 52-week exponential averages. Here are his results. One of the earliest technical tools, as easy to figure with pens and paper as well as with computer later on, was a price chart and...

  • Rate of Change by Martin J. Pring

    ARTICLE SYNOPSIS ...Rate of Change by Martin J. Pring Respected and well-known technician and author Martin Pring debuts as a STOCKS & COMMODITIES author, writing about the rate of change oscillator, a simple method of figuring advances or declines in a given period. The rate of change (ROC) is perhaps the simplest form of oscillator or momentum to understand and calculate. It measures the speed of an advance or decline over a specific time span and is calculated by dividing today's level by a level n periods ago and multiplying the result by 100. For example, an annualized (or 12-month) ROC is calculated by di...

  • SIDEBAR: DESCRIBING A SPREADSHEET PROGRAM

    ARTICLE SYNOPSIS ...DESCRIBING A SPREADSHEET PROGRAM...

  • SIDEBAR: DONCHIAN'S TRADING GUIDES

    ARTICLE SYNOPSIS ...DONCHIAN'S TRADING GUIDES Richard D. Donchian revised his 1934 guidelines for securities trading in 1974. His two sets of basic rules for general and technical trading have stood the test of time....

  • SIDEBAR: EXPANDING THE AVERAGE

    ARTICLE SYNOPSIS ...EXPANDING THE AVERAGE How to modify the start of an exponential moving average....

  • SIDEBAR: EXPONENTIAL MOVING AVERAGES

    ARTICLE SYNOPSIS ...EXPONENTIAL MOVING AVERAGES Defining exponentially smoothed moving averages -- which, for most traders, would be a series of closing prices -- is simply another form of a moving average. ......

  • SIDEBAR: TIME DELAY OF LINEAR EXPONENTIAL AVERAGES

    ARTICLE SYNOPSIS ...TIME DELAY OF LINEAR EXPONENTIAL AVERAGES Article Figure 2 indicates that if the price goes up linearly, after a while the exponential moving average will also be a straight line that is parallel to the original. For this to occur, there must be a constant separation between the lines. Let's designate the separation as ""B."" This situation is pictured in Article Figure 2. Recalling equation (1): ......

  • The Gann Quarterly Revisited by David C. Reif

    ARTICLE SYNOPSIS ...The Gann Quarterly Revisited by David C. Reif The Gann quarterly chart, a trend-following indicator like other range breakout techniques, was previously described by Jerry Favors in the January STOCKS & COMMODITIES. Most trend-following indicators give less than satisfactory results in the absence of a strong trend, and Reif, whose research on the indicator goes back a number of years, concludes that the Gann quarterly chart is no exception. Take a look. The Gann quarterly chart is a long-term indicator that I began following 15 years ago. In doing so, I have put together a collection of cha...

  • Trading Back Into A Range by John Sweeney

    ARTICLE SYNOPSIS ...Trading Back Into A Range by John Sweeney Last month in Settlement, I wrote briefly about some simple ideas for defining nontrending periods. Although exotic approaches are possible, simple things are easier to teach to computer packages. The program I've been using here for testing, Behold!, has a great worksheet capability and many sophisticated functions, so virtually anything can be defined mathematically. The problem with this software occurs when defining trading rules beyond entry and exit. Reversals and add-on trades are tougher if not impossible to program. When trading a range, you ...

  • Understanding Exponential Moving Averages by Raymond Rothschild

    ARTICLE SYNOPSIS ...Understanding Exponential Moving Averages by Raymond Rothschild Do you ever find yourself thinking that maybe you ought to try using the exponential moving average but find yourself intimidated into paralysis? Don't be. Let Raymond Rothschild be your guide into a not-so-alarming technique. Moving averages in general have been extensively analyzed by many investigators--all except the exponential moving average. The objective in technical analysis is to use every tool available, and that includes exponential moving averages. But first to review the formula for the simple moving average: in an ...

  • Utilities And Bonds by John J. Murphy

    ARTICLE SYNOPSIS ...Utilities And Bonds by John J. Murphy Of all the interrelationships between markets, one that has been taken for granted for decades is the relationship between the Dow Jones Industrial Average and the Dow Jones Transportation Average. John Murphy, veteran technician and leading proponent of intermarket analysis, points out that the third Dow Jones average, the Dow Jones Utility Average, can be used for forecasting purposes for stocks as well as bonds. Murphy explains. One of the basic premises of the Dow theory is that the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation...








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