DEC 1988 STOCKS & COMMODITIES Magazine

Article Archive For DEC1988

DMI trading rules by Jim Summers, Ph.D.

ARTICLE SYNOPSIS ...DMI trading rules by Jim Summers, Ph.D. In this issue, we start programming into Lotus 1-2-3 the trading rules used in J. Welles Wilder's Directional Movement Index (DMI) system. In the previous columns, we programmed the various mathematical components of the system and now, with the tedious part behind us, the fun begins! Knowing the trading rules and testing the results--and programming forces you to know the rules--is what gives you an advantage over shoot-from-the-hip traders. If you can't specify your trading rules clearly enough to test them, then why delude yourself into thinking you t...

AUTHOR: Jim Summers, Ph.D.DATE: DEC1988

Letters To S&C

ARTICLE SYNOPSIS ...Goaded Editor, I'd rather Stanley Kroll's program remained a well-kept secret, but Alexander Elder's condescending review of Kroll's latest book (S&C, August 1988) has goaded me to speak out. Elder would have us believe that Kroll ""struts"" and touts a system which delivers ""anything your heart desires, short of curing baldness."" Kroll's basic message is discipline: following ANY system with discipline is liable to provide profits. Kroll cannot be faulted for mentioning that the system he uses helps one guard against a multitude of common pitfalls. I don't recall his claiming in the book...

AUTHOR: Technical Analysis, Inc.DATE: DEC1988

Market Profile Part 5 by Thomas P. Drinka, Stephen M. Ptasienski and Robby L. Humes

ARTICLE SYNOPSIS ...Market Profile Part 5 by Thomas P. Drinka, Stephen M. Ptasienski and Robby L. Humes To make the information from the Chicago Board of Trade's Market Profile and Liquidity Data Bank reports more useful to traders, we have tabulated time-and-sales as well as volume data on 12 futures markets to determine what could be considered ""typical"" behavior. We analyzed 38 contracts (Figure 1) between February 1 and April 22, 1988 -- a relatively brief period which means that the volatility and trader participation may not reflect long-term measures. Rather, these are the type of analyses that Market P...

AUTHOR: Thomas P. Drinka, Stephen M. Ptasienski and RobbyDATE: DEC1988

AUTHOR: John SweeneyDATE: DEC1988

Opening Range Breakout Part 3 by Toby Crabel

ARTICLE SYNOPSIS ...Opening Range Breakout Part 3 by Toby Crabel In the opening range breakout technique, the heralds of an upcoming trend day are often inside days, narrow range days and hook days (see Stocks & Commodities, September and October 1988). I also have run across a new concept that categorizes price action and generally produces trending activity the next day. I call it Doji Lines. Doji is a Japanese word describing a comparison between the open and the close of the daily session. It is described in a book, The Japanese Chart of Charts by Seiki Shimizu. A Doji Line is a day that shows a very small...

AUTHOR: Toby CrabelDATE: DEC1988

Playing the "somewhats" by Len Yate

ARTICLE SYNOPSIS ...Playing the ""somewhats"" by Len Yates Tired of waiting for the market to do something significant and you want to steer clear of naked writing? This article describes a way to play what I call the ""somewhats"" -- times when you expect the market to go somewhat higher or somewhat lower. There is a very good strategy to apply in times like this. It's called a ""credit spread"" or ""vertical credit spread,"" and it has two distinct advantages: You can profit handsomely from a modest change in the underlying security and, if you choose out-of-the-money options, time is on your side. While you'r...

AUTHOR: Len YatesDATE: DEC1988

Price path: a new volatility measure by Joanne Hill, Ph.D. and Matthew Celebuski

ARTICLE SYNOPSIS ...Price path: a new volatility measure by Joanne Hill, Ph.D. and Matthew Celebuski Many trading strategies rely on market levels or changes in those levels for allocation among asset classes. In an option replication program, such as portfolio insurance, the option cost is paid throughout the life of the program. Frequently, the estimated costs differ significantly from the actual cost even when anticipated volatility estimates are realized. An important reason for this discrepancy is that the order of the returns impacts the cost of an option replication program but has no impact on the price...

AUTHOR: Joanne Hill, Ph.D. and Matthew CelebuskiDATE: DEC1988

Survival strategies for exchanges by Dr. Robert A. Wood

ARTICLE SYNOPSIS ...Survival strategies for exchanges by Dr. Robert A. Wood The rate of change in the structure of capital markets appears to be accelerating. Some forces affecting change are the evolution of futures and options markets, computerized trading which permits professional investors to focus liquidity demands of essentially unlimited size on exchanges instantly, trading strategies such as portfolio insurance, index arbitrage and ""hot money"" strategies which result in immense liquidity demands being placed on exchanges within very short time frames, upstairs block trades and, more recently, basket t...

AUTHOR: Dr. Robert A. WoodDATE: DEC1988

Swing Expectations by Arthur A. Merrill

ARTICLE SYNOPSIS ...Swing Expectations by Arthur A. Merrill Market moves are plagued by the ""noise"" of short-term vibrations. I've found it useful to clean up the moves by using a simple 5% filter for the market averages and a 10% filter for individual stocks. All swings of less than the specified percentage are ignored as in Figure 1, which charts recent moves of the Dow Jones Industrial Average (DJIA). This chart is quite similar to the point-and-figure method, which also ignores all moves of less than a specified number of points. To make the filter apply equally to rising and declining moves, 100% is alwa...

AUTHOR: Arthur A. Merrill, C.M.T.DATE: DEC1988

The secrets to stock option success by Patrick D. Bosold

ARTICLE SYNOPSIS ...The secrets to stock option success by Patrick D. Bosold Author: Kenneth R. Trester Publisher: Institute for Options Research, Inc., P.O. Box 12340 Reno, NV 89510 (800) 334-0854, Ext. 840 Contents: Ten cassette tapes, 270 page manual, Future Value Tables, Index Options booklet, three-month newsletter subscription, bonus cassette, three special reports. Price: $299 Does this options investment scenario sound familiar? Investor (beginner or veteran) gets ""hot tip"" about a pending event that should create a big move in a company's stock or the entire market -or- a friend, broker or fin...

AUTHOR: Patrick D. BosoldDATE: DEC1988