Article Archive For
DEC1989
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Beat the market with no-load mutual funds by Gary Zin, Ph.D.
ARTICLE SYNOPSIS ...Beat the market with no-load mutual funds
by Gary Zin, Ph.D.
In the past, I have invested in mutual funds based on their long-term performance, typically requiring
that a fund's five-year history exceed the compounded return of Standard & Poor's 500-stock index (S&P
500). In general, a diversified portfolio based on this criteria will do well, perhaps slightly exceeding and
rarely falling far behind the stock market. But, the portfolio generally does not substantially exceed the
returns of an index fund representing the broad market.
There is substantial evidence to support the premise that ...
AUTHOR: Gary Zin, Ph.D.DATE: DEC1989
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Can you draw a straight line? by Ron Jaenisch
ARTICLE SYNOPSIS ...Can you draw a straight line?
by Ron Jaenisch
The stock market has reached record highs and the markets are dominated by large financial
institutions with vast computer systems to aid them in their decision making. If the average investor turns
to the experts who write newsletters, varying opinions will be found. These days, if one doesn't have a
personal computer, one supposedly isn't managing his or finances properly.
Even with all this technology, the question often remains: Is this the end of the move or will it go further?
Now, the investor with even the most sophisticated computers can...
AUTHOR: Ron JaenischDATE: DEC1989
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Do stock prices reflect Fibonacci ratios? by Herbert H.J. Riedel
ARTICLE SYNOPSIS ...Do stock prices reflect Fibonacci ratios?
by Herbert H.J. Riedel
The claim has been frequently made that Fibonacci ratios occur in stock market data. A Fibonacci ratio
is the ratio between any successive numbers of the Fibonacci sequence -- the Fibonacci sequence
1,1,2,3,5,8... produces the ratios 1, 1/2, 2/3, 3/5, 5/8....
After the first four numbers in the Fibonacci sequence, the ratios approximately equal 0.618, known as
the Golden Ratio or phi (f). Comparing one number in the sequence to the next lower number (8/5,5/3,
2/1. . .) produces ratios that approximate 1.618, the inverse of the G...
AUTHOR: Herbert H.J. RiedelDATE: DEC1989
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First through the even by Grant Noble
ARTICLE SYNOPSIS ...First through the even
by Grant Noble
A few years ago I had the privilege of working with a former specialist, a broker's broker, on the New
York Stock Exchange. He told me how fellow specialists borrowed unlimited funds at 4%, how they used
""inside days"" to tell where the market was headed, the importance of the ""two-step top."" But by far the
most profitable advice he gave was ""first through the even.""
In January 1980, this specialist was approached by a large local making millions (open profits) from
thousands of long gold contracts. Understandably nervous, the local asked, ""When do...
AUTHOR: Grant NobleDATE: DEC1989
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Gann analysis on point and figure charts by Douglas Arend
ARTICLE SYNOPSIS ...Gann analysis on point and figure charts
by Douglas Arend
Of the many analytical techniques attributed to W.D. Gann, perhaps none is more widely followed
than the so-called geometric angles. Although applied generally to historical and intraday bar charts, this
method also can be used with point and figure or, as they are sometimes called, reversal charts. In this
case, the emphasis is on price alone rather than the combination of price and time.
P&F basics
Constructing daily point and figure (P&F) charts starts by determining the scale of the box (number of
price ticks per square) and reve...
AUTHOR: Douglas ArendDATE: DEC1989
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How to evaluate a commodity trading system by Kent Calhoun
ARTICLE SYNOPSIS ...How to evaluate a commodity trading system
by Kent Calhoun
The percentage of profitable trades, the average profitable trade, the average losing trade, the
maximum consecutive losing trades, the average profit per closed trade, the largest winning and losing
trades, the number of profitable buys and sells, the average number of days in losing and winning trades,
and the equity return on margin are not what I use to determine whether a commodity trading system can
be traded.
Just because a system ""makes"" money doesn't guarantee you will make money. I tested 60 systems that
""made"" more tha...
AUTHOR: Kent CalhounDATE: DEC1989
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Listen to the market by Thom Hartle
ARTICLE SYNOPSIS ...Listen to the market
by Thom Hartle
Technical analysis encompasses a myriad of approaches and, in the face of the trend toward high-tech,
I admit to being less of a computer system trader and more of a traditional chartist. I actually prefer to
state that I analyze the bond futures market as an interaction of supply meeting demand and determining
price. That may sound decidedly low-tech, but behind the most exotic computer program ever developed
for trading it is still the forces of supply and demand that present the trading openings.
If demand appears to be stronger than supply then bonds s...
AUTHOR: Thom HartleDATE: DEC1989
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Option premiums by Arthur Merrill
ARTICLE SYNOPSIS ...Option premiums
by Arthur Merrill
Can we derive useful information about the future direction of the stock market from option statistics?
I've found one item of data that has a good prediction record--the ratio of the premium on puts to the
premium on calls. (Premium is the strike price plus the cost of the option minus the current price of the
underlying security.)
The basic data, weekly average put and call premiums, are calculated and published by the Options
Clearing Corporation, 440 LaSalle, Chicago, IL 60605, and the weekly ratio is published by Technical
Trends, P.O. Box 792, Wilton, C...
AUTHOR: Arthur A. Merrill, C.M.T.DATE: DEC1989
AUTHOR: Technical Analysis, Inc.DATE: DEC1989
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Tactical stock trading by Hugh L. Logan
ARTICLE SYNOPSIS ...Tactical stock trading
by Hugh L. Logan
Peter Eliason's stock trading technique (""Tactical stock trading,"" Stocks & Commodities, March 1989
and ""Volatility analysis and simulation used in tactical trading,"" Stocks & Commodities, July 1989)
sounded so interesting I immediately sat down and began experimenting. Others have questioned the
consequences of using the technique on a downtrending stock (see Letters to the Editor, Stocks &
Commodities, May, July and September 1989) although Eliason has repeatedly cautioned users to use
strategic techniques (as distinguished from tactical technique...
AUTHOR: Hugh L. LoganDATE: DEC1989
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Trade like a cheetah by Hans Hannula, Ph.D.
ARTICLE SYNOPSIS ...Trade like a cheetah
by Hans Hannula, Ph.D.
The cheetah: an endangered species who's survived against the odds. It has survived by using a simple
set of two rules: be faster than anyone else, and be smarter than anyone else.
Sound like a good trading principle? At a recent Market Technicians Association (MTA) conference, in a
discussion with Dr. Van Tharp, a trading psychologist, I learned something about top traders that I
thought was unique to my own style of trading. What I learned was that many top traders use animals and
hunting as a mental metaphor to guide their thinking when they 're...
AUTHOR: Hans Hannula, Ph.D., RSA, CTADATE: DEC1989
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Trading options volatility by Andrew J. Sterge
ARTICLE SYNOPSIS ...Trading options volatility
by Andrew J. Sterge
Options are much more than a hedging vehicle or leveraged way of participating in spot or futures
markets. Indeed, options create strategies that did not exist before in trading an option's underlying
instrument. These strategies are known as volatility trades and the benefit is that you usually don't have to
pick market direction, something always tough to do. Instead, you bet on whether an option's volatility is
cheap or rich, in other words, undervalued or overvalued.
The term volatility is used with abandon in discussions of options, this on...
AUTHOR: Andrew StergeDATE: DEC1989
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Volume percentage ratio by Mike Burk
ARTICLE SYNOPSIS ...Volume percentage ratio
by Mike Burk
Volume is best used as a confirming indicator for general market trends and, in developing stock
market indicators, I've found a trio of volume calculations that work well in anticipating cycle tops and
bottoms. My basic volume indicator (Figures 1 and 2) is an exponential moving average of total volume
with a 0.04 smoothing constant.
It is plotted on a normal Y scale, that is, high values are the top of the scale. Although I have chosen the
Dow Jones Industrial Average to represent prices in these charts, broader indices such as the New York
Stock Exchan...
AUTHOR: Mike BurkDATE: DEC1989
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Weekly high/low moving average by Peter Aan
ARTICLE SYNOPSIS ...Weekly high/low moving average
by Peter Aan
Most moving averages of price are based on the closing price (see ""Simple moving average
crossover,"" Stocks & Commodities, June 1989), but the weekly variation computes moving averages of
the weekly highs and lows, based on the most recently completed calendar week.
This is a very simple system; you only have to compute the average high and low once a week (Figure 1)
and if, for instance, your current position is short, you will be concerned only with the high average.
Both the high and low averages are plotted on a weekly bar chart (Figure 2). ...
AUTHOR: Peter AanDATE: DEC1989
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What volume is it? by Richard W. Arms, Jr.
ARTICLE SYNOPSIS ...What volume is it?
by Richard W. Arms, Jr.
Markets often seem unpredictable and erratic. They give the impression of being disorganized because
they do not always behave as we think they should. We live by clocks and schedules, yet all too often
prices do not behave in such a manner as to meet our schedules. Therefore we think they are illogical,
even irrational.
Perhaps, however, it is our own lack of perception into the market that is the cause of our frustration.
Maybe we are trying in vain to impose on the market our world of clocks and calendars. Could it be that a
better measure of the...
AUTHOR: Richard W. Arms, Jr.DATE: DEC1989
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Wizards: minds over markets by Van K. Tharp
ARTICLE SYNOPSIS ...Wizards: minds over markets
by Van K. Tharp
Jack Schwager, commodity trader and confessed system skeptic, has been a familiar name in commodity
trading for a number of years. His 1984 book, A Complete Guide to the Futures Market, laid out most
tested techniques along with other methodologies.
His latest book, The Market Wizards: Interviews with Top Traders (Simon & Schuster, New York) might
be considered a companion to his technical tools book. Wizards brings home some of the more
important, and often, overlooked elements of successful trading--not magical systems, but the beliefs that
have m...
AUTHOR: Van K. Tharp, Ph.D.DATE: DEC1989