STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For FEB1994

  • Bonds vs. Stocks: A Historical View by Tim Hayes

    ARTICLE SYNOPSIS ...Bonds Vs. Stocks: A Historical View by Tom Hayes Relative value is a familiar buzzword when it comes to comparing bonds and stocks. But is it accurate? There are criteria that must be specified for comparisons, as Tim Hayes of Ned Davis Research Inc. points out; for one, the time periods the comparisons are drawn from. So what's a better value, stocks or bonds? This common question is often answered by comparing relative yields. When bond yields are high relative to stock yields, they can be expected to eventually drop back toward a more normal level relative to the stock yields. Thus, bonds...

  • Evolution of a Timing Model by Nelson Freeburg

    ARTICLE SYNOPSIS ...Evolution of a Timing Model by Nelson Freeburg How does a trading model evolve? Formula Research newsletter publisher Nelson Freeburg discusses the evolution of a trading model and explains such concepts as out-of-sample testing, parameter sensitivity testing and the inclusion of nonprice indicators for timing trades. Many come to trading and investment with high expectations. In my case, the markets soon made clear the limitations of my intuitive trading skills. There are talented traders who can sense an impending market move, adjust for risk and enter with a properly scaled commitment, al...

  • Lattice Trees by Tushar S. Chande, Ph.D.

    ARTICLE SYNOPSIS ...Lattice Trees by Tushar S. Chande, Ph.D. The lattice approach to option pricing is used to build a tree, so to speak, of futures prices. The price tree can be recomputed intraday to update the expected price range. These dynamic trees can be used for risk control via price simulations and can also be used for trading. Here, we apply the various uses of lattice (or dynamic) trees to estimate prices for the Standard & Poor's 500. Option prices can be calculated by any number of sophisticated mathematical models. All such models make certain assumptions about the underlying security's price beh...

  • Neuro-Linguistic Programmer Charles Faulkner by Thom Hartle

    ARTICLE SYNOPSIS ...Neuro-Linguistic Programmer Charles Faulkner by Thom Hartle Whether you interpret the acronym NLP as Neuro-Linguistic Programming or natural learning process, the cognitive process of trading is what Charles Faulkner, of Chicago-based Mental Edge Trading Associates and a certified Neuro-Linguistic Programming trainer, studies. One aspect of Neuro-Linguistic Programming is a technique for overcoming mental impediments to success. A trader himself, Faulkner has studied successful traders extensively. By modeling the mindsets of successful traders, Faulkner seeks to help other traders follow tho...

  • SIDEBAR: 20 QUESTIONS ABOUT GAMBLING (TRADING) BEHAVIOR by Technical Analysis, Inc.

    ARTICLE SYNOPSIS ...20 QUESTIONS ABOUT GAMBLING (TRADING) BEHAVIOR by Technical Analysis, Inc. In 1980, Gamblers Anonymous in Los Angeles published a list of 20 questions about gambling behavior. I took the liberty of inserting the word trading to help you translate your answer to your own trading....

  • SIDEBAR: CALCULATING TEMA1 AND DEMA1 by Technical Analysis, Inc.

    ARTICLE SYNOPSIS ...CALCULATING TEMA1 AND DEMA1 by Technical Analysis, Inc. These Excel spreadsheets (sidebar Figures 1 and 2) present the calculation of TEMA1 (column H) and DEMA1 (column N). TEMA1 uses a multiple linear regression over a 52-week period of closing prices to calculate the coefficients a2, a1 and a0 in cells I2, J2 and K2, respectively. The weekly closing price for NASDAQ is in column B. Column C has the values for X (representing the value t) and column D is X^2 (representing t^2) for the regression formula....

  • SIDEBAR: Calculating DEMA2 AND THE MACD by Technical Analysis, Inc.

    ARTICLE SYNOPSIS ...Calculating DEMA2 AND THE MACD by Technical Analysis, Inc. This Excel spreadsheet (sidebar Figure 3) presents the DEMA2 along with the MACD using DEMA2 as the smoothing filters. Column B (labeled X value) is the time t. This column could be elsewhere, as the values are not needed after the EMAs are initialized using a linear regression. Coulmn C is the weekly closing price for NASDAQ. The first linear regression is calculated in cells J2 and K2....

  • SIDEBAR: FORMULAS by Technical Analysis, Inc.

    ARTICLE SYNOPSIS ...FORMULAS by Technical Analysis, Inc. COMPUTRAC TRADE PLAN Thomas Aspray supplied the following trade plan for the MACD histogram and MACD momentum oscillator. His current trade plan no longer includes the three-unit smoothing of the MACD momentum oscillator that was part of the original calculation....

  • SIDEBAR: METASTOCK IMPLEMENTATION OF TEMA1 AND MACD-TEMA1 by Technical Analysis, Inc.

    ARTICLE SYNOPSIS ...METASTOCK IMPLEMENTATION OF TEMA1 AND MACD-TEMA1 by Technical Analysis, Inc. The TEMA1 moving average and the MACD-TEMA1 can be implemented in MetaStock version 3.x using the custom formulas. The period for the example TEMA1 below was chosen as 26; however, this is user-selectable. As stated, the DEMA2 formula, unfortunately, cannot be implemented in MetaStock because of its interrecursive nature....

  • Smoothing Data With Less Lag by Patrick G. Mulloy

    ARTICLE SYNOPSIS ...Smoothing Data With Less Lag by Patrick G. Mulloy Last time, Mulloy discussed basic moving averages, introduced a new filter called DEMA1 and demonstrated a method with which to utilize exponential moving averages. Mulloy also explained how this new filter could be used in the moving average convergence/divergence (MACD) indicator. Now, Mulloy summarizes with more filtering techniques for the MACD and trading the Nasdaq. Two opposing properties are always at work in the standard moving average smoothing used in technical analysis, increasing the moving average (MA) length to cull more rando...

  • The Inflation/Deflation Phases Of The Stock Market Cycle by Martin J. Pring

    ARTICLE SYNOPSIS ...The Inflation/Deflation Phases Of The Stock Market Cycle by Martin J. Pring Veteran analyst Martin J. Pring explains how the commonly known four-year stock market cycle actually contains lesser- known inflation/deflation phases, the knowledge of which would be very advantageous for asset allocation. Many stock market participants are aware of the so-called four-year stock market cycle, which encompasses primary bull and bear markets. However, it is not commonly known that each cycle can be roughly divided into an inflationary phase and a deflationary phase -- an important distinction for ass...

  • The MACD Momentum Oscillator by Barbara Star, Ph.D.

    ARTICLE SYNOPSIS ...The MACD Momentum Oscillator by Barbara Star, Ph.D. The moving average convergence/divergence (MACD) is one of the most popular indicators around. Here, Barbara Star reviews and updates ways to use it. At present, virtually every charting software package contains Gerald Appel's moving average convergence/divergence (MACD) indicator. The indicator is composed of two lines: the MACD line, which is the difference between two exponential moving averages (usually a 12- and 26-period EMA), and the signal line or trigger, which is an exponentially smoothed moving average, usually a nine-period EM...

  • Trading And Gambling by Ruth Roosevelt

    ARTICLE SYNOPSIS ...Trading And Gambling by Ruth Roosevelt Gambling is an ancient behavior. Humans have wagered on the outcomes of chance events since prehistoric times. Ruth Roosevelt, director of the Wall Street Hypnosis Center, explains how trading and gambling have certain characteristics in common and how not to let them become examples of problem behavior. Gambling is an old and universal behavior, and with it comes problem gambling. History abounds with examples of problem gambling. The inability to control the impulse to gamble and to continue to do so despite the amount of money won or lost has existe...








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