STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For JAN1988

  • Introductions by Arthur A. Merrill

    ARTICLE SYNOPSIS ...Introductions by Arthur A. Merrill Stocks tend to fly together, rising in bull markets and declining in bear markets. For this reason, analysts have been searching many years for indicators of the future of the overall stock market. It isn't easy to find a leader for the market, since the stock market itself is a leading indicator of the future of business. An indicator of stock prices is an indicator of an indicator, or an indicator of the second degree. Unlike the research of the alchemists, though, analysts have been successful in finding many stock indicators. Some of their findings are...

  • Letters to S&C

    ARTICLE SYNOPSIS ...Letters to S&C Overbought/Oversold Editor, I read with interest the letter from George N. Bower on the Overbought/Oversold indicator, in which Mr. Bower referred to the indicator's publication as a possible ""con"" on the reader, or the reader's sensibility. I have incorporated the indicator into my own trading system with some success, but do not choose to rely on it wholly. I use the indicator to tell me what the likelihood of a substantial move in the general market is in the near future, not as a specific buy/sell signal, the use Mr. Bower apparently tested the indicator under. In mutu...

  • Making spreadsheets part of your trading system Part I by Jim Summers, Ph.D.

    ARTICLE SYNOPSIS ...Making spreadsheets part of your trading system Part I by Jim Summers, Ph.D. This column will be all about using Lotus 1-2-3, Release 2.0 as a trading tool. Given the number of programs written for technical analysis fundamental analysis, and portfolio management, why would anybody want to use Lotus 1-2-3 for this purpose? The answer is simple--most traders are not programmers, but they want the control and-the customization power that programming can provide. Lotus 1-2-3 gives both. Lotus 1-2-3 helped me develop a trading system and a historical testing system to evaluate indicators. What I w...

  • Market Profile Part 2 by Thomas P. Drinka, Ph.D. and Robert L. McNutt

    ARTICLE SYNOPSIS ...Market Profile Part 2 by Thomas P. Drinka, Ph.D. and Robert L. McNutt The market is composed of time, price and volume. Each day, the market--in attempting to facilitate trade--develops a price range delineated by the daily high and low and a Value Area where most of the prices congregate. Volume is generated by the interaction of time and price. A ""brief time/price relationship"" is established when price does not remain in a particular range for a long time period. In this case, the market does not accept a particular price or price area and moves away from it. An ""extended time/price rel...

Opening Position John Sweeney - Editor

  • The Compulsive Trader Part 1 by Van K Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The Compulsive Trader Part 1 by Van K Tharp, Ph.D. Compulsiveness is perhaps the most serious of all trading problems. I have evaluated psychological profiles on thousands of commodity and option traders. Despite the fact that about 50% of the traders I have evaluated make money in the futures markets, I would still describe about 5%-10% of my sample as being compulsive gamblers. At least once a month I get a phone call from someone who has lost $250,000 or more in the markets and who is wondering how I can help. They typically say, ""My wife would kill me if I spent any more money on invest...

  • Trading options volatility by John Nelson and Stephen Kreis

    ARTICLE SYNOPSIS ...Trading options volatility by John Nelson and Stephen Kreis The objective in trading options is generally a rather straightforward one--buy the premiums low and sell them high. For many traders there is no need to make ""option action"" any more complicated than that. Other option investors like to take a more in-depth look at the factors that affect the premium level to develop their trading strategies. Volatility is the most important factor affecting option premiums. In fact, some traders only take positions based on volatility, and are always neutral with respect to price. Knowing volatil...

  • Trading primary markets by Allen D. Hanson

    ARTICLE SYNOPSIS ...Trading primary markets by Allen D. Hanson Few traders understand the difference between primary futures markets and those that are often called ""secondary"" markets. Sometimes it is not easy to tell the difference between them. As a new futures contract develops it gains status through volume (the number of contracts traded during a session) and open interest (the number of contracts that haven't been closed). Commercial participation grows and soon a specific industry is relying on this futures market as a prime source for its cash pricing. During the transition from a secondary to a prima...

  • Trends and price channels by Heidi Schmidt

    ARTICLE SYNOPSIS ...Trends and price channels by Heidi Schmidt For the beginner, it is important to know that technical analysis is based on the belief that current market prices are related to prices that occurred previously. In other words, technical analysis is the opposite of the random walk theory, which states that prices are not related to each other from one day to the next. Thus, the technician analyzes past price (or yield) activity hoping to glean from it the future direction of prices. Technical analysis does not attempt to establish a mathematical model of market activity, such as an econometric mod...

  • Volume Called the Market by R. Stuart Thomson

    ARTICLE SYNOPSIS ...Volume Called the Market by R. Stuart Thomson By going back to October 1986 we can better understand the market explosion that occurred in January 1987, thanks to our cumulative volume (CV) charts. (See ""Cumulative Volume"" in the June 1986 issue of Stocks & Commodities.) Starting in October 1986 and with some slow-down in December as the impact of the new Tax Reform Act reared its ugly head, the technical picture steadily improved. Figure 1 shows how the Dow Jones Industrials' cumulative volume broke out to a new high in September 1986, quickly retreated to a higher low that same month, br...

  • Volume analysis Part 1 by John C. Lawlor

    ARTICLE SYNOPSIS ...Volume analysis Part 1 by John C. Lawlor Historically, volume has had only modest use as a technical analysis factor, even though volume, or the magnitude of volume, is a most respected market force. Every day, the 15 most active stocks are listed--a subtle tribute to volume. Most technicians, when referring to price relationships, state that a large move in price should be on increased volume. Cumulative Volume (CV) as treated in a recent article in Stocks & Commodities (June 1986), is one basic measure of volume. The first important requirement for studying CV is to co-plot it with price. T...

  • Which Money Manager? by Charles Milmoe

    ARTICLE SYNOPSIS ...Which Money Manager? by Charles Milmoe None can answer the question absolutely, but there is a method of determining if your money manager has even a chance of making money for you next year. It requires a small amount of high school math and a desire to select a manager intelligently rather than emotionally. Many people select futures advisors based upon emotion (greed and fear); but, the failure rate in futures trading is so high that the prudent use of the following formula can help you objectively select and evaluate a futures and futures options money manager. The first requirement is ...

  • Winning on Wall Street by John Sweeney

    ARTICLE SYNOPSIS ...Winning on Wall Street by John Sweeney Author: Martin Zweig Publisher: Warner Books 666 Fifth Avenue New York, NY 10103 Price: $20 This is a good book. It has a very reasonable approach to trading the market, or even individual stocks. It's a compendium of experience-generated trading guidelines and indicators which should well serve a new trader or someone with fewer than five years of market study. It's frank (""Had I stayed with it, I would have made 50 points ... But that's only a fantasy.""), focused (""There is nothing wrong with bonds. My specialty happens to be stocks."") and str...







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