STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For JAN1991

  • A Session With Alex Elder by Thom Hartle

    ARTICLE SYNOPSIS ...A Session With Alex Elder by Thom Hartle Alexander Elder, director of the Financial Trading Seminars, is no newcomer to technical analysis nor to trading. Technical Editor John Sweeney and Editor Thom Hartle interviewed Elder on July 18 of last year in the STOCKS & COMMODITIES offices. How are you learning to become a better trader? The best way I know to become better at anything is to teach. Being confronted with a whole group of people who expect information and who ask very tough questions is the best way to organize my thinking and to become better at whatever it is that I'm doing. I f...

  • A Wyckoff Guide for Investors and Speculators by Craig F. Schroeder

    ARTICLE SYNOPSIS ...A Wyckoff Guide For Investors And Speculators by Craig F. Schroeder The Wyckoff method as it is taught today represents the results of more than 100 years of continuous market study. Those years have brought the development of numerous refinements and a variety of applications. The basic building blocks of the approach, however, have remained the same. The ability to stand the test of time in a field where techniques come and go as regularly as the seasons makes a working knowledge of the method a worthwhile undertaking for all serious investors and speculators. In his course in stock market...

  • Classic Reversal: A Double Bottom by Thom Hartle

    ARTICLE SYNOPSIS ...Classic Reversal: A Double Bottom by Thom Hartle The major commercial interests are involved in markets as a business. Large amounts of money are committed to managing the risk that is faced by these companies. Companies on the cash side of markets will use futures to enhance positions with leverage or to protect themselves from adverse price movement. Decisions are based on extensive fundamental and technical research. The size of the positions assumed by these players will be revealed by trading volume seen on each day's activity. One facet of technical analysis is that the large professio...

  • Creating A Synthetic Security by Jean-Olivier Fraisse, C.F.A.

    ARTICLE SYNOPSIS ...Creating A Synthetic Security by Jean-Olivier Fraisse, C.F.A. Experienced investors know their goal is to maximize returns while minimizing risk. The smaller the capital invested for a profit is, the higher the return is. Using synthetic securities may reduce the investment that is required to implement a given strategy. To describe synthetic instruments is at once simple and complex. A synthetic security is created by buying and writing a combination of options that simulates the risk and profit profile of a security. To decide on a beneficial combination, first group several financial inst...

  • Currency Investment With Tactical Trading by John Beatty

    ARTICLE SYNOPSIS ...Currency Investment With Tactical Trading by John Beatty Foreign currency deposit accounts -- for German Deutschemarks, British pounds and so forth--are not routinely available in the cities and towns of the United States. In fact, before January 1989, federal law prohibited such accounts. As a consequence, many believe that currency investments comprise only the trading of futures and options. And unfortunately, for many investors, futures and options are definitely too risky. Should you want to move your funds across foreign currency deposit accounts in a bank, however, you do have interesti...

  • Double Smoothed-Stochastics by William Blau

    ARTICLE SYNOPSIS ...Double Smoothed-Stochastics by William Blau The stochastic oscillator devised by George Lane is one of the most useful and widely used tools in technical analysis. This oscillator is based on the current close in relation to the highest and lowest prices in a specified time interval (Figure 1). By definition, price increases as the close approaches the highest price of the interval and, conversely, decreases approaching the lowest price in the interval. A maximum is defined when price touches the highest price and then recedes. These characteristics are succinctly expressed by Lane's stochast...

  • Letters To S&C

    ARTICLE SYNOPSIS ...LETTERS TO S&C FAST FOURIER AND SPECTRAL ANALYSIS Editor, I am a student at The School of Business Economics, Aarhus, Denmark. Presently I am working on my graduate report, which concerns the efficiency of the foreign exchange market. In order to detect inefficiency in the market I have performed several statistical tests, including spectral analysis. None of these tests have produced any significant results, however, and considering the fact that certain investors and investment firms through the use of technical analysis have produced profits substantially larger than could be expected un...

  • Managing Emotions And Money by Robert J. Hamilton

    ARTICLE SYNOPSIS ...Managing Emotions And Money by Robert J. Hamilton The pitfalls of trading are well known to investors as well as traders. As perils go, the star performers by far and away are hope, fear and greed. The mavens of trading theory agree that avoiding these pitfalls will lead to successful and profitable trading. The problem is, the mavens never tell you how to avoid those pitfalls successfully. They don't even tell you how to get a good commission discount. Successful option and commodity traders usually won't admit the ""h"" word--hope--to their trading vocabulary. They know that whenever you get...

  • Pseudo Stocks by Mark Harris

    ARTICLE SYNOPSIS ...Pseudo Stocks by Mark Harris The stocks charted in Figure 1 look for all the world like typical charts you might find in a chartbook. I have added a few uptrend and downtrend lines and shown how 52 (in the upper chart) seems to provide long-term resistance, then support, and in the latter stages resistance again. I can't tell you what stocks these are, because they aren't charts of real stocks: the charts were generated by my computer along with thousands of others. They are shown as a family here because they all possess common statistical characteristics. Some years ago I became interested...

  • 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: HLC INDEX

    ARTICLE SYNOPSIS ...HLC INDEX A version of the double smoothed stochastic index factoring in the e high, low and close....

  • SIDEBAR: RELEVANT FORMULAS AND OBSERVATIONS

    ARTICLE SYNOPSIS ...RELEVANT FORMULAS AND OBSERVATIONS Focusing on the profit and loss profiles, we have established that: Rstock + Rput - Rcall = 0 Where Rstock, Rput and Rcall are the risk--profit or loss --of holding the stock, the put and the call, respectively. ......

SIDEBAR: SMALL TALK

  • SIDEBAR: TERMS AND PROGRAMMING HOW -TOS

    ARTICLE SYNOPSIS ...TERMS AND PROGRAMMING HOW -TOS Here are the definitions of the terms used in Article Figures 2 and 3, and the names of storage variables you see at the top of the macro: CURR--Currency for which the database holds exchange rates SERIES--Ex. 12345, a numerical series that is optimized ......

  • SIDEBAR: THE WYCKOFF WAVE

    ARTICLE SYNOPSIS ...THE WYCKOFF WAVE To determine the current trend, the present position and probable future trend of the market, a means of charting the market's action to reveal the general direction of the trend is necessary. ......

  • Support And Resistance Levels by John J. Kosar

    ARTICLE SYNOPSIS ...Support And Resistance Levels by John J. Kosar With the advent of personal computers and charting software, support and resistance levels and their value as a technical tool have been overshadowed by sophisticated indicators. Nonetheless, support and resistance levels are one of the most basic and essential components of technical analysis. Support and resistance are price areas where an abundance of trading has taken place and where considerable buying or selling pressure exists. Underlying support (that is, buying pressure) keeps a market in an uptrend, and overhead resistance (selling pre...

  • Trading Simply: Minimizing Losses by John Sweeney

    ARTICLE SYNOPSIS ...Trading Simply: Minimizing Losses by John Sweeney Richard Dennis is said to have said, ""There's a lot less to trading than meets the eye."" If so, he was correct. I like to describe an approach that has nothing to do with entry or exit, but everything to do with minimizing losses. I believe virtually any system that can identify successful trades can be profitable, given good loss control. Here's how. FUNDAMENTAL RULES Approach trading, particularly futures trading, as a zero-sum game. In such a game you can only win if someone else loses. Stock trading is not such a game, definitively, si...

  • Trend Exhaustion Index by Clifford L. Creel, Ph.D.

    ARTICLE SYNOPSIS ...When a price trend changes direction, it is sometimes difficult to predict whether that change is just a small correction or the start of a major trend change. I use a simple indicator, which I call the trend exhaustion index (TEI), to help interpret such trend changes. TEI gives an indication of change in market direction. It is not infallible, but after using it for the past year, I have learned to appreciate it as part of my technical toolbox. It is especially useful in giving exit signals prior to major market declines. The index is constructed by dividing the New York Stock Exchange (NY...

  • Volatility by Arthur A. Merrill, C.M.T.

    ARTICLE SYNOPSIS ...Volatility by Arthur A. Merrill, C.M.T. Does the degree of volatility in the stock market give us any clue to the future of the market? I tested day-to-day volatility and found that it does have a good forecasting record. I took the percent change of the Dow Jones Industrial Average from the preceding day's close to the current close, and multiplied by 1,000 to get a reasonable number. All changes up or down were made positive. The changes in the week were then averaged to make the v basic index. The chart is a 33% exponential average, which is about the equivalent of a five-week average....








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