STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For JUN1991

  • Building A Variable-Length Moving Average by George R. Arrington, Ph.D.

    ARTICLE SYNOPSIS ...Building A Variable-Length Moving Average by George R. Arrington, Ph.D. Of the tools in the technician's arsenal, the moving average is one of the most popular. It is used to eliminate minor fluctuations in prices, filter data noise and identify any underlying trend. Ideally, a moving average is sensitive enough to signal when a new trend has begun, yet able to ignore short-term random price movements at the same time. As long as the underlying trend continues, longer averages work well, but shorter averages do a better job of indicating changes in trends. As a result, many technicians use t...

  • Comparative Risk Transfer Method by Richard A. Harrison

    ARTICLE SYNOPSIS ...Comparative Risk Transfer Method by Richard A. Harrison It would be nice to get the higher returns of a speculative investment like a managed futures fund, but they're just too risky."" Is that statement familiar? There is a method that allows an investor to move into these speculative investments with a limited predetermined risk. It also provides several advantages over the ""guaranteed"" futures funds. I call it comparative risk transfer, which provides greater liquidity and control for a very limited amount of risk during the initial phase of the program. ""GUARANTEED"" FUTURES FUNDS Se...

  • Comparing Indicators: Stochastics %K versus Williams' %R by Thom Hartle

    ARTICLE SYNOPSIS ...Comparing Indicators: Stochastics %K versus Williams' %R by Thom Hartle Ironically, technicians today suffer from overabundance. Compared with the dearth of only a few years ago, technical analysis packages today offer so many indicators that a trader can be overwhelmed. As a consequence, building a trading system based on an array of technical indicators requires painstaking investigation to assure that each indicator is appropriate for the task in question. A typical trading system, for instance, could have long, intermediate- and short-term indicators intended to produce trading signals wi...

  • Flowing With The Markets by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Flowing With The Markets by Van K. Tharp, Ph.D. Imagine yourself flowing down a river, only you don't know that you are. You do, however, notice that when you move in one direction, with the flow of the river, you move rapidly. When you move in another direction, against the river, you move slowly or not at all. In fact, when you go in that direction, you seem to put out a lot more effort just to stay in place. Your life becomes a struggle. It just seems to push you in another direction. Feeling miserable, you fight against it. But it doesn't help. You still seem to move only in one direction...

  • How Important Is A Turning Point? by Arthur A. Merrill, C.M.T.

    ARTICLE SYNOPSIS ...How Important Is A Turning Point? by Arthur A. Merrill, C.M.T. So, naturalists observe a flea Hath smaller fleas that on him prey And these have smaller still to bite 'em; And so proceed ad infinitum. --Jonathan Swift So goes the market. Waves within waves within waves. Sometimes it's difficult to see the forest; we see only the trees. The Dow theory is concerned with penetration of turning point levels. When does a turning point become important enough to set an important level? The Elliott wave theory is concerned with waves of various magnitudes. When does a turning point become impor...

  • John Murphy: Intermarket Analyst by Thom Hartle

    ARTICLE SYNOPSIS ...John Murphy: Intermarket Analyst by Thom Hartle When you think of classic textbooks on technical analysis, John J. Murphy's Technical Analysis of the Futures Markets comes to mind. Murphy, who is also the resident technical analyst for cable television's CNBC, has lately published Intermarket Technical Analysis, which takes the analysis of markets into the global arena, demonstrating how to monitor the effects that today's interrelated and interdependent markets have on each other. STOCKS & COMMODITIES Editor Thom Hartle interviewed Murphy via telephone on March 20,1991. ""A stock market tec...

  • Letters to S&C

    ARTICLE SYNOPSIS ...LETTERS TO S&C FILLING THE GAPS Editor, In ""Trading the Deutschemark's gaps"" (STOCKS & COMMODITIES, June 1991), John Sweeney presented an excellent model of explanatory research, going from ""what-if?"" to price-change and timing guidelines. The reader learned a way to trade gaps and also a way to analyze market action. After watching many real-time screens, I formed the opinion that markets always try to fill gaps if they can and failure to fill is a very strong signal. If you recall, I used that same principle in projecting prices for your September Mystery Chart contest. In the curre...

  • Picking Tops And Bottoms With The Tick Index by Tim Ord

    ARTICLE SYNOPSIS ...Picking Tops And Bottoms With The Tick Index by Tim Ord As a young trader, I first used moving averages, point and figure charts and some Gann methods and then moved on to the Elliott wave fad. But none of these methods or techniques really gave me a strong signal for a top or bottom in the market. What I did learn in my early years as a trader was that running with the masses is a guaranteed subscription to failure. It is said that 80% of the people who trade the markets lose; from my experience, I'd say this is true. The losing majority fund the marketwise minority. I wanted a trading meth...

  • SIDEBAR: BUILDING THE VARIABLE-LENGTH MOVING AVERAGE

    ARTICLE SYNOPSIS ...BUILDING THE VARIABLE-LENGTH MOVING AVERAGE Seven steps to constructing a variable-length moving average, page 223....

  • SIDEBAR: THE OPTIMISM/PESSIMISM INDEX

    ARTICLE SYNOPSIS ...THE OPTIMISM/PESSIMISM INDEX The Wyckoff method divides each trading session into intraday buying and selling waves....

  • SIDEBAR: THE WYCKOFF WAVE

    ARTICLE SYNOPSIS ...THE WYCKOFF WAVE The Wyckoff wave used as a common stock price index, page 227....

  • Take A Look At The Dow by Daniel E. Downing

    ARTICLE SYNOPSIS ...Take A Look At The Dow by Daniel E. Downing In the past, one of the first requirements of being a technical analyst was a promise of sorts to ignore the price action of the Dow Jones Industrial Average. A technician had to focus on the action of more broadly based stock averages such as the New York Composite Index, the Standard & Poor's 500, or the Value Line Index to get an understanding of what the market was doing. The thinking behind this was that the price action of these more broadly based indices gave a truer picture of what was going on in the stock market and better represented the ...

  • The Basics Of Developing A Neural Trading System by Lou Mendelsohn

    ARTICLE SYNOPSIS ...The Basics Of Developing A Neural Trading System by Lou Mendelsohn As traders begin to experiment with and apply artificial neural systems to financial forecasting, there are pitfalls to avoid in the design and training of these systems so this new technology can be used effectively and profitably. If you want to develop a neural system to predict the Standard & Poor's 500 stock index (S&P 500) or the Dow Jones Industrial Average (DJIA) for the next day, for instance, you would need to specify five factors: the output that you want to forecast, the input data requirements, the type of neural ...

  • The End-Of-The-Month Effect by Ben Warwick

    ARTICLE SYNOPSIS ...The End-Of-The-Month Effect by Ben Warwick Back-testing has radically changed the way traders view the markets. Although no one has yet found the Holy Grail of trading, the ultimate goal remains the same: to create a system that consistently yields profits with a reasonable amount of risk. Alternatively, a portfolio of trades can be developed using technical, fundamental and seasonal factors. One such strategy is the end-of-month (EOM) trade. Studying the EOM effect, mentioned by Martin Zweig as well as others, suggests that the majority of the stock market's gains are generated during speci...

  • Trading The Deutschemark's Gaps by John Sweeney

    ARTICLE SYNOPSIS ...Trading The Deutschemark's Gaps by John Sweeney Talk about humiliation! Looking at a Deutschemark chart, I figured I'd trade with the direction of any gap for short small gains. The evidence showed I was 180 degrees wrong! I asked my computer to look at four years of mark prices and trade long if the opening price were above the previous day's range and short if it were below it. Ignoring my usual practice, I asked only what the best and worst move for each intraday trade would be. As you can see from Figure 1, there is very little difference between favorable (MFE) and unfavorable (MAE) pri...

  • Wyckoff: Timing Your Commitments by Craig F. Schroeder

    ARTICLE SYNOPSIS ...Wyckoff: Timing Your Commitments by Craig F. Schroeder The Wyckoff method ends where it begins -- with the general market. Step 5 of the Wyckoff method, the final step and the topic of this month's discussion of the Wyckoff method, instructs the Wyckoff student to time positions in individual issues to anticipated turns in the general market. The logic of this is easy to understand. If the first four steps of the Wyckoff method have been correctly applied, the results will be enhanced by a market that is moving with a particular position. While it is true that all markets will have issues tha...








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