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• Data Filtering For Trend Channel Analysis by Anthony W. Warren, Ph.D.

  ARTICLE SYNOPSIS ...Data Filtering For Trend Channel Analysis by Anthony W. Warren, Ph.D. Trend-following methods typically utilize moving averages of closing price data for buy and sell signals. Often, the signals turn out to be false due to short-term market fluctuations. Here, longtime STOCKS & COMMODITIES contributor Anthony W. Warren, correcting one of the major drawbacks of moving averages, introduces a trend-following method that smoothes the data for trend identification and measures short-term price fluctuations to establish statistical boundaries. The following article will teach you how to use a zero...

AUTHOR: Anthony W. Warren, Ph.D.DATE: MAR1993

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• Determining Optimal Risk by Ed Seykota and Dave Druz

  ARTICLE SYNOPSIS ...Determining Optimal Risk by Ed Seykota and Dave Druz Seasoned traders know the importance of risk management. If you risk little, you win little. If you risk too much, you eventually run to ruin. The optimum, of course, is somewhere in the middle. Here, Ed Seykota of Technical Tools and Dave Druz of Tactical lnvestment Management, using subject matter and materials that they have used in lectures and workshops around the US, present a method to measure risk and return. Placing a trade with a predetermined stop-loss point can be compared to placing a bet: The more money risked, the larger the...

AUTHOR: Ed Seykota and Dave DruzDATE: MAR1993

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• OEX And The Thrust Oscillator by Stuart Meibuhr

  ARTICLE SYNOPSIS ...OEX And The Thrust Oscillator by Stuart Meibuhr STOCKS & COMMODITIES contributor Stuart Meibuhr suggests using advance-decline data for trading the OEX contract. Is it feasible? Meibuhr explains. The four items of data that describe the advances and declines in the New York Stock Exchange (NYSE) market continue to receive attention and research. Technician Richard Arms, in his 1968 article in Barron's, described the TRIN index (trading index), now known as the Arms index. The index shows the ratio relationship between advancing and declining issues to their up and down volumes. The index is ...

AUTHOR: Stuart MeibuhrDATE: MAR1993

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• Put Volume Indicator by John Bollinger

  ARTICLE SYNOPSIS ...Put Volume Indicator by John Bollinger Although it has been mined for many years, one of the richest veins in technical analysis remains the sentiment area. Here, money manager and market analyst John Bollinger discusses one such indicator. The essential idea behind all sentiment work is that the road less traveled is likely to be the more profitable one. By studying and monitoring the ebb and flow of speculative sentiment, the savvy investor should be able to determine when to veer off the more congested trading path to explore new territory outside the accepted norm -- often known as contra...

AUTHOR: John BollingerDATE: MAR1993

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• SIDEBAR: CALCULATING THE THRUST OSCILLATOR WITH THE TECHNICIAN

  ARTICLE SYNOPSIS ...CALCULATING THE THRUST OSCILLATOR WITH THE TECHNICIAN Plotting the thrust oscillator (TO) requires two user formulas. The first one calculates the daily value; this formula in The Technician's language is: ......

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• SIDEBAR: COIN FLIPPING MATH

  ARTICLE SYNOPSIS ...COIN FLIPPING MATH To find the optimal bet size for a coin that heads wins two times the fraction bet, and tails loses the fraction bet of the running total stake on tails: ......

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• SIDEBAR: Formulas

  ARTICLE SYNOPSIS ...Put/call ratio, Hines ratio, Bollinger, put/volume indicator, and technician's oscillator....

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• SIDEBAR: MATHEMATICA

  ARTICLE SYNOPSIS ...MATHEMATICA One measure of price volatility is to compute s, averaging the square difference between current closing prices and a smoothing filter, yi, and taking the square root -- that is, ... with ci denoting the current closing price and yi denoting the current value of a data filter such as an N-point moving average. The s uses a longer 2N data length because there is much greater noise variability when we compute the square error. First, we examine data lag versus moving average length N for a standard moving average. Suppose that the input sequence of values is a linear trend, as in...

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• SIDEBAR: METASTOCK

  ARTICLE SYNOPSIS ...METASTOCK The lead/lag filter can be implemented in MetaStock version 3.0 using custom formulas: Formula 1 mov(C,N,E) Formula 2 mov((N*fml(#1))-((N-1)*ref(fml(#1), -1)), N, E ) where mov(C,N,E) implements an N-point EMA on the closing price, fml(#1) refers to Formula 1, and ref(fml(#1), -1) implements a one-point delay on the EMA....

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• SIDEBAR: SYSTEM TEST

  ARTICLE SYNOPSIS ...Heat test to show profitability over a range of set sizes....

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• SIDEBAR: TREND CHANNEL SPREADSHEET

  ARTICLE SYNOPSIS ...TREND CHANNEL SPREADSHEET The trend-following method uses exponential smoothed moving averages (EMA) of price data. The equation for an EMA requires the previous day's EMA for the calculation of today's EMA. Consequently, the first period's closing price will be used as the first period's EMA and the smoothing process begins with the second period. In the spreadsheet, cells B2, C2, D2 and E2 are the first period's closing prices. The first exponential smoothing of the data occurs in column C. This is the three-week EMA prefilter. The alpha constant is 0.5. To produce a filter with zero lag th...

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• Steven C. Leuthold: Fundamentally Technical by Thom Hartle

  ARTICLE SYNOPSIS ...Steven C. Leuthold: Fundamentally Technical Institutional investment strategist and researcher Steve Leuthold brings almost 30 years of investment experience to his positions as chairman of the Leuthold Group, an investment research organization, and chairman of Leuthold & Anderson, an investment management firm. The Leuthold Group, which has more than 300 professional clients, publishes several monthly newsletters and produces Quantitative Themes, a value and growth stock screening product Leuthold, who is the author of The Myths of Inflation and Investing, is also general partner in Leuthold...

AUTHOR: Thom HartleDATE: MAR1993

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• Stochastics Indicators And Trading by David Lundgren

  ARTICLE SYNOPSIS ...Stochastics Indicators And Trading by David Lundgren Here, first-time STOCKS & COMMODITIES contributor David Lundgren reminds us that the stochastics indicator is just a guide to understanding the trend for trading. Stochastics, or any technical indicator for that matter, is just a mathematical formula that processes data from one form into another. That's all it is. It is not the crystal ball that you have been in search of all your life. It is simply a guide (and a very effective one at that) used to either confirm or contradict other analyses of the most important data of all -- price acti...

AUTHOR: David LundgrenDATE: MAR1993

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• The Coppock Guide by Tim Hayes

  ARTICLE SYNOPSIS ...The Coppock Guide by Tim Hayes One of the best megaphones of market action is the Coppock guide, a long-term price momentum indicator that effectively filters out short-term and intermediate-term market swings to issue a clear message on the market's underlying long-term trend. Tim Hayes of Ned Davis Research reports on the success of this indicator. The Coppock guide, which was developed in the early 1960s by technician E.S.C. Coppock, was designed as a guide by which to identify major market bottoms, with the specification that buy signals would be generated when the 10-month smoothing dro...

AUTHOR: Tim HayesDATE: MAR1993

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• Traders' Tips

  ARTICLE SYNOPSIS ...Data Filtering For Trend Channel Analysis by Anthony W. Warren, Ph.D. Trend-following methods typically utilize moving averages of closing price data for buy and sell signals. Often, the signals turn out to be false due to short-term market fluctuations. Here, longtime STOCKS & COMMODITIES contributor Anthony W. Warren, correcting one of the major drawbacks of moving averages, introduces a trend-following method that smoothes the data for trend identification and measures short-term price fluctuations to establish statistical boundaries. The following article will teach you how to use a zero...

AUTHOR: Technical Analysis, Inc.DATE: MAR1993

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• Trading Bond And Currency Funds by Joe Duarte

  ARTICLE SYNOPSIS ...Trading Bond And Currency Funds by Joe Duarte Today's broad selection of different types of mutual funds allows traders to allocate assets based on personal expectations of changes in the stock market, interest rates and currencies. S&C contributor and newsletter publisher Joe Duarte presents his methods to increase gains in a portfolio by including currency-based mutual funds as a choice for instruments. Asset allocation has become a popular investment strategy. In this strategy, capital is usually divided into stocks, bonds and cash, and capital is transferred from one category to another ...

AUTHOR: Joe Duarte, M.D.DATE: MAR1993

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• Trading Spreads by Thomas Cronin

  ARTICLE SYNOPSIS ...Trading Spreads by Thomas Cronin The price relationship between delivery months of a futures contract or between different futures contracts often change. And of course, where there is change opportunity arises for traders. Here, STOCKS & COMMODITIES author and commodity trading advisor Thomas Cronin explains how to trade spreads. Spreads, because of their lower margin requirements and in many cases lower risk, have always been popular and especially among grain and livestock traders. Although spreads are commonly used, few traders have even a basic understanding of the mechanics of spread t...

AUTHOR: Thomas CroninDATE: MAR1993