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• Chaos theory and market behavior by Bernd Anders

  ARTICLE SYNOPSIS ...Chaos theory and market behavior by Bernd Anders Chaos, in the original Greek, describes the primal condition--a w translation that means ""confuwsion"" as well as ""reality."" With this one word, the ancients captured what they intuitively knew about the world; that disorder, unpredictability and randomness are part of the natural order. Yet, since the 1970s, chaos has become the codeword for a revolutionary scientific movement that has revamped ancient notions about complex, irregular phenomena--from commodity prices to the weather--and discovered that, even in chaos, there is order. Unlike s...

AUTHOR: Bernd AndersDATE: NOV1989

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• Fundamentals behind technical analysis by Curtis McKallip Jr.

  ARTICLE SYNOPSIS ...Fundamentals behind technical analysis by Curtis McKallip Jr. Would you believe you are doing fundamental analysis without knowing it when you use technical indicators? No, not GNP, PPP, GPD, J-curves or deflators. That stuff is for government policy makers. Fundamental supply and demand analysis is often ignored. Not because it is wrong but because the information isn't there. You can get hourly price quotes off your satellite dish, but can you find out how many soybean plants were planted at 2 p.m.? (And how much would the exchanges charge for it?) If you could get this information it migh...

AUTHOR: Curtis McKallip, Jr.DATE: NOV1989

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• Inside day patterns in the S&P by Toby Crabel

  ARTICLE SYNOPSIS ...Inside day patterns in the S&P by Toby Crabel Computer studies suggest that inside days-- where the high is lower than the previous ! day's high and the low is higher than the previous day's low-- provide very reliable t entries in the S&P 500 futures market. The basic trading pattern (Figure 1) is an inside day (ID) followed by a sale if the next day's market opens lower or a buy if next day's market opens higher. Entry is on the open and exit is on the same day's close without a stop. In computerized tests, this basic procedure produced 68% winning trades in the S&P between 1982 and 1987. To...

AUTHOR: Toby CrabelDATE: NOV1989

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• Market letter sentiment by Arthur Merrill

  ARTICLE SYNOPSIS ...Market letter sentiment by Arthur Merrill Analyst Abraham Cohen, many years ago, began to tabulate the opinions of stock market analysts. He watched scores of market letters (including my own!) and each week put them in three piles: bullish, bearish and correction. He reported the percentage in each category in his weekly publication, Investors' Intelligence. I have found it useful to divide the ""correction"" pile and assign one half of the stack to the bullish and one half to the bearish categories. Market letter writers are presumed to be experts and to have access to more data than the o...

AUTHOR: Arthur A. Merrill, C.M.T.DATE: NOV1989

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• Neural networks: A trading perspective by Carol H. Halquist & George F. Schmoll, II

  ARTICLE SYNOPSIS ...Neural networks: A trading perspective by Carol H. Halquist & George F. Schmoll, III Neural networks and neural network simulators are used in signal processing, expert systems, modeling and forecasting. They may be used to solve complex, well-defined problems which may be impossible to solve algorithmically. They are primarily beneficial when the relation between input data and output data is not clearly understood, but a large number of sample sets of data are available. Neural networks are an alternative method used in signal processing, particularly in such fields as speech, vision and p...

AUTHOR: Carol H. Halquist & George F. Schmoll, IIDATE: NOV1989

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• Optimal parameter selection by Kent Calhoun

  ARTICLE SYNOPSIS ...Optimal parameter selection by Kent Calhoun The success or failure of any trading system hinges on the choice of its parameters. General wisdom holds that optimal parameters are variables that produce the highest cumulative profits on completed trades. My approach is based on a basic defensive trading philosophy--controlling losses is essential to making profits. So, rather than selecting optimal parameters to produce the largest closed cumulative profits, my goal is to locate profitable trading parameters that minimize equity drawdown as the market changes. Optimal commodity parameters vary ...

AUTHOR: Kent CalhounDATE: NOV1989

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• Overbought and oversold indicator by Thom Hartle

  ARTICLE SYNOPSIS ...Overbought and oversold indicator by Thom Hartle Traders often refer to markets as being in various states or conditions with a jargon that covers the spectrum of market action. Starting with ""It's a bull market. . .the market is overbought. . .the market is consolidating"" and moving to ""The market is forming a top. . .the market is oversold. . .it's a bear market. . .the market has bottomed. ""The point of this article is to explain a simple tool that I use to help me identify overbought and oversold conditions in the T-bond futures market. Overbought implies that a market has only a min...

AUTHOR: Thom HartleDATE: NOV1989

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• Parabolic stop/reversal by Peter Aan

  ARTICLE SYNOPSIS ...Parabolic stop/reversal by Peter Aan There are two primary variables for the system: the acceleration factor (AF) increment and the maximum acceleration value. In a long trade, for instance, the daily computation involves subtracting the current reversal stop from the most favorable point reached in the trade and multiplying this difference by the AF. This result is then added to today's stop to arrive at the reversal point for tomorrow. The general equation is: ... Every time the market moves into new highs, the AF is increased. As the AF increases, the stop, which will start out rather ""...

AUTHOR: Peter AanDATE: NOV1989

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• Revamping mediocre buy-write strategies by Jerry Kopf

  ARTICLE SYNOPSIS ...Revamping mediocre buy-write strategies by Jerry Kopf Stockbrokers usually introduce the average retail investor to option trading with a simplistic buy-write I strategy. Buy the stock and sell (write) a call option against it. The mechanics are straightforward. The seller or writer of the call option is establishing a contract with the purchaser of the call, promising to deliver shares of a stock at a certain price (the strike price) on a certain date (expiration date). The buyer pays the seller of the contract a fee (called the premium) to assume this risk. At expiration, if the stock is be...

AUTHOR: Jerry KopfDATE: NOV1989

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• SIDEBAR: Chaos on CompuTrac

  ARTICLE SYNOPSIS ...Chaos on CompuTrac A version of the chaos equation systems, programmed as a user study in CompuTrac is below....

AUTHOR: Technical Analysis, Inc.DATE: NOV1989

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• Setting stops: A new approach by John Ehlers

  ARTICLE SYNOPSIS ...Setting stops -- a new approach by John Ehlers The cliche in golf is ""drive for show, but putt for dough."" The analogy in technical trading is that the ability to pick entry points is highly focused, but scant attention is paid to how to exit a trade. This is unfortunate, because skillfully selected exit points can often make a large difference between overall profit and loss. There are, of course, several exit strategies in common usage. One is to exit with a predefined profit or loss. Another is J. Welles Wilder's parabolic stop-and-reverse or SAR (see related article in this issue). I us...

AUTHOR: John F. EhlersDATE: NOV1989

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• Shelly Natenberg: trader and teacher by John Sweeney

  ARTICLE SYNOPSIS ...Shelly Natenberg: trader and teacher by John Sweeney Shelly Natenberg, a floor trader at the Chicago Board of Trade, is the author of Options Volatility & Pricing Strategies, Probus Publishing, Chicago, 118 North Clinton St, Chicago, IL 60606, (800) 426-1520 or (312) 346-7985. He has been teaching options for six years to professional and floor traders at the Chicago Mercantile Exchange and is currently active in giving seminars for many different exchanges. Shelly, Probus sent us your book for review. I've scanned through this thing, but I wanted to get some more background on you before di...

AUTHOR: John SweeneyDATE: NOV1989

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• Trading windows for technical indicators by Frank Tarkany

  ARTICLE SYNOPSIS ...Trading windows for technical indicators by Frank Tarkany In a number of articles over the past three years, Stocks & Commodities' authors have developed evidence that changes in securities prices are generated by a process that is random, stationary and dependent. In English: today's prices depend to some extent on past prices. Frank Tarkany presented evidence in previous issues that prices are non-random and dependent. The next questions are, ""If prices are non-random and dependent, what is their nature and over what period of time do past prices affect today's prices and future prices?""...

AUTHOR: Frank TarkanyDATE: NOV1989