STOCKS & COMMODITIES magazine. The Traders' Magazine

Article Archive For NOV1990

  • A trader's tale: Post-crash profits with fast action by Patrick D. Bosold

    ARTICLE SYNOPSIS ...A trader's tale: Post-crash profits with fast action by Patrick D. Bosold For most people, commodity trading means getting on an adrenalin high at the start of the trading day, scrutinizing the markets intensely, making bold buy or sell decisions under pressure and executing lightning-fast trades to make a profit--especially during a market crash. But that's not Hal Masover's philosophy. At least, not most of the time. Masover, a broker in Fairfield, IA, is of the opinion that successful commodity trading comes from patience, study and carefully considered action. ""But once in a while,"" he ...

  • Consolidation Patterns by Melanie F. Bowman and Thom Hartle

    ARTICLE SYNOPSIS ...Consolidation Patterns by Melanie F. Bowman and Thom Hartle Every price trend, be it stock or commodity, takes a breather from time to time. It is a period of indecision when the pressures of buyers and sellers balance each other out. This stalemate most often sets in after prices have jetted upward or plummetted to the bottom of the chart. It is a sign that prices have moved too rapidly and the momentum has been completely absorbed by the prevailing supply or demand. This change from a trending (advancing or declining) to a consolidating market will usualy be accompanied by a visible increa...

  • Jim Owen On Professional Investment Managers by Mike Takano

    ARTICLE SYNOPSIS ...Jim Owen On Professional Investment Managers by Mike Takano Jim Owen is managing director of NWQ Investment Management Co. and author of The Prudent Investor, published by Probus Publishing Co. He is co-founder and executive vice president of the Investment Management Consultants Association (IMCA), a national organization representing investment management consultants, money managers, attorneys and certified public accountants who serve the middle market investor, or investors or institutions with accounts of $5 million to $100 million. Q: Do you think the information pool or resources are ...

  • Moving Average Myths by Jason S. Glazier

    ARTICLE SYNOPSIS ...Moving Average Myths by Jason S. Glazier There is a myth that commonly used averaging and smoothing techniques require different times to calculate. The simple, step-weighted and exponentially smoothed moving averages are the most commonly used for technical analysis. These three moving averages dominate technical analysis methodology. Rarely do technical analysis publications or books mention any aspects of efficiency in calculating commonly used functions, and commercial technical analysis programs often overlook these algorithms as well. To test this, see if your commercial program takes s...

  • One Approach To Trading Bonds by Thom Hartle

    ARTICLE SYNOPSIS ...One Approach To Trading Bonds by Thom Hartle During the course of trading, the technician strives to enhance profitability by developing a consistent approach. Success in trading, as in any profession or practicing any skill, comes from the school of hard knocks, trial and error: experience, and developing good judgment. Trading is perhaps one of the most difficult skills to acquire because experience can be so expensive. There is no four- or six-year university that will give the prospective trader a curriculum, tests, field trips and homework in the art and science of trading. There are, h...

  • Percent Difference Oscillator by Darryl W. Maddox

    ARTICLE SYNOPSIS ...Percent Difference Oscillator by Darryl W. Maddox To determine intermediate-term turning points in the Dow Jones Industrial Average (DJIA), I use a procedure that I call a percent difference oscillator. The data gleaned from the use of the oscillator can be used to time fund-switching or stock index option buying and selling. The oscillator involves calculating an 18-day moving average, the difference between the current day's close and the 18-day moving average and then expressing the difference as a percentage of the 18-day moving average. The calculation is as follows: %Diff. = (Current ...

  • SIDEBAR: A five-day step-weighted moving average

    ARTICLE SYNOPSIS ...Examples of calculations for five-day weighted moving average....

  • SIDEBAR: Assessing volatility's predictive value

    ARTICLE SYNOPSIS ...SIDEBAR: Assessing volatility's predictive value To assess the predictive value of volatility, I reviewed 1,443 days of price action on the Standard & Poor's 100 stock index, starting on May 15, 1984. Volatility was measured by the standard deviation of percentage change in closing prices over a 20-day period and the ensuing price action by the ratio of the highest to the lower closing price in the 30 days following the end of the volatility estimation period. If periods of low volatility are followed by large price moves, the coefficient of correlation between volatility and price action sh...

  • SIDEBAR: ELLIOTT WAVE PROPORTIONS

    ARTICLE SYNOPSIS ...SIDEBAR: ELLIOTT WAVE PROPORTIONS According to Elliott wave theory, the first, third and fifth waves are proportional by the 1 to 1.618 to 1 ratio, known as the Fibonacci ratio. Figure 1 illustrates the basic five-wave sequence of the Elliott wave, and Figure 2 shows how waves 1,3 and 5 relate based on the Fibonacci ratio. Figure 3 shows how waves 1, 3 and 5 for bonds would proportionally relate based on the Fibonacci ratio, while Figure 4 shows how wave 3 of a real-life bond move exceeded the ideal proportionality by only 2/32nds in the move from 101-08 to 88-07 during the first four months ...

  • SIDEBAR: Option price sensitivity and the Greek alphabet

    ARTICLE SYNOPSIS ...SIDEBAR: Option price sensitivity and the Greek alphabet To analyze the risk/reward profiles of option strategies, traders measure the sensitivity of option strategies to unit changes in independent variables such as the price of the underlying security, interest rates, volatility, and so forth. These sensitivities are traditionally designated by Greek letters....

  • SIDEBAR: SOME TEAM STRUCTURE TYPES

    ARTICLE SYNOPSIS ...SIDEBAR: SOME TEAM STRUCTURE TYPES Each team shown in this diagram is a two-person alliance unless specified otherwise. Note that we are dealing with changeable combinations. An information team can develop into a working team or even a trading team, or a trading team can develop into a working team, and so on. The transition phases are fluid....

  • SIDEBAR: Simple moving average

    ARTICLE SYNOPSIS ...A quick definition of the Iterative and noninteractive forms of the simple moving average....

  • Second Hour Index by Arthur A. Merrill, C.M.T.

    ARTICLE SYNOPSIS ...Second Hour Index by Arthur A. Merrill, C.M.T. In 1983 I noted an indicator developed by analyst Stan Weinstein: the last hour indicator. Changes in prices in the last hour seemed to be useful in forecasting the future. Having an hourly data bank extending back to 1971 plus a fine bump of curiosity, I wrote a program and checked it out. The index did indeed prove useful. My curiosity urged me on, and I checked the other hours of the day. Nothing happened until I tested the hour from 11 a.m. to noon, which, at that time, was the second hour. Here the score jumped up into the significant range....

  • Stage Analysis by Thom Hartle

    ARTICLE SYNOPSIS ...Stage Analysis by Thom Hartle Funds are invested in markets for various reasons. A high return on investment capital, of course, is the ultimate goal. Investment decisions, however, often are made with only limited amounts of careful thinking behind the decision to place capital at risk. The competitive nature of any market dictates that success over the long run will be directly correlated with the amount of effort advanced. The process of carefully thought-out investment begins with a thorough understanding of the market in question and a range of information sources. The typical first ste...

  • The Market Facilitation Index Update: 1/89 to 3/90 by Charles F. Wright

    ARTICLE SYNOPSIS ...The Market Facilitation Index Update: 1/89 to 3/90 by Charles F. Wright I have noticed through the years that when a technique is disclosed in the popular press you can count on it to stop working for some time after the disclosure. You can speculate as to why, but the most logical reason is that many individuals are testing it or trading it. With so many people looking at the system, it is not surprising that it does not work. This may be the market's way of weeding out the inexperienced and the part-timers. Most novice traders test a new technique in the immediate period after its disclosu...

  • Timing The Bond Market With Elliott And Fibonacci by Roger Farley

    ARTICLE SYNOPSIS ...Timing The Bond Market With Elliott And Fibonacci by Roger Farley Fibonacci ratio analysis offers the Treasury bond trader an excellent long-term picture of the market. A rudimentary understanding of the Elliott wave theory and Fibonacci retracements allows bond traders of any outlook an excellent projection of market objectives and turning points. Obviously, this approach relies on maintaining a proper wave count. Technicians who have developed a reliance on other trading tools often shy away from the Elliott wave because of the subtleties involved in interpreting corrections. As with any o...

  • Trading As Teamwork by Franz-J. Buskamp

    ARTICLE SYNOPSIS ...Trading As Teamwork by Franz-J. Buskamp If you were to ask Chicago trader Joseph Ritchie whether he sees himself as an individual trader or a team member, his reaction would probably be a tired smile. After all, he is a member of one of the most successful options and futures trading team, Chicago Research and Trading Ltd. In 1977 Joe Ritchie developed a simple, albeit promising arbitrage program. The dollars necessary to put the system into practice were provided by three friends of Ritchie, with whom he founded CRT. From a starting capital of $100,000, CRT has to date realized $300 million...

  • Volatility And Trading by Jean-Olivier Fraisse

    ARTICLE SYNOPSIS ...Volatility And Trading by Jean-Olivier Fraisse Volatility describes how fast and how much prices change. The larger a security's volatility, the wider its potential price move in a given amount of time. When measured consistently over time, a security's volatility generally remains within a well-defined range and periods of historically low or high volatility can be readily identified. These extremes do not last and the ensuing correction may provide a trading opportunity. Patience is essential because periods of extreme volatility can be protracted and further signals are required to confirm...







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