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• Developing A System by John Sweeney

  ARTICLE SYNOPSIS ...Developing A System by John Sweeney The great thing about many of the new trading support systems is that they facilitate the respectable practice of ""dinking around"": that process of tweaking every crazy idea that strikes one until something productive and, hopefully, profitable pops out. I've found this is best done on quiet Sunday afternoons. Now, this article is not for everyone. I'm going to take you through the grind-it-out process of developing a trading system. As you'll see, even with nifty software and fast computers, there's mostly sweat and dirt before you get to the gold--if yo...

AUTHOR: John SweeneyDATE: NOV1991

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• Fed Policy And The Stock Market

  ARTICLE SYNOPSIS ...Fed Policy And The Stock Market Revisiting Gould's Rule by George A. Schade Jr. On February 24, 1989, the Federal Reserve Bank of New York raised its discount rate to 7% and triggered the most recent signal of the ""three steps and a stumble"" rule. The rule decrees that whenever three successive rises occur in any of the three rates set by the monetary authorities--the discount rate, the reserve requirement and the margin requirement--sometime afterward the market is likely to suffer a substantial setback. The rates are set by the Federal Reserve Board. The discount rate is the interest rate t...

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• Guidelines For Price Objectives by E.M.S. Flynn and Thom Hartle

  ARTICLE SYNOPSIS ...Guidelines For Price Objectives by F.M.S. Flynn and Thom Hartle Trends come and trends go. That much, at least, is a given. An important question arises about those trends, however: How far will a move go, and can we project how far it will? Price moves can be predicted (more or less accurately) using any of a slew of methods, but accuracy will be likely to increase when more than one method agree on a given price level. (This is, of course, the ""safety in numbers"" theory and is certainly not unique to technical analysis.) But then, confirmation is important, particularly for a novice trade...

AUTHOR: E.M.S. Flynn and Thom HartleDATE: NOV1991

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• Historical Movement Of The Stock Market by Michael J. Moody, C.M.T.

  ARTICLE SYNOPSIS ...Historical Movement Of The Stock Market by Michael J. Moody, C.M.T. Experience enables you to recognize a mistake when you make it again. --Franklin P. Jones Perspective is critical for participants in the financial markets. Unfortunately, one's perspective is easily influenced by the emotions arising from recent price action, all too often leading to poor market decisions because current price action never continues indefinitely. Further price erosion in a falling market, as well as additional price gains in a rising market, can always be rationalized in the prevailing emotional climate. As...

AUTHOR: Michael J. Moody, C.M.T.DATE: NOV1991

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• Letters To S&C

  ARTICLE SYNOPSIS ...LETTERS TO S&C THE UPS AND DOWNS OF IT Editor, I have some questions regarding ""Historical movement of the stock market"" (STOCKS & COMMODITIES, November 1991). Mr. Moody states that the data cover the quarterly periods from 1940 through June 1991. This would be 206 quarters. My questions are: 1. Figures 1 and 2 cover 82 quarters, not 206. Why was 60% of the quarterly data not reported? Also, all frequency charts I have previously seen show the market up 60% of the time, but these two charts are 50/50. 2. Figures 3 and 4 together appear to cover 196 of the 206 quarters. Were the missing ...

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• Merrill MW Waves by Arthur A. Merrill, C.M.T.

  ARTICLE SYNOPSIS ...Merrill MW Waves by Arthur A. Merrill, C.M.T. Suppose prices have been moving in a certain way. What are the probabilities for future prices? You must look to the past for similar situations. How similar must the past situation be? If you ask your computer to search a historical database for an exact copy of a current price swing, it will have a difficult time. Suppose it succeeds in finding a duplicate situation, and you see that the market rose after the past price swing. Does this mean that now we can count on a sure rise, with 100% probability? Of course not. The evidence is insufficient...

AUTHOR: Arthur A. Merrill, C.M.T.DATE: NOV1991

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• Mutual Funds As Stock Index Proxies by Joe Duarte

  ARTICLE SYNOPSIS ...Mutual Funds As Stock Index Proxies by Joe Duarte Both mutual funds and stock indices such as the Standard & Poor's 500 are collections of stocks, but the}e is a major difference between them. A mutual fund manager changes the stocks in his collection or portfolio based on his or her perception of the stock market and the investment goals and philosophy of the fund's charter. The components of a stock index, on the other hand, may remain unchanged for long periods. The mutual fund's philosophy and its management style, however, smooth out the fluctuations in its net asset value as a function...

AUTHOR: Joe Duarte, M.D.DATE: NOV1991

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• PC Buyers Guide

  ARTICLE SYNOPSIS ...PC Buyers Guide Speed Versus Price by Jack K. Hutson Sooner or later, most traders give in to the urge to purchase a personal computer to help them analyze the markets as well as manage their money in and out of the markets. One of my tasks here at STOCKS & COMMODITIES has been to evaluate equipment for our editorial and circulation staff as well as for software testing platforms. About 18 months ago, I undertook the task of evaluating personal computer hardware with the hopes of producing a meaningful ranking of these systems for market technicians. As with all methodologies, I have chosen ...

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• SIDEBAR: CALCULATING RSI

  ARTICLE SYNOPSIS ...CALCULATING RSI Calculate RSI by summing the up closes during the first 14 days and dividing by 14. This is the up average (Column E). Then sum the down closes during the first 14 days and divide by 14. This is the down average (Column F). All values are absolute values (positive integers). Then divide the up average by the down average to determine the RS value (Column G). Add 1 to the RS value (Column H). This result is divided into 100 (Column I). The quotient is then subtracted from 100 to produce the RSI value (Column J)....

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• SIDEBAR: CALCULATING TSI

  ARTICLE SYNOPSIS ...CALCULATING TSI Calculating the true strength index requires an introduction to exponentially smoothed moving averages (EMA): Exponential Moving Average- The EMA for day D is calculated as: EMAD = aPRD + (1-a)EMAD-1 where PR is the price on day D and a (alpha) is a smoothing constant (0<a<1). Alpha may be estimated as 2/(n+1), where n is the simple moving average length....

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• SIDEBAR: Discipline and Flexibility

  ARTICLE SYNOPSIS ...DISCIPLINE AND FLEXIBILITY The novice trader will ignore a failed signal, riding his position into a large loss while hoping for the best. The more experienced trader, having learned the importance of money management, will exit quickly once it is apparent that he has made a bad trade. However, the truly skilled trader will be able to do a 180-degree turn, reversing his position at a loss if market behavior points to such a course of action. In other words, it takes great discipline to capitalize on failed signals, but such flexibility is essential to the effective synthesis of chart analysis...

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• SIDEBAR: IS IT TIME TO GO MAC?

  ARTICLE SYNOPSIS ...IS IT TIME TO GO MAC? Time was when virtually no software existed for traders whose machines were Apple Macintosh personal computers. Even Commodore had more software than Apple's machines, though retail technical analysis really got started with a lowly Apple II and CompuTrac's pioneering work. (Could it have been barely eight years ago?) Nowadays, an analyst can legitimately think of going the Macintosh way for his daily analysis and his heavy-duty technical requirements. CompuTrac Mac is a tour de force, a delightful program that fully exploits the Mac interface. Personal Hotline is anoth...

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• SIDEBAR: RSI: TWO VERSIONS

  ARTICLE SYNOPSIS ...RSI: TWO VERSIONS It may not be obvious that (1) RSI14 = 100?(100 / 1+RS) is the same as...

AUTHOR: Technical Analysis, Inc.DATE: NOV1991

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• Scheduling Time For Market Study by Van K. Tharp, Ph.D.

  ARTICLE SYNOPSIS ...Scheduling Time For Market Study by Van K. Tharp, Ph.D. Bill, a trader, called my office complaining that he never has enough time to really study the markets. He said his lack of time often resulted in serious problems, and he expressed an interest in consulting with me if I could help him solve his problem. I told Bill that I had helped others with similar problems, but that we would have to schedule two intensive days together in order to work on it. Bill exclaimed that he couldn't possibly give up two days out of his busy schedule. ""Couldn't we do it through hourly phone consultations ov...

AUTHOR: Van K. Tharp, Ph.D.DATE: NOV1991

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• The Midpoint Oscillator by Tushar Chande, Ph.D.

  ARTICLE SYNOPSIS ...Here's an indicator based on the concept used in %K and %R. The Midpoint Oscillator by Tushar Chande, Ph.D. I would like to share one of my own indicators based on the same underlying concept used in the popular stochastics (%K) and Williams' %R overbought/oversold indicators. To review, the formula for the stochastics %K is:...

AUTHOR: Tushar S. Chande, Ph.D.DATE: NOV1991

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• The Seasonal Cycle by Hans Hannula, Ph.D.

  ARTICLE SYNOPSIS ...The Seasonal Cycle by Hans Hannula, Ph.D. I use natural cycles to help me trade stocks and commodities profitably. One of the most obvious and powerful of nature's cycles is the cycle of the seasons. Its effect is obvious not only in commodities, but in stocks and bonds as well. Economists widely accept seasonal variations. Traders have long recognized seasonal variations as valuable timing aids. The seasonal cycle, in fact, is the basis of W.D. Gann's 45- and 90-day cycles. There are three important steps for a trader to take in applying natural cycles to his or her trading. First, a trader...

AUTHOR: Hans Hannula, Ph.D., RSA, CTADATE: NOV1991

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• True Strength Index by William Blau

  ARTICLE SYNOPSIS ...True Stength Index by William Blau Price momentum oscillators are popular tools for traders because the nature of these technical tools is to signal trend changes, something every trader wants to know. The ideal indicator would alert the trader to a change in the trend from a down market, at the low of the trend to an up market, correctly indicate that the up trend was in force until the absolute high and then signal the new trend. While this indicator may or may not exist, my own work has led me to the use of applying various smoothing techniques to changes in price. Many changes in price fr...

AUTHOR: William BlauDATE: NOV1991

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• William Byers Of Bear Stearns by Thom Hartle

  ARTICLE SYNOPSIS ...William Byers Of Bear Stearns by Thom Hartle William Byers, director of commodities futures research and a managing director of Bear, Stearns & Co., has been in the investment business since 1972. In addition to his administrative functions relating to Bear Stearns' commodity futures business, he is responsible for all of the firm's futures market research and serves as broker for a number of large speculative and institutional accounts. Byers is also a past director of the Market Technicians Association and the Futures Industry Association Research Division. STOCKS & COMMODITIES Editor Thom ...

AUTHOR: Thom HartleDATE: NOV1991