OCT 1997 STOCKS & COMMODITIES Magazine

Article Archive For OCT1997

Analysis in Action: Tushar Chande by Thom Hartle

ARTICLE SYNOPSIS ...Tushar S. Chande is a familiar name to regular Stocks & Commodities readers, as he's contributed any number of solid, well-researched and thoughtful technical articles over the years and has been a Contributing Editor for the past few. His background, like so many others, wasn't financial when he started out; he started out as an engineer before being bit by the trading bug before eventually ending up as a Commodity Trading Advisor in Chicago. Having evolved into a money manager, Chande has keen insight into trading system development. To conduct this interview, S&C Editor Thom Hartle and Chan...

AUTHOR: Thom HartleDATE: OCT1997SUBJECT: Interview

Correction or Reversal? by Alex Saitta

ARTICLE SYNOPSIS ...Markets trend. And within those trends are corrective phases, which in turn are followed by the trend resuming. At some point, the major market trend reverses. So what might be a clue to whether the current price action is a correction or a trend reversal? Here's one method to consider. After a market advance and the price drops below its moving average, technicians are faced with a question: Is the decline just a correction, or is it the beginning of a trend reversal? If, after the moving average cross, the technician decides it is indeed a correction (Figure 1), he'll prepare to buy support...

AUTHOR: Alex SaittaDATE: OCT1997SUBJECT: New Techniques

Evaluating Sysem Efficiency by Leo Zamansky, Ph.D.

ARTICLE SYNOPSIS ...We've all experienced good trades, bad trades and so-so trades. Wouldn't it be better if you had steps you could take to improve the entries and exits of the trades that your system generated to quantify the good from the bad? This article provides basic steps to do so. By Leo J. Zamansky, Ph.D., and David C. Stendahl Evaluating a trading system performance is not a trivial task. Not only does a trader need to know how much money the system has made but also how the system made the money. A system may be extremely profitable, but if it does not match the preferences of the trader using it, th...

AUTHOR: Leo Zamansky, Ph.D.DATE: OCT1997SUBJECT: Money Management

Measuring the Move by Michael Kahn

ARTICLE SYNOPSIS ...Chartists often use techniques to set profit objectives as well as determine their risk points in putting on a trade. Here, then, are some guidelines for your own trading. When a market breaks out of a technical trading pattern, traders need to correctly gauge potential price moves against the risk of being wrong. Most patterns reveal the market's intentions in their own shapes and sizes. Two, and sometimes three, price targets can be forecast with a simple assessment of the pattern itself. Measuring potential price moves works for all patterns and all time frames, thus aiding traders in thei...

AUTHOR: Michael KahnDATE: OCT1997SUBJECT: Classic Techniques

On Using Volatility Bands by Ahmet Tezel, Ph.D., and Suzan Koknar-Tezel, M.S.

ARTICLE SYNOPSIS ...We've all seen a stock break out of its trading range and trend to new levels. The initial surge will appear as a sudden increase in activity, pushing the price higher. The higher prices often reach levels that indicate the stock is temporarily overbought and, after a pause, may continue to trend. Technicians use indicators to identify the temporary extremes, and one indicator is volatility bands. This article details two trading systems designed to take advantage of the breakouts. Many software packages for technical analysis of the stock market contain volatility bands using standard deviat...

AUTHOR: Ahmet Tezel, Ph.D., and Suzan Koknar-Tezel, M.S.DATE: OCT1997SUBJECT: Trading Techniques

On-Balance Volume by John Sweeney

ARTICLE SYNOPSIS ...The on-balance volume indicator is a technical tool that traders use to determine the trend of volume. Here are the basics. The interplay of price and volume is the combination that is most discussed in traditional technical analysis. In these discussions, volume either confirms or does not confirm price movement by its expansion or contraction from prevailing values. Analysts examine the wildly fluctuating bar charts usually shown below price graphs to determine whether volume is truly expanding or contracting. To smooth the fluctuations in volume and also provide an overall indicator of pr...

AUTHOR: John SweeneyDATE: OCT1997SUBJECT: Indicators

Three-Line Break Reversal Signals by William Arnold

ARTICLE SYNOPSIS ...This charting technique is a simple but effective technique for determining the direction of the trend as well as changes in the trend. With volatility in the stock market increasing, many new and elaborate methods have been developed to predict market turns. This poses a problem: Indicators of complex construction may work or they may not, for no apparent reason. So finding system components that follow the keep-it-simple approach may seem unfashionable, but in reality it is a survival technique. In fact, older and simpler indicators have withstood the test of time for good reason. One class...

AUTHOR: William ArnoldDATE: OCT1997SUBJECT: New Techniques

Traders' Tips

ARTICLE SYNOPSIS ...METASTOCK "On using volatility bands" by Ahmet Tezel and Suzan Koknar-Tezel introduces two different volatility band trad-ing systems, one system using bands based on moving averages and the other based on regression bands. To plot the moving average asymmetric volatility price bands (MAAVPB) in MetaStock for Windows, simply plot Bollinger bands using 11 periods and 1.7 standard deviations. Then click your right-mouse button while the cursor is over the lower band and choose properties. Change the standard deviations to 2. This plot will now appear exactly as the bands discussed in the articl...

AUTHOR: Technical Analysis, Inc.DATE: OCT1997

Trend-Following The Corn/Wheat Spread by Scott W. Barrie

ARTICLE SYNOPSIS ...Grain markets offer profit opportunities due to the seasonal nature of their planting, crop development and harvesting cycle. During certain times of the year, the price of the grain crops are especially vulnerable due to these seasonal tendencies. Here are some trading strategies based on seasonal spread trading, using a trend-following method to filter seasonal signals. Seasonal analysis is comparable to any other analytical method; we assume that future price movement will be similar to past price movement. When working with seasonal analysis, you review past price behavior within the fram...

AUTHOR: Scott W. BarrieDATE: OCT1997SUBJECT: Trading Techniques

V15:10: Letters to S&C

ARTICLE SYNOPSIS ...MECHANICAL SYSTEMS Editor, Excellent article on the relative strength index by John Sweeney in the September 1997 issue! Has STOCKS & COMMODITIES published any articles on mechanical systems using relative strength index (RSI)? Can we look forward to future articles from John Sweeney on on-balance volume (OBV) and moving averages (MAs)? BROOKS RIMES - via E-mail See this issue for an article on the on-balance volume by Technical Editor John Sweeney. Moreover, see my article in the upcoming November 1997 issue for an article on using RSI as an indicator of trend. --Editor...

AUTHOR: Technical Analysis, Inc.DATE: OCT1997