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In the June 1997 Stocks & Commodities, we published a letter to the Editor from a reader who expressed doubts regarding the value of the techniques we discuss. He in fact was inquiring as to whether we had ever surveyed the performance of technically based traders. We directed him to a service that monitors the performance of market timers. (By the way, there is a difference between market timers and mutual fund managers. Market timers are money managers who typically switch their clients' monies into equity funds when their technical models are bullish and switch out of equity funds and into money market funds when their models turn bearish. They differs from mutual fund managers, who are in general fully invested in the stocks of their choice and ignore any technical issues pertaining to the health of the market.)
The service we suggested was The MoniResearch Newsletter, which tracks the performance of nearly 75 market timers. The thought occurred to me at that time that an interview with the newsletter's editor, Steve Shellans, would be an interesting read because, after all, here was an individual who has been tracking the performance of market timers for years; it occurred to me that he would have genuine insight into the industry.
And, as it turned out, he did. As our interview subject this month, Shellans offers some interesting thoughts, including how the market timing industry has adapted to the challenge of earning their keep during a market that has gone virtually straight up, as well as discussing whether you manage your own money or consider using a market timer.
For those of you who do want to trade - and I'm sure that's why you read S&C - our feature this month presents one Commodity Trading Advisor's technical approach to trading. His work is interesting because he combines classic chart analysis, looking for old-fashioned chart patterns such as triangles, with some technical indicators to increase the likelihood of being correctly positioned with an emerging trend. His work is more of a return to basic technical analysis than it is rocket science.
And that leads me to my latest topic atop my soapbox. Sometimes I wonder whether all the heavy dependence on computer-aided analysis and systems development these days isn't leading some people, especially new traders, astray. Computers do save us time, but are we giving up something in the process?
Think of it. To perform sound analysis and build a methodology, having some sort of intuitive sense of the market's characteristics can help, and you have to have a certain amount of hands-on experience with the market to develop that. I don't know how anyone can glean any sense of how markets operate by using summary tables, then deciding that this method is viable while this one is not. You may be missing out on opportunities to formulate a sound trading plan by not developing a feel for how different systems or indicators function under different market scenarios.
Of course, this means getting back to studying charts and analyzing signals visually, which can be a very time-intensive process if you want to study years of data. However, if you want to make sense of the markets - if you'll pardon the pun! - then you will profit from my suggestion.
