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VOLUME DATA AND RSI
Editor,I have always enjoyed your magazine. I hope that you can help clarify a couple points about the implementation of techniques presented in some of your past issues.
For indicators that are based on market volume, my question is, which source for volume information do I use? For example, do I use the NYSE volume reported on Yahoo! and PointCast, which may be different from the NYSE volume given in the San Jose Mercury News, which is different from the NYSE volume given in the San Francisco Chronicle, and so on? I am talking about differences of 100 million or more. What gives here?
My other question deals with the relative strength index (RSI). Can it be too high (indicating to sell rather than to buy) or too low (indicating to buy rather than to sell)? If so, what are some guideline values?
I cannot vouch for your various data sources. It may be that the newspapers are working under a deadline and are simply offering the last quote available before going to press. Since you have access to the Internet, I would suggest going to Data Broadcasting's Web site, https://www.dbc.com, and enter the symbol $TVOL in the "Get quotes" window.EJ RAIMONDI
via E-mailRegarding how to apply the relative strength index, please see my November 1997 article, "Using Fibonacci ratios and momentum," which discusses calculating retracement levels using Fibonacci levels and momentum, as well as using RSI levels to define a trend. The fact is, when price is persistently trending up or down, there are no perfect RSI values. The market will stay overbought or oversold during a trend. --Editor
STOCK SPLITS REVISITED
Editor: We received many communications from readers in response to a May 1998 letter to the editor, in which the letter writer was looking for a data source on stock splits. Here are some of the responses we received:
Editor,In reference to the inquiry from Ellen Shinn in your May 1998 Letters to S&C on stock split data, I know a couple of Internet sources:
The site http//quote.yahoo.com has a past and future stock split section. The site is free of charge.
The site https://www.quotes-plus.com maintained by data provider Quotes Plus offers a daily split file that can be edited and used. This area of the site is by subscription.
PIERRE LANA
Editor,The following sites contain the best information on stock splits I have seen so far :
https://quote.yahoo.com
https://www.e-analytics.com/splitd.htm
AINSWORTH PALMER
Editor,A list of announced splits are published in Barron's. The list appears in the Market Week section. As I write this, this week's list is on page MW103.
P.S. Couldn't be without my subscription to STOCKS & COMMODITIES. It's a valuable resource!
NICK WILLIAMS
Editor,In your May issue a reader inquired about obtaining a list of proposed stock splits. If she would point her browser to https://cbs.marketwatch.com/news/current/oli_stocksplit.htx, she should find what she is looking for.
P.S. I enjoy reading S&C even if 80% goes right over my head! Keep up the good work.
DAVID VARNEY
Editor,In response to the recent letter on stock splits, https://www.briefing.com maintains a comprehensive list of upcoming stock splits. Access is by paid subscription, but if you open an account with E*Trade, you get free access. You will also get E*Trade's other research links.
KRISTINE ERICKSON
Tacoma, WA
Editor,For stock split information, https://www.briefing.com offers a good list, as does America Online, just to name two.
Thanks for your magazine. It's a great help.
JIM IRVINE
Thanks to all who wrote in and volunteered information. --Editor
NEW GANN SWING CHARTIST
Editor,There's one facet in "The new Gann swing chartist" (S&C February 1998) that I don't understand. With reference to entry rule 1, does the system require you to buy (or sell) the period after a close above (or below) the hi-lo activator (at the next open)? Or is entry rule 1 stating that you should buy (or sell) based on a buy (or sell) stop if the hi-lo activator is penetrated by two ticks during the trading period? Or can you take either approach?
The hi-lo activator is a three-period moving average of either the highs or the lows plotted one day forward. Thus, you know all day today what today's hi-lo activator value is. As the rule states, if the Gann swing chart is in an uptrend, then the buy signal occurs if the market closes above today's hi-lo activator.ROBERT LAMBERT
Antioch, TNIn other words, buy on the close if the market closes above the hi-lo activator. --Editor
ART ILLUSTRATES CONCEPT
Editor,Is there an error in Figure 13 on page 53 of the February 1998 article "The new Gann swing chartist"? The horizontal green hi-lo activator line on bar A cannot be an average of the previous three days' highs.
Figure 13 is an artist's rendition of the rule. Figures 25-29 are the rules as calculated and plotted by the program The Fibonacci Trader. --EditorRICHARD MEANWELL
via E-mail
DISCOVERING GANN BOOK
Editor,I really loved the interview with Asoka Selvarajah in your April 1998 issue. He mentioned a book by Robert Krausz (A W.D. Gann Treasure Discovered), but I can't seem to find it anywhere. Can you tell me how I can get a copy? Also, is it possible to get a copy of your February 1998 issue or a reprint of the article by Krausz, "A new Gann swing chartist"?
For information on purchasing A W.D. Gann Treasure Discovered, visit https://www.fibonaccitrader.com, or call The Fibonacci Trader Corp. at 512 443-5751, fax 512 443-7119.LORI J. DOTSON
via E-mailAs for the February issue, you can purchase single back issues for $8 apiece. Call our Circulation Department at 1-800-TECHNICAL (800 832-4642) to find out if we have any copies left. --Editor
IMPLIED VOLATILITY
Editor,For some time now I have tried to develop a calculation to determine the implied volatility for stocks. Further, I am trying to determine the relationship between implied volatility for a stock and its options. Please tell me if you have published anything on these topics.
For a good discussion on calculating implied volatility, I recommend McMillan on Options by Lawrence G. McMillan, which we reviewed in our April 1997 issue. The book is published by John Wiley & Sons (908 469-4400). -- EditorONNO GOEDKNEGT
Holland
LIVERMORE TECHNIQUES
Editor,I am a two-year subscriber to your fine magazine, as well as a graduate student of business at the Illinois Institute of Technology. I'm interested in finding out whether you have ever published an article on the trading system outlined in Jesse Livermore's book, How to Trade in Stocks. Any information you could provide would be greatly appreciated, as this request is in regard to a possible research paper.
Thanks and keep up the great work!
Our Technical Analysis of STOCKS & COMMODITIES, Volume 1 book (1982-83) contained an article on Livermore's system. Here's an abstract of the article, taken from our back-issue article list, which is posted at our Web site (https://www.traders.com):MICHAEL STRUPP
via E-mail"The Livermore system"You may contact our circulation department at 800 832-4642 to order our Volume 1 book ($29.95 plus shipping).Jesse Livermore, one of the pioneers of the trading game, is profiled, along with some of the trading techniques he developed. Some, such as trend development, are as important today as they were in Livermore's time. By Jesse H. Thompson, pages 82-85.
If you are looking for an article on swing trading methods, I would take a look at the book A W.D. Gann Treasure Discovered by Robert Krausz (512 443-5751, fax 512 443-7119, https://www.fibonaccitrader.com), which is reviewed in the June issue. In addition, we published an excerpt from his book in the February 1998 STOCKS & COMMODITIES. His method is for trading futures, but the book also presents a method for swing trading stocks. Livermore's method used swing charting by price, while Krausz's Gann swing charting technique uses new daily highs or lows. I think you will find Krausz's book to be a well-documented look at Gann's technique for swing trading. --Editor
INTERNATIONAL DATA
Editor,Thanks for a very interesting magazine.
I realize that you do not recommend specific data vendors for obvious objectivity reasons, but I have a problem that I need assistance with. I am a Hong Kong?based trader trying to develop a trading system to trade equities and equity futures on southeast Asian markets (Hong Kong, Taiwan, Singapore, Korea, Malaysia, Thailand, Indonesia, Philippines and possibly Japan, though it's not really in southeast Asia).
Your Bonus Issue lists many good data vendors, which in general have good to excellent coverage of the US markets. But unfortunately, your Readers' Choice Awards doesn't have a category for international data providers. This is an unfortunate omission in an international magazine like yours, which reaches a global audience of traders who trade in many markets outside the US.
Could you publish (or just send me by E-mail) a table of the data vendors' coverage of non-US markets? I am basically looking for end-of-day and historical data on all the markets listed above at a reasonable cost.
Keep up the good work on a great magazine!
Visit the Futures Industry Institute's Web site at https://www.fiafii.org/institindex- .htm for information about data. The site has an international map at https://www.fiafii.org/factbook/fiimap.cfm, which will enable you to contact the individual exchanges for more information. --EditorJAMES R. DE CASTRO
Hong Kong
VIRTUALLY INCLINED
Editor,I would renew my subscription if STOCKS & COMMODITIES were published online in real time. The information is much more useful if it is on a computer, as opposed to the cumbersome and inefficient hard copy.
The information we publish is mainly how-to techniques for improving trading skills. We do not publish news, commentary, opinion or other time-dated information that lends itself well to real-time, online display. However, we do maintain a Web site (https://www.traders.com), where you will find information that benefits from being presented on the computer, such our Traders' Tips section (which contains code for TradeStation, MetaStock and other software), and our Software Comparison Table, the entirety of which is too lengthy to publish in the magazine, as well as many other resources. In addition, later this year, our articles will be offered over our Web site for a fee. All our past articles are also offered on a CD-ROM. In fact, our newly released version -- S&C on CD, version 2.15 -- includes all our articles up to the end of 1997, for those who prefer to have our articles, reviews, spreadsheets and Traders' Tips on the computer.SCOTT MCCABE
via E-mailBy the way, this magazine has been published since 1982 as a magazine on paper. I'm sure many readers still appreciate the portable, easy-on-the-eyes paper medium. --Editor
AMBIGUOUS COMMENTS?
Editor,I read with great interest your April 1998 Quick-Scan of Jeff Cooper's book, Hit and Run Trading, not the least due to the mixed opinions attributed to the Quick-Scan by some of my associates. I carefully tallied the book's pros and cons as discussed in the Quick-Scan. I also noted that some statements made in the Quick-Scan weren't necessarily favorable or unfavorable; for example, the mere fact that Cooper offers 15 rules for trading means little until we know just what these rules are and just how efficacious they can be in actual battle.
It was, then, with great anticipation that I waited for the end of the article and for the final, unbiased, decisive conclusion. And this was it: "Hit and Run Trading will give you set-up entry rules, but be sure and check for yourself the validity of the techniques; you should be convinced that you are working with high-probability trades." To me, this throws the ball back into my court, but if I were able to judge in so refined a manner, I would hardly have need for the book!
Is not this unopinionated conclusion leading us somewhat into the world of ambiguity, or at least, using double-edged reasoning (not intentionally, one hopes)? Does the Quick-Scan's concluding statement mean that, in the light of having to check for yourself the validity of the techniques, you then have to be entirely and doubly convinced that these are high-probability trades before taking them? Or does it mean that after having checked for yourself the validity of the techniques, this checking process ought to then lead you (or have led you) to be convinced that these are high-probability trades? Whichever way you parse it, you may still have to make up your own mind, and perhaps this is as it should be.
Tongue in cheek aside, I enjoy your magazine immensely and hope this stimulates you to clarify my doubts, and unbalance yourselves a little. As to whether I should part with my $100 and invest in Jeff's Short-Term Stock Traders' Bible, has anyone got any ideas?
In my view, we accurately presented you with facts about the book, and without ambiguity, we advised the reader that we were not necessarily endorsing the book's methods. Rather, we summarized the book's contents for the Quick-Scan, as well as the steps necessary to determine if the techniques presented are viable.ARTHUR LOWE
via E-mailWhile a Holy Grail in trading doesn't exist, most traders are willing to look at new ideas. The market is a moving target, and traders must always consider new methods.
At STOCKS & COMMODITIES, our editorial mission is to present you with methods, or lead you to sources of methods, that may help you improve your trading. As a how-to publication, we don't tell readers what to use or what not to use, but we try to give readers the know-how to help them find what works for them. Testing a trading idea given in a book (which would be a six-month process...) and presenting the results is just not part of our scope. We do, however, present articles describing methods and encourage our authors to test their methods and list the results. The fact is, everyone has a unique temperament and tolerance to risk and reward. I cannot judge what strategy is appropriate for you.
Testing systems and presenting the results is part of the editorial scope of a publication called Futures Truth, and in this issue, I interview John Hill, Futures Truth's publisher. With this interview, I hope to lead readers to yet another source of information related to trading.
For more on the topic of what I hope to offer readers in each issue of this magazine, please also see my Opening Position in this issue. In my opinion, you are correct when you say that "you may still have to make up your own mind, and perhaps this is as it should be." To succeed at trading, you have to believe in your method, and to believe in your method, you have to prove to yourself that it works. The bottom line is, it's your money. You have the final say of how you trade. I don't know everything there is to know about trading, but I know what works for me. Just judge the facts for yourself. --Editor
July 1998 Contents