January 1999Letters To The Editor

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QUESTIONS ANSWERED

Editor,

The 1998 Bonus Issue I just received with my new subscription to STOCKS & COMMODITIES was a godsend. During the last four weeks I have been trying desperately to match software and data without luck. With any luck, now I may have most of my questions answered. Great magazine.

Terrence Mohammed, via E-mail

Thanks for writing. The brand-new 1999 Bonus Issue will be mailed by the New Year, and all our current, paid subscribers will be receiving it, so look out for it! The 1999 Bonus Issue will contain the latest Software Comparison Table, the 1998 Readers' Choice Awards for products and services, classic articles, and more resources. We hope our subscribers will find it useful.--Editor

VALUABLE ARTICLE

Editor,

I loved the article "Uncovering value in an oversold stock" in your October 1998 STOCKS & COMMODITIES. This is just the type of article that keeps me in the game!

Mike Veale, via E-mail

CUP-WITH-HANDLE

Editor,

Rick Martinelli and Barry Hyman's "Cup-with-handle and the computerized approach" (Stocks & Commodities, October 1998) was very intriguing. Not much information was offered though in terms of the actual programming steps the author took or the type of software program that one can use to scan the universe of stocks. Without such information, the article is intriguing but not instructive -- and the latter is what has established STOCKS & COMMODITIES' good reputation. Is it possible for the author to revisit the topic to provide some enlightening specifics?

Kostas Grigorakis, via E-mail

See Traders' Tips in this issue for code that will help your favorite technical analysis program to identify cup-with-handle patterns based on Martinelli and Hyman's approach. Each month, vendors of several popular technical analysis programs contribute software code to implement the techniques discussed in this magazine, and in this month's Traders' Tips, we look back to the October Martinelli and Hyman article. Thanks for writing. -- Editor 

BRITISH POUND, CUBED

Editor,

Thanks for yet another excellent article from Dennis Meyers ("British pound, cubed," November 1998). I set up Meyers' turbo timing system, as described in the August 1997 Stocks & Commodities, in Microsoft Excel and have been following it on a daily basis. Thanks also for the sidebar showing how to set up the moving cubic polynomial calculation in Excel. It appears that with minor modifications, this could also be applied to a quadratic or quartic or any other order polynomial one might wish to use to fit a financial time series. In the "British pound" article, Meyers seems to have settled on an optimum period (T) from 40 to 44 days for the British pound. Has he done any similar work on the S&P 500? If so, could he make a suggestion as to an optimum period to use for analysis of that index?

Pat Lafferty, via E-mail

We checked with author Dennis Meyers, who said he hasn't researched the S&P 500. Thanks for writing.-- Editor

IS THERE A CLEAR PATH?

Editor,

I am new to the technical analysis approach to investing. I have been a reader of your magazine for about a year, and my hat is off to all the contributors of your magazine, your staff, and fellow subscribers. My question to you is: With all STOCKS & COMMODITIES' very informative and packed issues, is there a way for the somewhat unseasoned technical analysis investor to sort through this vast amount of information? The reason I ask is that many articles mention specific indicators and/or methods used for the analysis of futures, securities, and other markets. Is one indicator or group of indicators best used for one market or the other? Is there a rule of thumb that could be followed as to which indicators or methods are to be used at certain points in the market?

Dave Fox , via E-mail


West Windsor, NJ

The only real path is a process of self-discovery to determine what methodology you are most comfortable with. Every method or indicator has characteristics that lead to profits or losses under certain market conditions. Every trader must determine whether he or she can personally tolerate the typical losses and profits generated by a given technique. No universal approach prevails, because all traders bring their own personality to their trading.

After you find a method that fits your style, you need to create a set of defined procedures so you can test the technique over different time periods to measure the systemÕs performance and, most important, thoroughly understand the strong and weak points of the system.

As for sifting through the vast amount of information in our back volumes on a topic-by-topic basis, you can perform a text search in the abstract listing at our Web site (https://www.traders.com). Under the Search heading from our home page, go to the Back Issue Archive area, select a volume to search, and use your browserÕs Find command to search a keyword.

A slightly more sophisticated search method is to use the search engine on our CD-ROM. S&C on CD contains 16 years' worth of past volumes with a search engine for searching by keyword, title, and author. Contact our Circulation Department at 1-800-Technical, or visit our Web site for more information. -- Editor

TWEAKING INDICATORS: MACD

Editor,

Thank I subscribe to STOCKS & COMMODITIES and I have read books by technicians Alexander Elder and John Murphy. However, I haven't been able to determine the proper values to enter into my MACD formula (such as four-day, nine-day, 10-day, 40-day, 50-day, or 200-day). I realize most indicators (such as RSI, OBV, stochastics, and so on) all have presets, but are these short-, mid- or long-term presets? Any ideas on how to tweak these indicators?

JC Grimes, via E-mail


Tampa, FL

Of course, the topic of adjusting indicator parameters is larger than we can address in this column, so we'll have to settle for referring you to several articles weÕve published on the topic of MACD and its parameters. These articles were written by different authors and thus offer individual though similar viewpoints. Contact our Circulation Department about how to get hold of any of these articles.-- Editor

Morris, Gregory L. [1987].
"Trend of the Trend," Technical Analysis of STOCKS & COMMODITIES, Volume 5: February.

Narvarte, John A. [1989].
"Winning Parameters for Customized MACD," Technical Analysis of STOCKS & COMMODITIES, Volume 7: February.

Ehlers, John F. [1991].
"The MACD Indicator Revisited," Technical Analysis of STOCKS & COMMODITIES, Volume 9: October.

Star, Barbara, Ph.D. [1994].
"The MACD Momentum Oscillator," Technical Analysis of STOCKS & COMMODITIES, Volume 12: February.

Mulloy, Patrick G. [1994].
"Smoothing Data With Faster Moving Averages," Technical Analysis of STOCKS & COMMODITIES, Volume 12: January.

Vakkur, Mark, M.D. [1997].
"The Moving Average Convergence/Divergence," Technical Analysis of STOCKS & COMMODITIES, Volume 15: April.

INDICATOR PARAMETERS

Editor,

I am a subscriber to your magazine and I must commend you on the excellent contents from month to month. Currently, I am contemplating doing some programming and I require information on how to program indicators such as the MACD, RSI ADX, stochastics, and so on in a software format for my data. Could you please tell me how I could obtain this information?

E. Dina, via E-mail


Vancouver, BC, Canada

Thank you for your complimentary remark. For MACD parameters, see the previous letter for a list of articles; we have also published articles on the other indicators you mention. However, rather than try and list them all here, I'd suggest you contact our Circulation Department about our S&C on CD index, which is helpful for this kind of research. We also plan to expand our Novice Trader area at our Web site this year to cover all the basic indicators. And again, anyone can search the article abstract listing at our Web site for articles on particular topics.

Beyond that, see the list of classic books on technical analysis we published on page 14 of our December 1998 issue, many of which discuss popular indicators. In addition, each month in our Books for Traders column, we list newly published books relating to technical analysis and trading. You may find some resources there for recent work on classic indicators.-- Editor

LOOKING FOR A TRADING SYSTEM

Editor,

I am looking for software that does the opposite of the work performed by most trading systems. Most system trading software optimizes trading dates according to predefined trading rules. The system I am looking for is a system that can optimize a set of trading rules according to predefined buy/sell dates allocated to a set of equities. The logic behind this is simple: It's easy to spot on a historical chart ideal buy and sell points. The question is: Which rule(s) should be applied in order to retain (only) these buy/sell signals? Could you help me in finding information about this?

Bernard LeClère, via E-mail

I don't have any suggestions; perhaps someone reading this will.-- Editor

VIDYA CODE FOR DAY TRADER

Editor,

I love the articles in S&C, especially the interviews, which provide a lot of valuable information. As I was reviewing my past issues looking for new ideas, I came across an indicator called Vidya, developed by Tushar Chande. His original article, "Identifying powerful breakouts early," was published in the October 1995 issue of S&C. Unfortunately, I donÕt have a copy of that issue. In your January 1998 issue, Gerald Marisch offers "Breaking out of price channels." Marisch included a routine for Vidya written in EasyLanguage. However, I'm currently using Window On WallStreet Day Trader program, and I'm wondering if anyone has an equivalent routine for use in this program.

Chris Leong, via E-mail

Many software vendors specialize in writing and developing third-party software code. Check our Classifieds section for developers of customized code, or check with Window on WallStreet for published code.

By the way, we do have the October 1995 in stock. You can purchase it from our Circulation Department if you wish. -- Editor

S&P 500 INDEX

Editor,

Do you happen to know where I can find the exact formula for computing the value of the S&P 500 index? I have tried the S&P Web site, but it does not give a detailed-enough description. P.S. Keep up the good work!

Chris Schell, via E-mail

The time restraint between point A occurring and the rest of the pattern being completed may be read off the chart in Figure 3 on page 66 of the October 1998 issue. There, each of the four time frames is given both a maximum and a minimum number of days. Starting with point A, for example, we may add numbers from the chart to get 25 days for the shortest allowable pattern, and 175 days for the longest. Other times may be similarly determined.

Thanks. I don't , but perhaps our readers can help.-- Editor

 

SMALL ACCOUNT TRADING

Editor,

I enjoyed your interview with Courtney Smith in the November 1998 Stocks & Commodities. His no-nonsense and down-to-earth attitude about trading is refreshing.

But in the interview Smith mentions that one cannot trade small accounts safely -- that is, with a 1% risk factor -- except for in a few markets. However, he must be forgetting about the Mid-America exchange. At the Mid-Am, with $20,000, one can trade two contracts of any of the grains for a $200 risk, which would be like trading with a $500 risk on a full-size contract. The currencies, meats and bonds are also half size, allowing them to be traded with appropriate risk. One can even trade all the agriculturals with single Mid-Am contracts with a $10,000 account and a $100 risk.

It is true that the commissions will be a bigger factor with smaller accounts, so even a winning system will not do as well because of it. But the important thing for a beginning trader is to learn how to trade while keeping the "tuition costs" down. The lower risk involved in trading the smaller contracts at the Mid-Am can help you keep your emotions from taking over and lets you get to sleep at night. I am currently scale trading Mid-Am wheat with a small account, which I could not possibly do with Cbot wheat, given the mimimum contract size there.

Bill Ohsie, via E-mail

Thank you for writing to remind us of this opportunity.-- Editor

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