 |
|
ELECTRONIC DAYTRADING
Editor,As a long-time subscriber to your magazine, I would like to ask why I havenÕt seen any articles on electronic or online trading. That being the case, could you recommend some books or other sources of information so that I can get a better understanding of this new means of trading stocks?
In the May 1999 STOCKS & COMMODITIES, we presented an interview with David Nassar, author of How To Get Started In Electronic Day Trading. The other recent article was Mark Conway's "Daytrading Stocks" in our August 1998 issue. -- EditorRobert Campbell, via E-mail
BOLLINGER BANDS & RELATIVE STRENGTH INDEX
Editor,I found Stuart Evens' March 1999 Novice Trader article "Bollinger Bands" interesting. I am now doing some exhaustive backtesting on more than a dozen commodity markets in order to build decent trading systems.
I incorporated the MetaStock code given in the article into my series of tests to compare it with other systems I'm testing and developing, and it has its merits in some markets.
As I continue to refine a system, I look for opportunities to incorporate different indicators.
Frank Svejda, via E-mail
Cave Creek, AZ
FAVORABLE EXCURSION
Editor,Well done to David Stendhal and Leo Zamansky at Rina Systems for their March 1999 STOCKS & COMMODITIES article, "The Maximum Favorable Excursion Strategy." The article is very readable, making the concept easy to grasp. The concept is also artfully illustrated in the accompanying charts. Thanks to the authors for taking the time to write the article and to prepare the software, and thanks to S&C for publishing the article.
See also Technical Editor John Sweeney's recent book, Campaign Trading, which closely examines the concept of maximum favorable excursion (published by John Wiley & Sons). -- EditorThomas Lott, via E-mail
ON-BALANCE VOLUME
Editor,Do you have a reference or have you ever published an article on the on-balance volume (OBV) indicator for daytrading equity markets? Are you familiar with the money flow work done by Lazlo Birinyi in the same area?
Regarding Birinyi's money flow concept, I interviewed Lazlo Birinyi in the February 1993 STOCKS & COMMODITIES (Volume 11), in which he discussed money flow. Birinyi also included a sidebar with that article explaining his money flow concept (which differs from Martin Pring's or Marc Chaikin's techniques for measuring money flow). In the November 1997 STOCKS & COMMODITIES (Volume 15), Technical Editor John Sweeney contributed a basic article on on-balance volume. But while we've covered each of these concepts several times over the years, we haven't yet published anything specifically relating to daytrading that way. -- EditorBob, via E-mail
BOND DATA
Editor,Being a bond trader, I was particularly intrigued by your interview in the January 1999 STOCKS & COMMODITIES with Bruce Kamich. I would like to set up some of the bond indicators that he talks about in the interview, particularly, the last half-hour indicator, the secondaries indicator, and the Barron's confidence index.
I would like to purchase historical data to test the indicators myself. Could you recommend any source(s)? If not, is there some way I can get in touch with Bruce Kamich?
Bruce Kamich's contact information was given in the January 1999 interview. See also the next letter. -- EditorChuck Harkes, via E-mail
BOND DATA ENCORE
Editor,I have read your magazine now for more than two years, and I look forward to it every month. I am a physician with a great interest in technical trading, and your magazine has helped me make a great leap forward in my understanding of this complex field.
I read with interest Michael O'Higgins' newest book, Beating The Dow With Bonds. As you probably know, O'Higgins popularized the dogs of the Dow investment strategy. His newest contribution includes bonds and T-bills in a mechanical system. This may not at first glance appear to be a technical trading system in the traditional sense. However, I think it qualifies in that it uses set trading rules to establish long positions based on intermarket relationships between the stock market, Treasury bond market, and gold market.
My problem is that I trust nobody when it comes to my money. Thus, I would like to test his strategies, plus a couple of my own variations. However, I cannot find a data source that will provide me with comprehensive historical Treasury bond data for each contract since 1969. Are you aware of any?
Perhaps if my variations are of value, I could submit them to your magazine to share with other traders.
You don't provide enough information in your letter about what kind of bond price history you need. Moreover, some prices are not available as far back as 1969. Review the "Data services" section of our Advertisers' Index toward the back of every issue and check with some of those data vendors for the kind of data they offer, or review the "Futures data" category of our Readers' Choice Awards in our 1999 Bonus Issue. Good luck. -- EditorTodd Stewart, M.D., via E-mail
Little Rock, AR
NOVICE TRADER'S NOTEBOOK
Editor,Is there any way to get more of your past online topics for the Novice Trader's Notebook? Your explanations are very easy to understand!
Currently, we have nearly a dozen chart patterns described in our Novice Trader's Notebook, and we are working on adding more! Thanks for writing. -- EditorNicki Dalziel, via E-mail
FILTERED WAVES AND MEASURING PRICE MOVES
Editor,In his book, Filtered Waves: Basic Theory, Arthur Merrill described how to calculate filtered waves. I decided to calculate the average percentage change and its standard deviation between peaks and troughs and vice versa. For instance, a minimum percentage is used to establish a new peak or trough. A minimum percentage might be 4%, but the average percentage difference could be 13% and the standard deviation 11%. The number of days between them is also calculated, as is the frequency with which they occur. For instance, one can ascertain that 10% of the time, it took the price five days to reach its low of the move, or that of 75% of the time, a peak was reached in one to five days. I don't know if this is a known method of measuring price moves, or if it has any value.
In any case, do you have an article that takes up this method of gauging a market?
See "The Technical Basis Of Risk-Reward Analysis" by Victor Sperandeo in the May 1994 STOCKS & COMMODITIES (Volume 12, pages 222-228).-- EditorAmir Delic, via E-mail
WYCKOFF METHOD OF TRADING
Editor,When I read in your magazine about the availability of your book, Charting The Stock Market: The Wyckoff Method, I purchased it and read it with great interest. I believe these days, traders use computers to scan market sectors to find leaders. In your 1999 Bonus Issue, in the interview with John Murphy, I again read about sector analysis. In it, he mentions that some software packages help scan markets for leaders.
Can you help me to find out what those packages are? Can you or some of your readers recommend ways to count sector composites (as Wyckoff recommended) or indices they use instead? When you discover market leaders, how do you scan stock sectors that those leaders are part of?
For software packages, we encourage you to check our S&C on CD index for product reviews (we've reviewed several products in our magazine over the past months that include a scanning feature) or visit our Website and use the software search portion of our search engine to help locate products that suit your needs. (Our Website address is https://www.traders.com.)-- EditorV. Himmelfarb, via E-mail
Riga, Latvia
S&P 500 MINICONTRACT
Editor,Having recently moved from trading the S&P 500 contract to the S&P 500 minicontract, I was surprised to see that your Futures Liquidity feature calculates that one needs to trade nine E-mini contracts to achieve the same potential return as the full-sized S&P.
In view of the fact that one S&P contract is the equivalent of five E-mini contracts (slippage and commissions excepting), and that they both move almost exactly in step, I find the number of nine in the table to be very misleading. I appreciate that your formula is averaged over the last three years, but given the fact that the E-mini hasnÕt been around that long, and more important, that the S&P went through a halving of its contract value in 1997, it appears that you are comparing apples with oranges.
We substituted the three-year trading range of the S&P 500 for the E-mini, and the column "Contracts to trade for equal dollar profit" changed to five for the E-mini. Thanks for pointing this out.-- EditorAndrew Nopper, via E-mail
SOURCE CODE
Editor,I am aware that technical analysis software (in binary code) is commercially available. But I would like to get source code to compute threshold-crossing indicators such as the RSI, %K, and so on, and the zero-crossing oscillators such as ROC, MACD, and so on.
Could you provide me with a list of references (books or journal articles) where source listings of programs for calculating stock market indicators are available? Thank you.
We sometimes publish article sidebars containing the Microsoft Excel code for implementing an indicator described in an article (we use Excel code because it's readable and widely accessible to readers), and we publish our Traders' Tips column, which contains source code for use with some commercial programs contributed by software developers. Further, I might suggest checking our Classifieds and Market Place sections in the magazine for programming consultants and programming services. Offhand, I don't know of any books made up of source code listings and printouts.-- EditorD.P. Mazumdar, via E-mail
ARTICLE SUGGESTIONS
Editor,As a current subscriber, may I make some suggestions for future articles? I would like information on LEAPS, wraps, SPDRS, and so on. Are they tradable? What are their components? What transaction costs are involved? In addition, I would like to see more articles on mutual funds.
I have read probably 40 to 50 books on trading, yet I have never seen LEAPS mentioned, and IÕve only seen one reference to someone trading Fidelity mutual funds. I have been trading stocks and futures for about seven years.
Can I also suggest an article on indices, including what components make up the different indices, what are their weightings, and can they be used in relative strength analysis? Finally, IÕd suggest an article on neural networks and fuzzy logic. I looked for a book on the basics, but they all seemed too technical. Perhaps one of your advertisers who develop neural net software could contribute an article.
Ian Duncan, via E-mail
We touched on the topic of LEAPS (long-term equity anticipation securities, which are options with long maturities) in "Basic Options Techniques" by Mark Vakkur in the August 1998 STOCKS & COMMODITIES (Volume 16). We've published many articles on neural networks, including the November 1997 and November 1996 articles by Jeffrey Owen Katz, Ph.D., with Donna L. McCormick, of Scientific Consultant Services; and a December 1995 article by Steve Ward and Marge Sherald, developers of the NeuroShell Trader software. You can use the search engine at our Website to locate other articles. Thank you for your article suggestions.-- Editor
INTRODUCTION TO TECHNICAL ANALYSIS
Editor,Nice Website.
Do you know of any books or Websites written for a beginner that would give me an overview of technical analysis? Or do I take the free trial of your magazine and learn on the run? I like reading charts of stocks. But while I may see an upward trend, I really donÕt understand how to use all the tools provided, such as SMA, EMA, Bollinger bands, and countless others. I need a starting point. Your help would be much appreciated.
Our Website carries the Novice Trader's Notebook and Traders' Notes features, which explain a dozen technical analysis concepts. In addition, we hope to publish a book soon containing a collection of articles on basic topics. In our magazine, we've been running a Novice Trader series, and we've received some nice feedback from readers about it.Tim Crowley, via E-mail
I'd suggest taking the trial subscription to STOCKS & COMMODITIES, because we try to provide information for all levels of traders, and because it will give you something to work toward. Further, visit the Websites of BigCharts.com, MurphyMorris.com, Quote.com, TheStreet.com, TradingTech.com, and WallStreetCity.com, which were voted favorites by our readers last year. Moreover, our own Website, https://www.traders.com, also contains links to many additional Websites having to do with technical analysis and trading that you will find useful. Finally, here is a list of suggested reading:
Arms, Richard A. [1983]. Volume Cycles In The Stock Market, Dow Jones-Irwin.
Colby, R.W., and T.A. Meyers [1988]. The Encyclopedia Of Technical Market Indicators, Dow Jones-Irwin.
Edwards, Robert D., and John Magee [1997]. Technical Analysis Of Stock Trends, 7th ed., Amacom.
Fosback, Norman G. [1985]. Stock Market Logic, The Institute for Econometric Research.
Graham, Benjamin, and David Dodd (originally); Sidney Cottle et al. (5th ed.) [1988]. Graham & Dodd's Security Analysis, 5th Edition, McGraw-Hill.
Hutson, Jack, ed. [1991]. Charting The Stock Market: The Wyckoff Method, Technical Analysis, Inc.
Krausz, Robert [1997]. A W.D. Gann Treasure Discovered, Geometric Traders Institute, Inc.
Meyers, Thomas [1989]. The Technical Analysis Course, Probus Publishing.
Murphy, John J. [1991]. Intermarket Technical Analysis: Trading Strategies For The Global Stock, Bond, Commodity And Currency Markets, John Wiley & Sons.
_____ [1997]. The Visual Investor, John Wiley & Sons.
O'Neil, William J. [1988]. How To Make Money In Stocks, McGraw-Hill.
Pring, Martin J. [1985]. Technical Analysis Explained, McGraw-Hill Book Co.
____ [1992]. The All-Season Investor, John Wiley & Sons.
Rhea, Robert [1934]. The Story Of The Averages, Rhea, Greiner & Co.
_____ [1962]. The Dow Theory, Rhea, Greiner & Co.
Sperandeo, Victor [1991]. Trader Vic: Methods Of A Wall Street Master, John Wiley & Sons.
Wyckoff, Richard D. [1931]. The Richard D. Wyckoff Method Of Trading And Investing In Stocks, Wyckoff Associates, Park Ridge, IL.
Of these, The Visual Investor; Charting The Stock Market: The Wyckoff Method; and How To Make Money In Stocks are probably the easiest to understand. Good reading.-- Editor