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15 YEARS OF S&C
Editor,
Great magazine. Have enjoyed subscribing since 'way back in 1985! Keep up the great work!
Kirk Bruenig, via E-mail
DAYTRADING MARGIN CHANGES
Editor,
Thank you for producing a great magazine.
I am writing in response to Editor John Sweeney's June 2000 Opening Position in S&C about the SEC proposing to the NYSE and NASD to increase the margin minimum to $25,000 for daytraders. Could you tell me how soon something like this could come into effect, and when would this happen, in your opinion? In which ways do the SEC, market makers, or specialists benefit from this proposal?
Alan Agostini, via E-mailSince the proposal in December 1999, precisely nothing has happened, at least as far as the proponents (the NYSE and NASD) know. The SEC had no comment when we checked.
The SEC sued two broker-dealers in February 2000 for violating federal margin-lending provisions, which is the best information on who is targeted by these changes: competitors of NYSE and NASD brokers. Market makers and specialists are only peripherally involved. -- Editor
TECHNICAL ANALYSIS VOODOO?
Editor,
On page 93 of the July 2000 S&C, I ran across this line: "Inserted here are the planetary lines of Mars and the signs of the zodiac. Areas where the two cross can indicate trend changes."
It's little wonder that many remain skeptical of technical analysis when a leading technical analysis periodical publishes such rubbish. What's next, "Using Voodoo To Analyze The Markets"?
Brooks RimesGrand Island, NY
You are quoting a caption from a product review. Product reviews describe and comment on products and discuss products' techniques for the benefit of our readers. In this case, the reviewer draws no definitive conclusions but merely describes and tries to implement the technique used by the product discussed, Ganntrader.A number of S&C readers rely on financial astrology (see the next letter), and in Technical Analysis of STOCKS & COMMODITIES, The Traders' Magazine, we try to present a variety of techniques and products that will serve different readers. Not everyone can use every article, product, or technique described in STOCKS & COMMODITIES, but we hope most readers will come away with something from each issue. -- Editor
ASTROLOGY AND TRADING
Editor,
I just read an article in Australian Astrology Magazine by Bill Meridian. I would like to know more about how the planets affect our trading. I trade only the Australian share price index (SPI). I have noticed how the market can rise after a full moon. Any information on where to start would be appreciated.
Julie Grauer, via E-mailWe have published articles from time to time in S&C on astrology and market cycles (including one by Bill Meridian). Here are some:
Hannula, Hans, Ph.D., CTA [1992]. "Trading Planetary Eclipses," Technical Analysis of STOCKS & COMMODITIES, Volume 10: April.
_____ [1987]. "In Search Of The Cause Of Cycles," Technical Analysis of STOCKS & COMMODITIES, Volume 5: March.Katz, Jeffrey Owen, Ph.D., with Donna McCormick [1997]. "Lunar Cycles and Trading," Technical Analysis of STOCKS & COMMODITIES, Volume 15: June.
Kimball, Robert S. [1987]. "Cyclical Analysis Of Stock Prices With Astrology," Technical Analysis of STOCKS & COMMODITIES, Volume 5: October.
Krausz, Robert, MH, Bche [1998]. "The New Gann Swing Chartist," Technical Analysis of STOCKS & COMMODITIES, Volume 16: February.
Marisch, Gerald [1998]. "Combining Gann's 50% Rule With Vidya," Technical Analysis of STOCKS & COMMODITIES, Volume 16: March.
Meridian, Bill [1988]. "Planetary Analysis," Technical Analysis of STOCKS & COMMODITIES, Volume 6: September.
Use the search engine at our Website, Traders.com, to locate additional articles. -- Editor
SHOWING THE MATH, REVISITED
Editor,
I agree with Gordon Fogal in your July 2000 Letters to S&C ("Showing the math") that S&C authors should provide the complete math (algebra, calculus, and so on) behind their ideas rather than just providing the programming code.
John Giovannucci, via E-mailWe try to include both whenever possible. Thanks for writing. -- Editor
ADAPTIVE TRENDS AND ESCILLATORS
Editor,
I have backtested John Ehlers' trend-following system (given in "Adaptive Trends And Oscillators," S&C, May 2000) and compared the results to some other simple, standard trend-following systems. I downloaded the formulas from Equis International's Website into MetaStock for Windows and wrote a system test based on Ehlers's theory for trading trends; that is, buy when the close has stayed above the instantaneous trendline for longer than half the dominant cycle and sell when the close drops below the instantaneous trendline. I somewhat arbitrarily chose 13 large-cap stocks to test, starting August 7, 1998, ranging from big winners such as QCOM to big losers like WMI.
There were 85 trades, average profit per stock of 69%, and average profit per trade of 10.6%. The good results are due to some big movers in the list such as QCOM. These results tended to be better than using a system of the closing price crossing a standard moving average.
However, better results than those obtained with the complicated Ehlers system were obtained by using a simple crossing of standard moving averages. For example, using the same database and period, and using a system of buying when the 20-day exponential moving average (EMA) crosses the 50-day EMA and selling when the close drops below the 50-day EMA, produced 54 trades, average profit per stock of 76%, and average profit per trade of 18.3%.
I congratulate Ehlers on his mathematical prowess, and the basic ideas are promising, but unfortunately, as far as trading the trends goes, a simpler system probably will work as well or better. How about some backtesting results for the "cycle mode trading" portion of the article? Looking at Figure 2 on page 21 of the May 2000 issue, it appears that cycle mode trading might not work well either. The results were suspect, since no backtest results were given. Of course, my results are only based on some minor testing, but that's more than was given in the article.
Dwight Cook, via E-mailWe provide the tool, but you provide the tradable. If, in testing the tool, you find it's not working (or not working well enough) for your tradables during the period you wish to test, don't use it! Nothing works perfectly all the time, unfortunately. We generally don't perform backtesting on the techniques we publish because there's no way to provide generality: trading vehicles, trading horizons, and testing periods will all vary for each trader. -- Editor
TECHNICAL ANALYSIS COURSE
Editor,
Recently in the Letters to S&C column, you've been discussing college-level technical analysis courses. I would also like to bring a course to your readers' attention.
I will teach a seven-week evening technical analysis class at Bellevue Community College in Bellevue, WA, this fall. The class will blend charting exercises, lectures, electronic visual aids, and reading materials. For more information, call the Bellevue Community College at 425 564-2263.
I am a full-time securities trader with an MBA and CMT and am a past president of the San Francisco Technical Analysis Assocation.
Gatis RozeSeattle, WA
CHARTING SOFTWARE
Editor,
I would like to know if there is software available to accomplish the following objectives:
1. Simultaneously display price history (or other parameters) of multiple funds or stocks to illustrate comparative behavior.
2. Draw swing charts at successive levels from raw price histories.
Any help will be appreciated. I have been a subscriber for many years and believe your magazine to be the very best.
P. Winslow, via E-mail
All the major technical analysis packages will draw comparative charts, but the lack of an industry-wide definition of swing charts has prevented a standard implementation. You'll probably have to create your own. -- Editor
ERRATA: E*TRADE, MORGAN STANLEY DEAN WITTER COMMISSIONS
Editor,
I bought your July 2000 issue, in which there appeared a feature on brokerage companies. I'd like to correct a mistake. As a customer from E*Trade, I would tell you that the commission rate you list is wrong. E*Trade usually collects from $14.95 to $19.95 per trade. Limit orders are $19.95, independent of whichever stock exchange it was bought from. I don't know if this is a mistake either from S&C or E*Trade, but readers should be aware of this.
By the way, I don't need to mention that S&C is a great magazine. It is a given.
Paulo Ricardo Capelo do NascimentoBrooklyn, NY
In our July issue, we listed $14-$16 as the commission rate for E*Trade, information we received from E*Trade. As you point out, $15-$20 would probably have been a more accurate statement.In addition, several readers have called to our attention that the commission we listed for Morgan Stanley Dean Witter was a misprint; it should have read $40.-- Editor
ERRATA
On the Readers' Choice ballot that was attached to the August S&C mailed to most domestic subscribers, we inadvertently left off CSI's Unfair Advantage data product from the category of end-of-day data services. We sincerely regret the error.
In addition, Dynamic Trader, version 3, should have appeared on the ballot under the "Software >$500" category.
Because we couldn't list all products on the ballot, we hope readers will take advantage of the write-in areas to cast their votes for favorite products not listed. -- Editor