December 2002 Letters To The Editor
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The editors of S&C invite readers to submit their opinions and information on subjects relating to technical analysis and this magazine. This column is our means of communication with our readers. Is there something you would like to know more (or less) about? Tell us about it. Without a source of new ideas and subjects coming from our readers, this magazine would not exist.
Address your correspondence to: Editor, STOCKS & COMMODITIES, 4757 California Ave. SW, Seattle, WA 98116-4499, or E-mail to editor@traders.com. All letters become the property of Technical Analysis, Inc. Letter-writers must include their full name and address for verification. Letters may be edited for length or clarity. The opinions expressed in this column do not necessarily represent those of the magazine. -Editor
OUR 20TH ANNIVERSARY
Editor,
The October 2002 issue of STOCKS & COMMODITIES finally reached me here in New Zealand. Congratulations on the 20th year of publishing S&C.
I remember meeting STOCKS & COMMODITIES publisher Jack Hutson at a seminar in Toronto, Canada. He was telling me about this exciting idea he had about publishing a new magazine that would feature new ideas in technical analysis of all markets. He asked me if I would write some articles for the magazine. I told him I liked his idea and would be glad to help. That was 20 years ago. Jack has certainly turned his idea into a great success story.
Please express my humble thanks to Jack and the whole crew at STOCKS& COMMODITIES for including me in such a distinguished group of people who have made a contribution to market analysis.
This is certainly a high point in my career in the futures industry.
- J. Welles Wilder, Christchurch, New Zealand
Editor's note: J. Welles Wilder was among several market technicians featured in our October 2002 article, "The Titans Of Technical Analysis."
RICHARD D. WYCKOFF
Editor,
In the October 2002 S&C, staff writer David Penn went on "a not-so-random walk through the history of charting the markets." This walk through history led Penn to identify five historic figures as "titans of technical analysis": Charles Henry Dow, R.N. (Ralph Nelson) Elliott, W.D. (William Delbert) Gann, Arthur A. Merrill, and Richard Wyckoff.
Our hats off to Penn for his wisdom in selecting Richard Wyckoff as one of the five titans. David Wood of the Technical Security Analysts Association of San Francisco (TSAASF) currently teaches a course on the Wyckoff method at Golden Gate University in San Francisco.
- Hank Pruden, Ph.D., Professor of Business, Executive Director Institute for Technical Market Analysis
Ageno School of Business, Golden Gate University San Francisco, CA
LAWRENCE McMILLAN
Editor,
Thank you very much for naming me in the October 2002 S&C article, "The Titans Of Technical Analysis." It is truly an honor to be recognized by one's peers.
I have to admit that I don't know much about Greek mythology (an old Latin course in high school, perhaps). I know the titans were some pretty powerful guys. Were the "heroes" the group below them? Just wondering how you came up with the designation "heroes" for the group of technicians after the "titans."
Thanks once again.
- Larry McMillan, via e-mail
Staff Writer David Penn replies:
The titans were the predecessors of the Olympian gods we are more familiar with. If memory serves, the heroes of the Greek-based myths (for example, Hercules and Achilles) were less powerful than the gods (Zeus, Apollo, et al.). Our resident mythologist tells me that many, but not all, heroes were the result of "god" and "human" unions (Hercules was the son of Zeus and a mortal).
TITANS OF TECHNICAL ANALYSIS
Editor,
In reading "The Titans Of Technical Analysis" by David Penn in the October 2002 S&C, I was most gladdened to see Art Merrill included in the group of individuals considered to be the "titans" of this field.
However, I believe the most important aspect of Merrill's contribution was not mentioned, and that is his commitment to scientific analysis of technical indicators. He rigorously evaluates selected methods to determine their validity, often beginning with just anecdotal evidence. This unwillingness to take at face value a technically based approach sets an example that every market technician should follow.
Anyone who intuitively sees value in using technical analysis but is struggling with its implementation would do well to review the writings of Art Merrill, not so much to learn which methods he finds useful, but to study the steps Merrill follows in his process of substantiating a technical indicator.
If every trader applied the same critical eye to his own favorite technical approaches as Merrill has done, he would undoubtedly improve his results, as methods that do not hold up to scrutiny can then be abandoned, and the trader can focus his efforts on using those that do.
- Thom Hartle, via e-mail STOCKS & COMMODITIES Editor, 1991-99
TITANS OF TECHNICAL ANALYSIS
Editor,
Just got the 20th anniversary issue (October 2002 S&C) and was astounded to see Art Merrill described as a chartist! Technical Trends [begun by Art Merrill in 1960] was the first publication to statistically estimate the reliability of technical indicators and do it by forecast period.
Also, you left out John Ehlers, whose mathematical derivations were the first and, so far, only public techniques for accurate cycle estimation. Moreover, Ehlers has shown how virtually every technical indicator can be improved using those techniques, and has published them in STOCKS& COMMODITIES itself. Instead of him, your heroes include people who have never contributed so much as a single indicator or trading system. Indeed, some aren't technicians at all.
- John Sweeney, via e-mail, STOCKS& COMMODITIES Editor, 1986-90, 1999-2001
Publisher Jack K. Hutson replies:
Everyone will have different opinions on who should be listed with the significant technical analysts. My list would have been different. I would have looked a little closer to our own contributors, because before we started publishing STOCKS & COMMODITIES in 1982, very little was in print about technical analysis.Art Merrill is a good choice, as would have been John F. Ehlers. As another note, this magazine published Anthony W. Warren's BASIC computer code implementing the maximum entropy method (MESA) two years before Ehlers started selling his version.
Staff Writer David Penn replies:
Our heroes did include those who have contributed indicators: John Bollinger and the Bollinger Bands; Richard Arms Jr. and the Arms index; Martin Zweig and the put/call ratio; and a number of indicators devised by J. Welles Wilder. Don't they count?Regarding your comment about John Ehlers' mathematical derivations, although he wasn't listed as a hero, the article did mention John Ehlers' MESA adaptive moving average.
FAST FOURIER TRANSFORM
Editor,
I am trying to use the fast Fourier transform in Microsoft Excel, but I do not understand what it does. Could you please explain what the output means after the FFT acts upon a list of numbers (a power of 2).
-William Tetley, via e-mail
Microsoft Excel comes with supplementary software tools for more advanced users. To be able to use these tools, Excel users will first have to install them through the Tools: Add-in menu. One of the Excel add-ins in Analysis Tools is fast Fourier transform (F).
FFT can be used to numerically determine if there are any cycles in time series data and what the cycle lengths and strengths are. But prior to using the FFT routine, the user's data should be preprocessed. Thom Hartle's article "Preprocessing Data And Fast Fourier Transform" (April 1994) with sidebar "Excel Fast Fourier Transforms, December Copper Data" shows how to do it using Excel. The spreadsheet may be replicated from this information. In addition, Anthony Warren's original FFT spreadsheet layout is included on our S&C on CD product, as are many other related articles.
A graph of the FFT power spectrum output shows cycle lengths/frequency versus their relative size/magnitude. This can be used to optimize a filter, such as a simple moving average. Beats eyeballing a chart to guess how many days to average by. -Jack K. Hutson, Publisher
TRADESTATION EASYLANGUAGE
Editor,
I'm trying to filter futures trades in TradeStation 2000i based on certain dates (that is, programmatically exit all trades prior to the end of the trading session on a day preceding holidays, not enter any trades on triple witching days, cover existing open positions with options on economic report days, and so on). I want to be able to do all this from within EasyLanguage code, so I can get realistic backtesting results for both the e-mini and full-size S&P contracts.
Do I need to define arrays, enter the dates in the arrays, and programmatically act on those dates? Is there a way to enter the dates into an external .txt or .xls file (or any other external file format, for that matter), use EasyLanguage to read the external file, then programmatically act on the dates? Is there some other, easier way that I'm missing (perhaps pulling the holiday dates from GlobalServer's holiday list somehow)? Thanks for any help you can provide.
- Darren Brothers, via e-mail
Try posting your question related to EasyLanguage programming on the TradeStation discussion forum at TradeStationWorld.com.
TradeStationWorld is a trading and development community where TradeStation users can discuss trading ideas, share EasyLanguage techniques, and learn to make the most of EasyLanguage in order to create their own trading strategies. At the site, users can access the discussion forum, the EasyLanguage library, and articles written by well-known industry professionals. -Editor
FUTURES TRADING SYSTEMS
Editor,
Any suggestions on where can I find a list of the best trading systems for commodities and S&P futures?
- Val, via e-mail
First, our website at Traders.com offers a few starting places for researching trading systems. One is the Traders' Resource database. Although the Traders' Resource is simply a listing, not a ranking or rating, it provides a list of many available products, lists basic features, and provides company contact information. Second, you could post a message at our Message-Boards at Traders.com to ask for other users' opinions on products.
Third, you could check out the publication Futures Truth at FuturesTruth.com. While tracking and rating trading systems in real time is beyond our scope (since we are a how-to magazine about using technical analysis techniques), Futures Truth is a publication whose sole focus is tracking and ranking trading systems for futures traders. The publication has been around since the 1960s and was started by John Hill. (We are not affiliated with Futures Truth.)
Good luck! -Editor
ELLIOTT WAVE SOFTWARE
Editor,
With the hope that a market low may have been reached, many of us are turning to Elliott wave theory for some reassurance.
Are there any product comparisons available, and especially packages for MetaStock?
- Bill, via e-mail
There are several software packages that focus on Elliott waves. Two that come to mind are Elwave by Prognosis Software Development and Advanced GET from Trading Techniques. Other products offering Elliott wave analysis may be found by searching the Traders' Resource database at our website, Traders.com.
For a list of available MetaStock plug-ins, see MetaStock's website at www.equis.com/Products/Plug-Ins/Default.aspx. -Editor
ZIGZAG VALIDITY REVISITED
Editor,
Would you be so kind as to relay my comments to Spyros Raftopoulos, author of the August 2002 article "Zigzag Validity," in regard to my Letter to S&C in the November 2002 S&C and his reply.
I have just read your gracious comments responding to my letter in respect to your August 2002 article. I most humbly apologize, as in rereading your article, it should have been clearer to me than I took it. Your response was clear and I thank you for that.
Your article, and reply, are both well written and thoughtful.
- Norman J. Brown, via e-mail
Sometimes it takes more than one reading of an article to fully connect the concepts presented. We appreciate your taking the time to write back. -Editor
In Memoriam
We regret to report the passing of technician Robert Krausz on October 3, 2002. Krausz was a leading proponent of multiple time frame analysis and was the developer of the Fibonacci Trader software. He was featured in Jack Schwager's New Market Wizards. He contributed several articles to STOCKS & COMMODITIES and was interviewed in our September 1995 issue.
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