March 2006 Letters To The Editor
or return to March 2006 Contents
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 firstname.lastname@example.org. 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
I really enjoyed your January 2006 issue, especially the article "A Blueprint For Your Trading." In it, author Vadym Graifer used a couple of mind maps to illustrate the article. Are these available at your website, Traders.com? If not, would the author share them?
Vadym Graifer replies:
The mind maps used in the article were created with ConceptDraw Mindmap software and are two out of many used in my book, The Master Profit Plan. The book is available through my website at http://www.realitytrader.com/masterplan/.
Thank you for the kind words.
SIMPLE-RANGE TRADING STRATEGY
I found "A Simple-Range Trading Strategy" by Xavier Maria Raj in the December 2005 S&C to be a very interesting article. Can you provide the author's email address?
Xavier Maria Raj may be reached at email@example.com.--Editor
STOCK INDEX CREATION
I subscribe to STOCKS & COMMODITIES magazine, and now I'm looking for trading software that will allow me to create my own stock index. Do you have any idea which company offers such a product?
I need software that will let me create as many indexes as I need, in real time, and that allows me to add or delete stocks from the index. I want the stock index to give me data similar to the Dow Jones averages.
Please let me know whether you are aware of any trading system or software that can do that.
Several programs are available that give you the flexibility to create a basket of securities, and this would enable you to create your own index. One such software program that we recently reviewed is TymoraPro. You would, of course, have to make sure that you get real-time data; are able to weight each of the components in the index; and chart the index.--Editor
Have you ever published a product review on a software trend-recognition tool called PremiereTrade AI? I am using this tool to trade the forex market. Please advise and thanks so much.
Frank J. Lane
Sorry, we have not reviewed this product.--Editor
How about doing at least one book review per issue? Your current ones crammed onto one page are just a regurgitation of the flyleaf.
Sure it's a lot of work and you have to not only read the books but understand them as well. Don't you have in-house technical analysis skills or do you rely on freelance writers?
There are lots of new technical analysis books coming out. How do we know whether to buy them or not?
We have from time to time written Quick-Scans on books. Our staff writers write most of them.--Editor
I am looking for an add-on to technical analysis software like TradeStation or MetaStock that would enable me to build an equity curve from buy/sell signals that the trader directly draws over the price graph of a commodity; for example, using specific active vertical lines.
Such software would be of great help for discretionary traders to validate their semiautomatic systems.
Have you published an article about such software? If not, could you advise me on where I might find this type of software?
I'm not sure I know of any software that exactly matches your needs, but you may want to try Adaptive Trading Solutions, a plug-in for MetaStock, or Trading The Equity Curve, which is a TradeStation tool.--Editor
SCANNING FOR DIVERGENCES
I am a five-year subscriber of STOCKS & COMMODITIES and Working Money and I would like to ask you a question:
Is there some reliable software that is capable of searching and scanning stocks to find divergences between the price and an oscillator (without having to write a code or formulas)?
I don't know of any software or website that will automatically do what you want. You would need to write code to identify these divergences. Perhaps some of our readers can provide some input. --Editor
FORMULAS FOR METASTOCK
I emailed John Ehlers to ask if he could supply the formulas from his book Rocket Science For Traders to use with MetaStock 9. He advised me to contact your tech support for them as he has written many articles about them in your magazine. I would appreciate it if you could help me with this request.
The only formulas we can offer are the ones provided in the articles we publish. If we have published an article that included the MetaStock formulas, then you would be able to find that article in the Online Store at our website, www.Traders.com. Use the search feature to search for your keywords of interest.
Otherwise, as a magazine, we don't provide technical support for MetaStock or any other products that we do not sell ourselves. Please contact Equis International's technical support department for MetaStock or visit the support area of their website, www.metastock.com.--Editor
I found Bill Pritchard's article "Trading Flat-Base Breakouts" [January 2006 S&C] particularly interesting. I've long noticed breakouts' ability to provide outstanding gains, but have not had much luck finding them as often as I'd like. To help the reader scan for them, Pritchard gives the criteria for StockCharts.com. As a member of Prophet.net, I tried to extrapolate the same criteria for a Prophet scan, but without much success. Would it be possible for either Pritchard or someone at STOCKS & COMMODITIES to provide the flat-base breakout criteria for a Prophet scan?
We'd have to redirect you to Prophet.net technical support or their user forum to help you customize a technique for that program. Unfortunately, we can't customize techniques for all the different programs, and our articles' authors usually only work in one program during the writing of an article.--Editor
FINANCIAL ENGINEERING & TECHNICAL ANLAYSIS
I'm a new subscriber to S&C, and I noticed that although the magazine has articles regarding the use of both technical (indicators and systems) and fundamental analysis, I've yet to find a review of "quant" software or systems (like Quantdeveloper).
How can technical analysis and quantitative finance be used to complement each other? Can you suggest more resources regarding this subject?
Editor: There is a difference between technical analysis and quantitative analysis. Technical analysis is applied mostly by the retail trader, whereas quantitative analysis is used mainly by institutions. Often, the "quant" analysis is proprietary, hence making it difficult for us to review in a software product. Regarding how the two can be used together, it would be extremely difficult unless the quantitative analysis techniques were fully disclosed.
However, we have published articles from time to time that involve quantitative analysis techniques, such as the following sampling of articles (available from our website, Traders.com):
Arrington, George R. . "A Duration Proxy For Stock Portfolios," Technical Analysis of STOCKS & COMMODITIES, Volume 16: August.
Ballesca-Loyo, Luis . "Optimizing Portfolios Using Value At Risk," Technical Analysis of STOCKS & COMMODITIES, Volume 20: February.
Ehlers, John F., and Mike Barna . "Determining Equity Growth Performance," Technical Analysis of STOCKS & COMMODITIES, Volume 20: March.
Hosley, William N. . "Basis For Stock Worth," Technical Analysis of STOCKS & COMMODITIES, Volume: 14: February.
Macek, Anthony J. . "Back To Basics With Quantitative Analysis," Technical Analysis of STOCKS & COMMODITIES, Volume 10: July.
Siligardos, Giorgos . "The Concept Of Equivalence," Technical Analysis of STOCKS & COMMODITIES, Volume 21: February.
Silver, Lloyd . "Risk Assessment For Security Analysis," Technical Analysis of STOCKS & COMMODITIES, Volume 11: January.
Trongone, Anthony . "Trading In A Sideways Market," Technical Analysis of STOCKS & COMMODITIES, Volume 22: December.
We've interviewed several people in the magazine with quant backgrounds, including the following people:
• "Analysis In Action: Tushar Chande" (October 1997)
• "On The Fundamentals Of Technical Analysis: Andrew Lo" (December 1997)
• "Edgar Peters Talks About Chaos Theory" (December 2002)
• "Leo Zamansky Of Rina Systems" (October 2004).
As for resources in financial engineering, Dennis Meyers, one of our contributing authors, runs Meyers Analytics (online at www. MeyersAnalytics.com), which specializes in financial engineering consulting for financial institutions and also develops analytical software for traders. In addition, here is a book we listed in one of our Books For Traders columns:
Dictionary Of Financial Engineering: Over 2,000 Terms Explained by John F. Marshall. The highly technical field of financial engineering began in the 1970s with the development of option pricing theory. Today, it makes extensive use of derivative instruments, including options, to structure products having unique investment characteristics and to manage the risks inherent in modern business enterprises. Published by John Wiley & Sons, year 2000, 289 pages, $59.95, ISBN 0471242918., www.wiley.com.
Finally, here is a quarterly journal we've listed in our references section several times that may be useful to you:
Journal of Financial and Quantitative Analysis
University of Washington
School of Business Administration
ERRATUM: TRADING FLAT BASE BREAKOUTS
In the January 2006 issue of S&C, page 47, second column, second bullet: What does it mean when it reads, "Daily close for today is less than 50 days"?
Bill Pritchard replies:
This appears to be a typo. The phrase, "Daily close for today is less than 50 days," should have read: "Daily close for today is less than $50" [that is, less than fifty dollars].
Editor's note: Bill Pritchard is launching a new, revamped website at www.afterburnercapital.com, which will offer subscription-based content. Pritchard can be reached at firstname.lastname@example.org.
ERRATUM: BLUEPRINT FOR TRADING
A reader pointed out an error in our website address as it appeared on page 84 of my January 2006 article, "A Blueprint For Your Trading." There should be no "s" in our website address. The correct website address is: www.RealityTrader.com.
Vadym Graifer, Reality Trader
ERRATUM: CUSTOMIZED PORTFOLIO DIVERSIFICATION
In the Working Money article "Customized Portfolio Diversification" by Robert Lewis and Rena Gelb that appeared in the February 2006 issue of S&C, several captions appeared with the incorrect figures. The correct order of the captions should have been as follows:
• The caption on Figure 7 belongs on Figure 9
• The caption on Figure 8 belongs on Figure 7
• The caption on Figure 9 belongs on Figure 8.
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Originally published in the March 2006 issue of Technical Analysis of STOCKS & COMMODITIES magazine.
All rights reserved. © Copyright 2006, Technical Analysis, Inc.