September 2007 Letters To The Editor
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
IN MEMORIAM: SHARON YAMANAKA 1959-2007
Technical Analysis of STOCKS & COMMODITIES graphic designer and freelance business writer Sharon Yamanaka was a rarety in that her talents spanned both the analytical and the artistic. Originally hired as a graphic designer at Technical Analysis, Inc., in 1997, she quickly proved herself to be as proficient as a writer and technician as she was an artist. Her articles about her trading and the indicators she used were among the most requested by readers writing into our Letters to the Editor column, and the last two she wrote can be found in this issue. In addition, a book she was writing for Marketplace Books should be seeing print later this year.
Sharon passed away suddenly on June 26. She will be missed.--Ed.
VANTAGEPOINT REVIEW
Editor,
I have just purchased VantagePoint software and I noted with interest your review by Phil Crosby published earlier this year ("VantagePoint 7.0," February 2007 S&C). In the review, he states that he uses the system in conjunction with other tools. I would be interested to know what these additional tools are. Perhaps Mr. Crosby could write another article about this, as I am sure that many of your readers would be interested as well.
Fatima Riordan
Phil Crosby replies:
I use a few other tools for trading beyond VantagePoint. I primarily use TradeStation, since it allows traders to easily code trading strategies using its rules-based EasyLanguage tools. Once these strategies are coded, they can be backtested to understand their validity. It takes a short time to gain proficiency in EasyLanguage, and once you understand it, you can very quickly test out different ideas and backtest them. TradeStation also has a myriad of indicators that can be used for trading analysis and incorporation into various strategies. I'm a believer in using the smallest number of indicators possible for use in trading strategies, and so I primarily use price, volume, and the slow stochastic indicator to determine trade entry and exit points.
I also like to incorporate fundamental analysis when selecting equities to trade, and to provide this information I use the Daily Graphs Online tool from Investor's Business Daily (IBD). Daily Graphs Online provides a wealth of fundamental information on most US-traded equities on one screen (as well as some pertinent technical information). The key fundamental information I use is revenue and earnings growth for the most recent five or six quarters, as well as market capitalization and forward P/E versus recent growth. Daily Graphs Online also provides good information on market-level trends, which I incorporate into my decisions as to whether I should be long or short the market at any point in time. I select equities to trade based on fundamental strength and then use the technical indicators (looking at both weekly and daily time frames) to identify entry and exit timing.
One last tool I use is the point & figure charting service provided by Dorsey Wright & Associates. Point & figure analysis provides a good perspective of supply and demand forces affecting a security or group of securities. I use the Dorsey Wright site primarily to review overall market and individual sector conditions (using their bullish% indicators).
In summary, the main tools I use are TradeStation, Daily Graphs Online, and Dorsey Wright's point & figure service. I incorporate both fundamental and technical factors when considering a trade -- fundamental factors for identifying trading candidates, and technical factors for timing. I review market- and sector-level information to determine whether I should be aggressive or defensive in my trading. I also look at multiple time frames when considering trades, since I have found that trends in higher time frames tend to be more powerful and persistent than trends in lower time frames.
FRACTAL DIMENSION INDEX FUNCTION INCORRECT?
Editor,
I was converting the fractal dimension index function code from the
April 2007 Traders' Tips section to a different platform, and I noticed
the calculation is different than in Basic code from:
https://www.complexity.org.au/ci/vol05/sevcik/sevcik.html(which is noted in the article as the algorithm's source).
I think the code published in your Traders' Tips section is wrong, but I have not verified it since I don't use TradeStation.
Code obtained from:
https://forum.esignalcentral.com/showthread.php?s=86bafcb6cb9fdb6611is practically the same.
e649b65a4b45e2&threadid=14015&highlight=fractal+dimension
If possible, could you please let the author know so that he can correct it?
Gustavs Avotins
Jason Keck of eSignal replies:
I've tested the changes suggested by Mr. Avotins and all I can say is that it does plot a different line, but it still does not match the appearance of the fractal dimension index (FDI) plotted in the chart images that Radha Panini provides in her March 2007 S&C article ("Trading Systems And Fractals").
The difference may simply be the parameter used for the number of periods that the indicator is based on. Panini didn't provide a default value for this parameter provided in her article, so it is difficult to verify the accuracy of our formula translation. However, I've tried many different values for the period length, and the indicator never comes close to matching.
If Panini would provide the parameters used for each of her chart images that display the FDI as well as the open source code she used to calculate it, I'm sure we could figure out what the exact differences are.
METASTOCK CODE FOR MARKOS KATSANOS' ARTICLE
Editor,
I am a great admirer of the research by Markos Katsanos. Unfortunately, the MetaStock code was not provided for his latest article, "How Effective Are Rectangles?" (June 2007).
Could you or Mr. Katsanos help me and other users of MetaStock by providing the code?
Michael Riedel
See also the next two letters.--Editor
MORE ABOUT MARKOS (1)
Editor,
I like the articles written by Markos Katsanos ("Las Vegas Or Los Nasdaq?" [January 2005], "Measuring Flags & Pennants" [April 2005], "Detecting Breakouts From Flags & Pennants" [May 2005], and "Bear Flags" [April 2006].
However, I was disappointed to find that no MetaStock code was provided in his most recent article, "How Effective Are Rectangles?"(June 2007).
If you could provide the code in the next issue, I will look for it.
Many thanks and please encourage Mr. Katsanos to continue writing articles -- they are very interesting.
Michel Laurent
Belgium
MORE ABOUT MARKOS (2)
Editor,
I just wanted to drop you a note to say how much I enjoy Markos Katsanos' articles in STOCKS & COMMODITIES, especially the recent one in the June 2007 issue on rectangles.
For this article, do you know why MetaStock code was not supplied by you or Equis?
Again, thank you for your efforts. I hope he will keep writing.
Mike
We spoke with author Markos Katsanos and in response to all your letters, he has written some MetaStock code to help implement the system. We have posted it in the Subscriber Area of our website, www.Traders.com (the direct URL is https://technical.traders.com/sub/sublog.asp).--Editor
BACK ISSUES
Editor,
Before I became a subscriber last month, I was looking through a recent STOCKS & COMMODITIES issue in a bookstore. I would like to locate a certain article from that issue.
This article contained a paragraph or so of code common to many trading systems, but I don't remember the other details of the article. I'm not sure if it was code for trending, breakouts, oscillating, or something that switched between them dynamically.
Please advise how I can find this code or other similar code in recent issues. Thank you.
Jeff Manera
You can review the table of contents of each issue of STOCKS & COMMODITIES at our website. To do so, go to the STOCKS & COMMODITIES homepage at:
(or click on STOCKS & COMMODITIES from www.Traders.com). The table of contents for the current issue will be listed here. Clicking on any article will take you to an abstract of the article.https://www.traders.com/S&C_homepg.html
To review the content listings for past issues, click on the "Back Issues Archive" link.
Code from our Traders' Tips columns is reproduced in full at our website
in the Traders' Tips area. (See the Back Issues Archive.) Code that was
given in articles is reproduced at our website in the Subscribers Area:
If you see an issue of interest by browsing the contents of recent issues at our website, you can contact our subscription department at 800-Technical to order a copy of the issue.--Editorhttps://technical.traders.com/sub/sublog.asp
FIBONACCI SPIRAL
Editor,
Do you have any articles on the Fibonacci vortex (spiral)? Thank you.
Duc Nguyen
Here are two S&C articles having to do with the Fibonacci spiral that may interest you:
Forecasting Market Turns Using Static And Dynamic Cycles
by Brad Swancoat and Ed Kasanjian, vol. 10:9 (October 1991)
Who hasn't heard of Fibonacci ratios by now, but to actually use them in predicting market turns?
Nonlinearity, Chaos Theory And The DJIA
by Victor E. Krynicki, Ph.D., vol. 9:9 (September 1991)
Studies of nonlinear concepts and chaos theory in other fields have shown that it is necessary to examine the structure of a process to understand that process; larger patterns may be reflected in similar patterns on a smaller scale. Many natural patterns have a fractal structure, and such structures can be found in the solutions to certain mathematical equations.
If these articles don't fit what you are looking for, here are some
more articles on the Fibonacci method to mention. Try also using the search
engine at our website, www.Traders.com, to locate these and additional
articles.--Editor
Are Fibonacci Levels Leading Indicators For Forex?
by Todd Gordon, vol. 23:10
(October 2005)
Gain insight into the trading tactics of institutional foreign exchange traders.Retracement Analysis Beyond The Horizontal
by Cornelius Luca, vol. 23:6 (June 2005)
There's more to Fibonacci analysis than applying the standard group of three horizontal lines at 38.2%, 50%, and 61.8%. This article focuses on fanlines and compares them to the standard Fibonacci horizontal lines.
Triangles With Fibonacci Targets
by J. Mark Kinoff, vol. 22:12
(December 2004)
When triangles or wedges confirm that a trend is continuing, you can use a simple breakout for your trade entry and a Fibonacci ratio calculation to determine the optimal target area to exit the trade.Fibonacci And Gann Projections
by Dennis D. Peterson, vol. 22:10
(October 2004)
It's time to have a little fun and see what a day-at-a-time replay can reveal in terms of future projections.Fibonacci-Based Fractal Form And Elliott Waves
by Robert R. Prechter Jr., vol. 21:9
(September 2003)
The stock market is a tapestry of Fibonacci number ratios. Here's a look at how you can apply Elliott waves to find these ratios, from a master Elliottician.Combining Fibonacci Retracements And The RSI
by Ingo W. Bucher, vol. 21:3
(March 2001)
Combining the two can help identify significant support and resistance levels.The Gartley Setup
by Rudy Teseo, vol. 19:1 (January 2001)
Fibonacci ratios still work to measure retracement of stock movement.Long-Term Fibonacci Support And Resistance
by Kevin W. Murphy, vol. 16:10
(October 1998)
Here's a historical review of the major swings in the stock market and the Fibonacci relationships.Using Fibonacci Ratios And Momentum
by Thom Hartle, vol. 15: 11
(November 1997)
Do any of these samples of sage advice sound familiar? "Don't buy it here, but wait for a pullback." "I would wait and sell on a bounce." What does this really mean? Where and when do you act? Here's one technique for calculating retracement levels using that tried-and-true favorite, Fibonacci ratios, as well as using momentum to define the trend.Dynamic Multiple Time Frames
by Robert Krausz, vol. 14:11
(November 1996)
This private trader, who was profiled in The New Market Wizards, discusses his technique of combining two methods: multiple time frames and the Fibonacci Trader method.Fibonacci, Elliott And Volatility
by Paul G. Williams, vol. 8:9
(September 1990)
Suppose we could chart volatility just as we chart conventional prices. Then we could use Elliott wave analysis, Fibonacci characteristics and cycle techniques to forecast greater or lesser volatility.
ERRATA: PREMARKET PREDICTION
In the article "Premarket Prediction" in the July 2007 issue, we inadvertently switched the tables in Figures 4 and 5 at the bottom of page 38. The article text and figure captions are correct, but the actual tables were switched. We regret this error.--Editor
Originally published in the September 2007 issue of Technical Analysis
of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright
2007, Technical Analysis, Inc.