BOOKS ON FOREX USING P&F CHARTS
Editor,
In your April 2008 Letters To S&C section, a reader asks for
recommendations for books that show the methods and techniques for trading
forex using P&F charts. The letter was prompted by James Chen's February
2008 Forex Focus article, "Point & Figure For Forex." In response to
the letter, Chen recommends Thomas Dorsey's book, Point & Figure
Charting, as being the best and most comprehensive book for all markets.
No single book can claim to be the best and most comprehensive
current book on P&F charting for all markets, since markets are complexified
and variegated. I teach forex trading using P&F charts, and I would
like to mention the book Exchange Rate Analysis With Point & Figure
Charts by Friedrich W. Tolke, published by Peter Lang of the European
University Studies, Frankfurt am Main. This classic book is published in
three different language editions.
Vini Mbah
MUTUAL FUND TRADING
Editor,
In your April 2008 issue of S&C, your Traders' Resource section
featured mutual funds. While pointing out the various costs that need to
be borne in mind when trading mutual funds, your article neglected to include
the recently imposed SEC frequent-trading restrictions/redemption fees
that may apply to many mutual funds.
These restrictions can affect the timing of your trading through
30- to 90-day holds or blocks on purchases of mutual fund shares. This
will have a detrimental impact on trading if your indicators are for shorter
holding periods. Redemption fees of 1-2% of your assets can be assessed
on the holdings of many mutual funds, thus significantly eating into or
even generating actual losses on what a model may have assumed was a winning
trade. Because there is a "backdoor" application of these restrictions
on omnibus accounts, the rules affect 401k and other retirement plans as
well.
Many plan sponsors have also adopted frequent-trading restrictions
that may be more restrictive than the mutual funds' policies of the funds
offered in the plans.
Anyone wishing to apply technical analysis methodologies to mutual
fund trading should be aware of any restrictions on trading that may apply
to the mutual funds they are considering and/or to their retirement plan
assets.
Stephen Tabb
Tallahassee, FL
DETERMINING THE END OF THE TREND
Editor,
I was impressed with Jody Samuels' article "Determining The End
Of The Trend" in the STOCKS & COMMODITIES Bonus Issue and found it
potentially very helpful. However, I was unable to duplicate the oscillator
readings indicated in Figure 4 using the standard MACD histogram with settings
of 5/34/5. I tried it on several charting platforms. I also added a five-period
SMA to the MACD histogram to get the signal line referred to in the article,
but this didn't match that of Figure 4 either. What might I be doing wrong?
Further, in Figure 3, I was unable to determine how the author
found the length of wave 1 to be 1.3170. Could you comment on that?
Finally, will this method work on equities as well?
Thank you for your assistance with these questions.
Bob Hug
Savannah, GA
Jody Samuels replies:
In the chart in Figure 4, I was able to duplicate Bill Williams' Awesome
Oscillator by using the MACD histogram with the settings 5/34/5. I then
created an MACD with the five-period signal line and copied that to the
MACD histogram. Make sure the signal line is a simple moving average (SMA).
The other suggestion I have is to ask the developer of the charting package
to incorporate Bill Williams' oscillator into it. Many charting packages
already have it under different names, such as "chaos indicator" or "Awesome
Oscillator" (AO).
Regarding the length of the wave, to calculate 100% of the wave 1 target
for wave 5, you have to measure the length of wave 1 from start to finish
(1.2325 - 1.1638 = 687 pips). Then you add this measurement to the
start of wave 5, or the end of wave 4 (wave 4 bottom = 1.2483 + .0687 =
1.3170). This is called the equality with wave 1 target for wave 5.
Finally, you asked whether this method will work on equities as well,
and the answer is, unequivocally, yes!
Editor's note: For more in-depth information on Williams' oscillators,
please refer to the book Trading Chaos, second edition, by Bill
Williams, or visit the website of Bill Williams and Justine Williams-Lara
(Profitunity Trading Group) at http://profitunity.com.
For a list of charting software that includes the Williams' indicators
and oscillators, visit the Profitunity website.--Editor
DOW THEORY
Editor,
Regarding the February 2008 article "Confirmation Destination"
by David Penn, I've done extensive studies regarding Charles Dow's work
through Victor Sperandeo's books and interpretations. Sperandeo's work
is based on strict interpretation of Dow theory. The whole "mathematics"
concept is to help distinguish a true secondary, with economic repercussions,
from nothing more than a sneeze in China, such as happened in the first
part of 2007.
By establishing characteristics such as 33% to 66% retracement,
one can look at certain short-term corrections and see them as nothing
more than a reaction and not a true correction. Penn repeatedly talks about
the secondary in 2006 as having some significance to Dow theory, which
it has none that I make out.
Once a secondary has been confirmed by new highs by both the Dow
Jones industrial and transportation averages, which it did, it has no other
significance than signaling that the trend is intact and that the economy
should stabilize and resume further growth for the time being.
To me it seems as though the most significant, and subjective,
aspects of Dow theory have been left out. That is, during a correction,
to qualify as a secondary, some economic event must be present such as
an economic slowdown that identifies the secondary as such. As the market
bottoms and signals that this slowdown should have run its course by turning
up but fails to reach new highs together to confirm, and then turns down
and takes out the prior lows, this signals a long-term change in trend.
In a bull market, this would be known as the beginning of a bear
market. These long-term signals are the most important information that
can be acquired from proper interpretation of Dow theory.
Thomas J. Swisher II
Twin Falls, ID
David Penn replies:
Thank you for your feedback. As I stated in my article, I depart from
traditional Dow theory by allowing for corrections half as severe as Vic
Sperandeo notes. I also stated that the mathematics of the correction are
not as important to me as the way the market reacts to the correction.
We appear to differ in our application of Dow theory in that you feel
my secondary reactions are too small in size, but in my view, your minor
corrections are too long in duration. However, we still wound up with the
same conclusion: the market was likely to rally into 2007, which it did.
Editor's note: David Penn is now a senior editor for TradingMarkets.com.
RSI BANDS AND REVERSE ENGINEERING
Editor,
Regarding François Bertrand's April 2008 S&C article,
"Visual Variation On An Index: RSI Bands," I would like to point out that
the idea of the article is not new. S&C readers can read my June 2003
S&C article, "Reverse Engineering RSI," and check the paragraph under
the subheading "The RevEngRsi as a level curve" on page 28.
The RSI bands (referred to by Bertrand) are exactly the 30 and
70 level curves used for my RevEngRSI indicator shifted by one day into
the future. Further, the AmiBroker code provided in Bertrand's article
provides essentially the same indicators -- shifted forward by one day --
as the code that appeared in the June 2003 Traders' Tips section that accompanied
my article (although possibly with some very small, negligible differences
in values possibly due to calculation matters). S&C readers can check
this their own by going to:
http://www.traders.com/Documentation/FEEDbk_docs/Archive/062003/TradersTips/TradersTips.html#amibroker2
I certainly endorse the use of my published work by others writing
articles, since this is the point of making formulas or ideas available
to the public. But my work should be attributed and referenced when my
formulas and ideas are used in an article, rather than having the article
promoted as a new idea.
I generally try to attribute the necessary credits to anyone who
inspires me to write an article, either in the body of the article or at
the end as a reference. Further, I consider this a must when I am about
to use other researchers' ideas. In my June 2003 article, I specifically
quoted Constance Brown's book, Technical Analysis For The Trading Professional,
as what sparked me to create the RevEngRSI indicator. I don't know whether
Constance Brown was the originator of the reverse engineering idea, but
her work is where I got the spark. Although my article contains innovative
work not previously published and I could have simply presented my RevEngRSI
formula without any further reference, I was honest enough to mention Brown
in my article.
Again, I endorse the use of my published formulas to create articles,
but only with the proper references to my research contribution. Aspiring
authors must also be aware that original and smart ideas should be published
in hardcopy, well-known, discrete, and highly regarded magazines like,
for example, this one in order to safeguard their research work and to
have proof of the originality of their work.
If I am wrong or am missing something, I sincerely apologize.
Giorgos Siligardos
Thank you for writing. We, as well as our authors, appreciate
the importance of crediting and referencing sources. At times, advancing
and perfecting techniques is the result of building on the work of others.
At other times, ideas are independently developed, as was the case here.
Unfortunately, we can't always know what influences and inspirations went
into an idea (and occasionally the author may not know himself), although
we appreciate the opportunity to mention your June 2003 article now and
will also include this reference with the archived edition of the article.--Editor
TEMA, HEIKIN-ASHI FORMULAS
Editor,
I am interested in getting the code for the moving average crossover
technique discussed by Sylvain Vervoort in the May 2008 issue of S&C
("The Quest For Reliable Crossovers") for the thinkorswim platform. Please
advise.
Jibin Thomas
Unfortunately, we cannot offer the thinkorswim formulas. Please
contact the developer of thinkorswim at www.thinkorswim.com or support@
thinkorswim.com for technical support. Thank you for writing.--Editor
CODE AT TRADERS.COM
Editor,
Thanks for a great magazine. I am a Germany-based subscriber since
last August and I truly appreciate your magazine. It helps me advance my
trading and market knowledge tremendously!
One wish, though (and maybe it's already granted somewhere and
I just missed it): Since not everyone over here is using Tradestation/EasyLanguage
(and since you're going the extra mile to publish code for other programming
languages anyhow), could you put the code for AmiBroker (and maybe other
programs too) on your website for subscribers to download? One zip file
per issue or so would do, or even just keep adding them into one zip for
the current year to make things easy on the webmaster.
Theo Beisch
Regensburg, Germany
Thank you for writing. There are two areas of our website where
published code is posted: one is in the Traders' Tips area (http://www.traders.com/Documentation/FEEDbk_docs/backissues.html),
and one is in the Subscriber Area (http://technical.traders.com/sub/sublog.asp).
Both of these areas are links off our home page at www.Traders.com.
In our Traders' Tips area, we post code that appeared in the Traders'
Tips section of our magazine. You can either scroll through our back-issue
archive to browse the Traders' Tips sections, or use the search engine
at our website to help locate items of interest.
In our Subscriber Area, we post code that appeared in articles (for
example, code listings that appeared in article sidebars). Login
requires your subscriber number (found on your magazine mailing label)
and last name.
In addition, if you are looking for code that was published in our Letters
To S&C column, you will find all past Letters To S&C columns posted
at our website as well.
The code posted at our website is not in a downloadable zip format but
is provided as text and can be copied and pasted into your program.
Finally, if we haven't published the particular code you are interested
in getting, you could try checking the website of the program you are interested
in for code, or contact their technical support or user forums to request
custom code.--Editor
ARTICLES ONLINE
Editor,
Is there some way to download/print an article for study/reference?
I am interested in an article in your current issue.
Johnathan
Articles from our current issue are not available online. They
appear only in the printed magazine. Past articles, however, are available
at our online store at www.Traders.com.
After an issue is no longer current, the articles in it are made available
for downloading through the store.--Editor
Back to June 2008 Contents
Originally published in the June 2008 issue of Technical Analysis
of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright
2008, Technical Analysis, Inc.
