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CMT OR CTA?
Editor,I am interested in earning a professional designation in technical analysis. Is the CMT or the CTA the designation of choice? Can you tell me how to contact the institutions in charge of assigning these designations?
The Market Technicians Association (MTA) administers a program for obtaining certification as a Chartered Market Technician (CMT). This professional designation is awarded to members successfully completing a program of two exams and an original research paper accepted by a peer review committee for publication in the MTA Journal. The Market Technicians Association is a national organization of market analysis professionals with the goal of exchanging information, administering educational programs and upholding ethics codes and professional standards among technical analysts. Contact the MTA at One World Trade Center, Suite 4447, New York, NY 10048; E-mail ShelleyMTA@aol.com, or www.mta-usa.org.TERRANCE O'DONOHUE
via E-mailCommodity trading advisors (CTAs) represent a class of professionals who trade commodity and financial futures on regulated global futures and options markets.
Thus, unless you are interested in professionally managing clients' accounts, the CMT designation is what you want for certification that you are proficient in technical analysis.--Editor
OF THANKS AND COPYRIGHTS
Editor,After 18 years of trading and analyzing the financial markets, and after six years of publishing Formula Research, it was indeed a thrill to read your generous review of my newsletter in the May 1997 issue. Thank you for your kind words.
Let me just point out that the trading systems we feature are proprietary and available only to Formula Research subscribers. Anyone who exploits our confidential findings for commercial gain is guilty of professional bad faith and possible copyright infringement.
NELSON FREEBURG
Editor
Formula Research
FAIR VALUE INDEX
Editor,As a viewer of CNBC, I notice the network often makes reference on the morning shows to the fair value index in relationship to the S&P futures. I don't fully understand this concept. Could you elaborate or refer me to a past issue of S&C for more information?
Fair value is based on the idea of arbitrage, which compares two equivalent positions in terms of risk and reward. The S&P 500 futures contract should trade at a premium to the S&P 500 cash index because futures prices include the theoretical cost of the acquisition of the underlying 500 stocks of the index, potential dividend income and the time element involved. For each contract, there is a premium value such that investors become indifferent to whether they're buying stocks or futures. This premium value is called the fair value. For more on this, see "Market direction and the S&P 500 premium" by Jean-Olivier Fraisse (S&C, December 1990). In addition, check with the Chicago Mercantile Exchange about the specifications for the S&P contract, because the contract has changed since publication of Fraisse's article.--EditorJOHN M. RUSSELL
via E-mail
WAITING FOR THE PAPERBACK
Editor,I've just ordered a trial copy of STOCKS & COMMODITIES. I have two questions:
1. What's in the magazine that isn't online?The STOCKS & COMMODITIES Web site (www.Traders.com) contains abstracts of current and past articles, among other things. Complete articles and product reviews are presented in the magazine only. Later this year, full articles will be available for downloading over the Internet for a fee. However, some people still prefer reading the physical magazine over their computer screen, which is less portable and can be hard on the eyes.2. Where can I look for good information about which hardware and software setups I should consider for serious trading over the long haul?
MIKE HOGE
via E-mailFor information about software, take a look at our new 1998 Bonus Issue, published last month. The Bonus Issue contains two sections that may be of interest to software shoppers: the Readers' Choice Awards for products and data services, and the Software Comparison Table, which lists the features of 160 different technical analysis software packages. In addition, we publish product reviews in each issue of STOCKS & COMMODITIES, as well as an Advertising Index at the back of each issue as a guide to the ads appearing in that issue. Many software vendors advertise in STOCKS & COMMODITIES.--Editor
HEDGE FUND TRADERS
Editor,Do you know of any hedge fund traders or daytraders, or a source that might list these type of asset managers? I would like to diversify my portfolio with this style of management, but I don't know who manages assets in the style(s) frequently mentioned in your magazine.
Contact Gary Spitz at The Investors Research Network, 800 543-2525 or ctar@franklin.lisco.com. In addition, see Spitz's article, "Alternative investments for volatile times," in next month's issue.--EditorANDY BERWICK
via E-mail
TOO TECHNICAL?
Editor,As I await the arrival of the November S&C in the mail, I read your November Opening Position at your Web site, which addresses the readers who tell you they find the magazine too technical. I don't agree with that criticism. Here are my reasons.
At least in the Italian technical analysis community, STOCKS & COMMODITIES enjoys a status of biblical proportions. Of course, the first time you read the magazine, it may seem too technical, but after that, you become more comfortable with the content. If a reader wants to know more about a particular topic or indicator, he or she shouldn't fault the magazine for not covering that topic in that particular issue.
To those readers who find your magazine too technical, I would like to make a few suggestions: First, use the online resources at the S&C Web site (www.Traders.com). The site is not a duplication of the magazine, and there are areas for beginners there. I was reading S&C magazine long before the S&C Web site came online, and I find the site has added to my enrichment.
Second, order a copy of S&C on CD, a compact disc with 12 years of S&C articles. With the CD, you can use the powerful search facilities built in, so you can easily search out all the articles, figures and sidebars on a specific subject.
In conclusion, even if you don't find the articles interesting in the first issue you take, you may find something you need later. Please accept my compliments for the magazine. It is not too difficult; it is varied, and it is always welcome.
SANDRO GIANGRANDI
Italy
via E-mailThank you for your sincere compliments and for the opportunity to plug our compact disc. S&C on CD can be ordered from our circulation department at 800-TECHNICAL, 206 938-0570, or from our Web site at www.Traders.com.--Editor
BEGINNER'S READING LIST: STOCKS
Editor,I'm a new stock trader and was wondering whether there were any books available to begin learning about technical analysis of the stock market. Although I am familiar with the stock market and I have read the November issue of STOCKS & COMMODITIES, I would like to learn more about the many tools mentioned in that issue and get more background knowledge of such items.
Here is a list of classic reading material on technical analysis and the stock market:JAMIE LAWRENCE
via E-mailArms, Richard A. [1983]. Volume Cycles in the Stock Market, Dow Jones-Irwin.Colby, R.W., and T.A. Meyers [1988]. The Encyclopedia of Technical Market Indicators, Dow Jones-Irwin.
Edwards, Robert D., and John Magee [1997]. Technical Analysis of Stock Trends, 7th ed., AMACOM.
Fosback, Norman G. [1985]. Stock Market Logic, The Institute for Econometric Research.
Graham, Benjamin, and David Dodd (originally); Sidney Cottle et al (5th ed.) [1988]. Graham & Dodd's Security Analysis, 5th Edition, McGraw-Hill.
Krausz, Robert [1997]. A W.D. Gann Treasure Discovered, Geometric Traders Institute, Inc.
Meyers, Thomas [1989]. The Technical Analysis Course, Probus Publishing.
Murphy, John J. [1991]. Intermarket Technical Analysis: Trading Strategies for the Global Stock, Bond, Commodity and Currency Markets, John Wiley & Sons.
_____ [1997]. The Visual Investor, John Wiley & Sons.
O'Neil, William J. [1988]. How to Make Money in Stocks, McGraw-Hill.
Pring, Martin J. [1985]. Technical Analysis Explained, McGraw-Hill Book Co.
____ [1992]. The All-Season Investor, John Wiley & Sons.
Rhea, Robert [1934]. The Story of the Averages, Rhea, Greiner & Co.
_____ [1962]. The Dow Theory, Rhea, Greiner & Co.
Sperandeo, Victor [1991]. Trader Vic: Methods of a Wall Street Master, John Wiley & Sons.
Wyckoff, Richard D. [1931]. The Richard D. Wyckoff Method of Trading and Investing in Stocks, Wyckoff Associates, Park Ridge, IL.
BEGINNER'S READING LIST: COMMODITIES
Editor,I am interested in commodities. What book would you recommend I read?
Here are some classics on commodity trading and technical analysis:E. RADY
Dunedin, FLKaufman, P.J. [1987]. The New Commodity Trading Systems and Methods, John Wiley & Sons.LeBeau, Charles, and David Lucas [1992]. Computer Analysis of the Futures Markets, Business One-Irwin.
Murphy, John J. [1991]. Intermarket Technical Analysis: Trading Strategies for the Global Stock, Bond, Commodity and Currency Markets, John Wiley & Sons.
_____ [1986]. Technical Analysis of the Futures Markets, New York Institute of Finance.
Schwager, Jack D. [1984]. A Complete Guide to the Futures Markets, John Wiley & Sons.
_____ [1996]. Schwager on Futures: Technical Analysis, John Wiley & Sons.
_____ [1995]. Schwager on Futures: Fundamental Analysis, John Wiley & Sons.
HOW MUCH IS ENOUGH?
Editor,What is the financial profile of the typical trader? My stock portfolio is worth $6,000 and I am bored to tears with it. It's risk capital, whereas my retirement funds are not in that particular account. Is $6,000 enough, or should I take up skydiving for excitement?
I like your Web site. I located it through a column in thestreet.com.
For a bit of reality, see this month's interview with Charles White, who discusses optimum account sizes for commodities trading and the equity risks involved. My advice to you is don't trade for excitement; for that, go to Las Vegas.--EditorJAY HEWITT OWEN
via E-mail
ERRATA
Editor,I am writing you about the article by John Sarkett, "Time and options probabilities," which appeared in the December 1997 issue. Unfortunately, the article has factual mistakes, which incorrectly result in a probability figure given on page 44 of 31.30%. The correct figure should be about 15%. The correct number can easily be confirmed by looking at the delta of the option. Delta is the rate of change of an option's price versus the change in price of the asset.
Delta is also the probability that the option will finish in the money. The delta of that option is also about 15%, not 31%. The author incorrectly uses the common (base 10) logarithm, when probability calculations should use the natural logarithm.
John Sarkett replies:DON FISHBACK
via E-mailYou are correct that the formula should have used the natural log. Any references to "log10" in my article should be changed to "log" (that is, the natural logarithm, or "LN" in Excel). Using the natural log, the correct outcome of the equation on page 44 would be 14%, not 31%.
In addition, the variable "ST" should have appeared as "St," where St is the current price of the stock. ST, given in the article as the terminal price of S, should be eliminated. Thus, the corrected equation is:
Regarding delta: Delta mirrors probability, sometimes closely, and so is widely used as shorthand for probability. Since each is calculated by a different formula, however, the delta and probability are not the same.
