To trade the stock market effectively, you need a plan to pick out the stock
that could outperform others. Here’s an example of a plan for trading
that uses a stock’s relative yield to the broad market and technical
analysis.
By Thom Hartle.
Malley explains how to determine the appropriate amount of leverage for
commodity trading.
By J.M. Malley.
Identify trading opportunities for the stock indices with the option premium
ratio.
By Christopher Cadbury.
After you’ve gained some experience with trading, you’ll begin
to notice that the market you trade has some typical characteristics. Have
you ever considered quantifying them? Here are some ideas on the subject.
By Thom Hartle.
Here’s a method to graphically display the signal status for a group
of indicators as well as an algorithm for generating a consensus indicator
that shows when these indicators are in sync. The methods described can be
used with any group of indicators.
By Norm North.
What goes through the mind of someone designing a neural network trading
system? Last month, James Stakelum explained some of the steps involved in
putting together a neural network. This time, he talks about the choices
he made to design a neural network to apply to the financial markets specifically.
By James Stakelum.
How do your emotions affect your trading? The founder of Trading on Target
discusses ways to break emotional patterns that hinder your trading success.
By Adrienne Laris Toghraie.
Presented here are the ins and outs of the commodity channel index, as defined
by creator Donald Lambert and modified by the author.
By D.W. Davies.
Jerry Wagner, president of Flexible Plan Investments, Ltd., of Bloomfield
Hills, MI, currently has approximately $200 million under management. His
firm was the top-ranked market timer for the last seven years in the MoniResearch
newsletter’s 1993 annual survey of market timer performance. He is
a founding member of the Society of Asset Allocators and Fund Timers (Saafti),
a nonprofit trade association of registered investment advisory firms that
manage client assets with market timing. STOCKS & COMMODITIES Editor
Thom Hartle interviewed Wagner on October 27, 1994, via telephone and discussed
how market timing can improve investment returns and how he uses the political
climate as an indicator.
By Thom Hartle.
Behold! Macintosh v. 2.2
SuperCharts (Omega Research).
Testing indicators to confirm viability is always important, and here, two
indicators that stand up to historical testing are presented and then used
to develop a simple mutual fund switch system.
By Nelson Freeburg.
Curious about how state of mind plays a role in trading? This author has
studied investment surveys that detail bullish and bearish states of mind
of advisors and investors and he has identified patterns that indicate trading
opportunities for stocks and stock indices.
By Christopher Cadbury.
Here are statistical ways to measure the correlation between data and to
combine two data series to form a new one.
By Clifford J. Sherry, PhD.
Here’s how to find the appropriate leverage for stock trading and
researching leverage with a simulated portfolio.
By J.M. Malley.
Successful trading requires the willingness to commit to specific objectives.
Here, psychiatrist Ari Kiev explains how to center your state of mind to
optimize your trading.
By Ari Kiev, MD.
The year 1994 will be known for the debacle in the derivatives markets.
But what are these instruments that seem to have left a number of money managers
holding the proverbial bag? To answer this question and others, we spoke
to Mary Pugh, former senior vice president of Washington Mutual Savings Bank
and now a fixed-income money manager in Seattle, WA. We spoke to Pugh about
the mortgage-backed securities market, how it works, what the instruments
derived from mortgages are all about and more.
By Thom Hartle.
Trend channels are a method by which to identify the outer boundaries of
a trend. A number of methods are based on the technician’s judgment
to identify the components of a trend channel. Here’s one method that
reduces the need for seasoned judgment by using two statistical methods to
determine the components of a trend channel.
By Bob McCullough.
Auditrack
Reuters Money Network Platinum Service
Visual Pattern Designer Professional.
The S&P futures market is dominated by anti-trend traders. It’s
a fact: It’s a tough market to trade using trend-following approaches.
But if you can’t beat ’em, why not join ’em?
By Tushar S. Chande.
Trading methods don’t have to be complex; indeed, they can be very
simple. Here’s one that will help you trade Eurodollars.
By George Panagakis.
Most technically based traders become familiar with the classic chart patterns
because those patterns give the trader visual evidence of the demand/supply
balance of a stock. Interpreting the chart accurately can give you an early
warning about your next trading opportunity. Here, the cup-with-handle pattern,
a relatively new chart formation, is examined.
By Gregory Kuhn.
By now, much has been written about the Internet, the international computer
users’ network. But details have not been as forthcoming. How can Internet
help traders and investors?
By Suzanne Withers, PhD.
Sooner or later, many traders encounter problems limiting their success.
Often, the solutions are available but people resist changing. Why do they
do that, anyway? Toghraie explains how to overcome resistance.
By Adrienne Laris Toghraie.
There seems to be a connection between engineering and investing. Like Jack
Hutson, the publisher of STOCKS & COMMODITIES, John Sosnowy of the Sosnowy
Investment Management Co. (Simco), Cameron, TX, was an engineer before he
turned to the world of finance. He changed careers in 1969, leaving the engineering
field to work as a stockbroker for a major brokerage firm before starting
up his own investment advisory concern in 1984. We interviewed John Sosnowy,
covering the concept of tactical asset allocation, how to design a market
model and what indicators to use, the funds he particularly likes, determining
the amount of risk an investor is most comfortable with and the secret to
making a profit in the market.
By Thom Hartle.
Here’s a recent trade in foreign currencies what was used, the reasoning
behind it and the outcome. Take a look.
By D. W. Davies.
How do you use trendlines? It’s one of the most basic tools of investment
analysis, yet it’s not explained as clearly as it might. If you’re
just starting out, here’s the scoop. Or if you’re an old pro,
here’s a refresher.
By Bruce R. Faber.
What you see is not necessarily what you get. What you see for prices on
your computer screen may not be what’s really going on in the commodity
pits. Some prices that appear on your screen may even be canceled. How’s
that? Here’s how.
By Joe DiNapoli.
Binomial Market Model, v. A.08
Monocle
HyCharts Option Master for the Newton
Stock Doctor, v. 3.13
Mesa for Windows, v. 1.5
Thinks, v. 103.
What impact does the variability of the market have on the price of an individual
stock? This S&C contributor suggests a way to measure the impact of the
Standard & Poor’s 500 on your favorite stock.
By Clifford J. Sherry, PhD.
Seasoned traders know that relationships exist between markets. In theory,
if fundamentals move one market in one direction, then another market may
also move in the same direction or show a propensity to move in the opposite
direction. These intermarket relationships are often referred to as linked
markets. Can traders use this information? Indeed they can. Here are some
ways.
By Thom Hartle.
Markets are either trending or in a trading range marking time until the
next trend. It follows, then, that a potential trading concept is to identify
the trading range and wait for the new trend to start. Here’s one method
for identifying a trading range and the results of trading the breakout.
By Alex Saitta.
The parabolic stop and reversal indicator is a popular trading tool, but
it’s subject to false signals. Here’s how it can be modified
to improve its performance.
By Dennis Meyers.
Leverage is a key factor in trading, but few traders understand its importance.
Here, Malley concludes his work on the subject.
By J. M. Malley.
Charles Kirkpatrick II is not only a market researcher and money manager,
but he also holds the distinction of being the first recipient of the Charles
H. Dow Award for technical analysts. This award, which is cosponsored by
Barron’s, the Market Technicians Association (Mta) and Dow Jones Telerate,
is based on the best article submitted to the Mta. STOCKS & COMMODITIES
spoke with Kirkpatrick about the research that led him to his award-winning
theories, how he selects stocks, his thoughts on risk management and more.
By Thom Hartle.
Here’s the scoop on the volatility index as an analytical tool for
identifying extremes in market sentiment.
By S. Jack Karczewski.
Here’s a little-known indicator that combines price change and volume
to create a short-term and an intermediate-term trading tool.
By John A. Sarkett.
The New Science of Technical Analysis R.N. Elliott’s Masterworks
Mathcad Plus 5.0 for Windows
Finance Pack for Mathematica for Windows 2.2.3.
The Titanic syndrome is a stock market timing system built on various stock
market indicators. As with all trading systems, additional refinements are
possible on the original. Here, then, is one trader’s double set of
modifications on the original Titanic syndrome system.
By Dennis Meyers.
The tick index may appear to be one of the simplest of market indicators,
but it also offers insight into market psychology. As a stand-alone indicator,
the tick index has its place in the technician’s toolbox, but combining
the tick index with candlestick charting, another technical method for spotting
changes in market trends, creates a potent combination.
By Tim Ord.
Picking the tops and bottoms of the market has always been the dream of
traders. Is it necessary, though? Here are the results of using a long-term
momentum indicator based on the Dow Jones Industrial Average (DJIA).
By Jay Kaeppel.
What can investors do to overcome adverse market conditions? You could try
using a covered call strategy. This strategic planner and analyst recounts
a series of trades he executed using a covered-call options strategy in a
high-technology stock.
By Lawrence Serven.
Waiting until the end of the day for a trading signal may be an unnecessary
delay for your trading system. How can we get around it? Here’s one
trader’s method of improving a system by using more than one time period
for market signals.
By Gene Carey.
Thomas R. DeMark has been called “the ultimate indicator and systems
guy” with the publication of his well-received book, The New Science
of Technical Analysis. Who is he and what has he done that deserves
such accolades? STOCKS & COMMODITIES interviewed DeMark about his trading
philosophies and how he explored the frontiers of technical analysis using
basic techniques.
By Thom Hartle.
Have you ever wondered how accurate the consensus estimates of interest
rates were from the top US economists? How about how accurate those economists
are in comparison with neural net technology? Here’s how to use neural
nets to forecast rates.
By Milam Aiken.
Overcome psychological impediments to your trading. This psychiatrist discusses
how to maximize trading performance by committing to specific financial results.
Ari Kiev, M.D.
Time to Trade
U.S. Equity OnFloppy version 4.0
Tradeline Electronic Stock Guide
The Institutional Report
Power Plus.
Here’s a trading system based on a price pattern and which uses the
Standard & Poor’s 500 index as a test case.
By Adam White.
Here’s a new indicator based on the change in a day’s trading
range as evidence of the start of a new trend in a market.
By Jack L. Weinberg.
Even as you read this, the candlestick charting technique, with its origins
in Japan, is being absorbed into the ways of Western technical analysis.
Here’s how candlestick charting can be used for a typically Western
technical analysis strategy.
By John H. Forman III.
The optimum predictive filter is the difference between a technical indicator,
such as the relative strength indicator or stochastics, and its exponential
moving average. Here, we describe it, how to generate it, and how it can
be used. It cannot be used in all market conditions but carefully observing
when it can be used can make it a valuable weapon in your technical arsenal.
By John F. Ehlers.
Exchange rates fluctuate on a second to second basis, but the long-term
trends can be understood by using an indicator based on the ratio of inflation
rates. The case in point? The recent Mexican peso debacle.
By John Kean.
Market traders and advisors use sentiment surveys as a tool to identify
extreme bullishness or bearishness. Here, then, is one trader’s research
into identifying what the best levels of a sentiment survey are for trading
Treasury bond futures.
By Lee Ang.
Perry Kaufman began his career in the field of trading and market research
in 1971. Since then, he has been a money manager, consultant and author of
six books, including the popular Commodity Trading Systems and Methods.
His most recent book, Smarter Trading, presents his perspective
of the key issues in trading and designing systems. Today, he writes and
edits the quarterly report “Kaufman on Market Analysis,” which
he publishes from his farm in Vermont. STOCKS & COMMODITIES interviewed
Perry Kaufman about how markets evolve, ways to manage risk, designing a
trading system and his views on the use of computers to validate trading
strategies.
By Thom Hartle.
Stock Selector System
Moore Research Center Report
Net Money
The Little Book of Investing
Beyond Candlesticks
NeuralWorks Predict for Windows, version 1.0
FastTrack, version 3.5
Getting Started in Stocks
Electric Scorecard II, version 6.0c
Neural Net Tutor, version 1.0 for Windows
Money Maker for Windows, version 2.0.
Projection bands, a new method using trading bands, projects market data
forward along the data trend with the maxima and minima of the projections
defining the band. The method provides another means of signaling potential
changes for market direction relative to the trend.
By Mel Widner, PhD.
Filtering is simply processing price data to remove extraneous, noisy, information.
What’s left after filtering can be considered to be the more important
and perhaps tradable information. Here’s a method to filter price data
for reliable patterns as well as some suggested trading plans.
By Scott Barrie.
Traditional point & figure charting is one of the oldest methods known
in technical analysis. The technique is unique because it only records the
direction and change in price while ignoring the passage of time. But it
has certain disadvantages; for example, it is virtually impossible to adjust
a point & figure plot for stock splits or dividends without replotting
the whole chart. Making each box represent a fixed percentage change a logarithmic
scale has several advantages. Here’s what they are.
By William G.S. Brown.
Here are some more nuances for trading stocks based on the charting pattern
called the cup-with-handle pattern introduced by William O’Neil.
By Gregory Kuhn.
This indicator expresses buy and sell signals based on user-defined percentage
changes in a market. The UD% price change indicator is compared with a simple
moving average crossover and two different channel breakout systems using
the Standard & Poor’s 500 index as an example.
By Dennis Meyers.
Many STOCKS & COMMODITIES readers dream of trading for a living; they
fantasize about giving up their humdrum day-to-day job and focusing on the
opportunities in leveraged markets such as futures. But as everyone knows,
dreams and realities are usually far apart. Can it be done? Can you be an
overnight success? Meet Joseph Stowell, a former schoolteacher who patiently
worked at trading for more than 20 years before realizing his dream of trading
for a living. Stowell spoke to S&C about how he did it, what it takes
to trade successfully, his way of trading Treasury bond futures and more.
By Thom Hartle.
Does the part of the brain that influences you the most affect how you trade?
The founder of Trading on Target explains the importance of using skills
that are built on both intuitive and deductive mental processes.
By Adrienne Laris Toghraie.
TT ChartBook version C
MetaStock for Windows version 5
TradeStation version 3.5.
Here’s a new indicator for trading the Standard & Poor’s
500 index, based on the relative performance of the Dow Jones Utilities Average
to the S&P. Trading rules and supportive studies are also provided.
By dennis Meyers, PhD.
Here’s a comparison of the historical dividend yield of the S&P
500 on a monthly basis and what the 10-year total return for the S&P
was after each observation of the dividend yield.
By Elliott Middleton, PhD.
There are various ways to select what stocks to trade. Here’s a method
that combines fundamental value and technical analysis as a way to select
a stock, and a real-world trading situation on which it was applied.
By Thom Hartle.
Here’s some helpful advice to novices who are considering trading
commodity futures. This should give you some idea of what’s involved.
And whether you should.
By Jay Kaeppel.
This psychiatrist, who teaches strategies for trading success, discusses
the identification and management of psychological stopping points that can
limit your success as a trader.
By Ari Kiev, MD.
The question is as old as technical analysis itself: Does the market trend?
Here’s a method to determine the degree to which markets trend historically.
In addition, there’s a comparison of various markets based on the observable
degree of trend.
By Alex Saitta.
What should you consider when you’re designing or testing a trading
system? Here are some hints that may help you.
By Mike DeAmicis-Roberts.
Pattern recognition is used to standardize and categorize market behavior
into quantifiable market movements. After a collection of patterns have been
identified, the market movement following each pattern can be measured. This
post-pattern description can be used as a forecasting tool. In this article,
Merrill waves are used as the basis for the patterns and forecasting.
By Scott W. Barrie.
Looking back on decades of market activity can give anyone a certain perspective,
and Justin Mamis, who writes the Mamis Letter, a newsletter for
Hancock Institutional Equity Services that is a joint venture of Tucker Anthony
and Sutro & Co., certainly has the experience to speak about. He became
interested in the stock market in the post-Korean War period, and in the
ensuing four decades has seen tops and bottoms, been an executive at the
New York Stock Exchange (NYSE), worked in a specialist firm, traded options
on the American Stock Exchange (ASE), seen the development of trading instruments
that were unheard of when he started out, and experienced and not necessarily
to his liking the introduction of a tool that is nearly ubiquitous today,
the personal computer. STOCKS & COMMODITIES spoke with him about how
the markets, money managers and technical analysis itself have changed over
the years.
By Thom Hartle.
Asset Allocator
DataCaster
NetCaster
OptionVue IV, version 1.70
Signal for Windows.
Technical indicators, and oscillators in particular, measure the behavior
of price relative to time. For example, the rate of change oscillator calculates
the percentage change in price over a set period. That said, now consider
an indicator that reverses the roles of price to time and measures the passage
of time relative to price. This article details such an indicator, presenting
numerous applications.
By Tushar S. Chande.
Cycle theorists will tell you that there may be tradable cycles within market
data. Before looking for those cycles, though, you must determine the noise
level within the data. Here are some methods to do so in this, the first
of two parts.
By Robert Wayman.
Oscillators come in many shapes and forms. Here, one unique oscillator is
analyzed to determine patterns and the results in the stock market after
a particular pattern occurs.
By Christopher Cadbury.
Philosophically, technicians and fundamentalists appear to be at odds: One
group studies underlying factors driving the market, while the other focuses
on the market itself. Technical approaches count on the existence of price
trends to make profitable strategies, but fundamentalists count on trends,
too. Here, one market analyst reviews the differences and similarities between
the two.
By Alex Saitta.
The relative volatility index was designed to measure the direction of volatility.
Since it was first introduced, however, its developer has not simply rested
on his laurels; here are further refinements on the original.
By Donald Dorsey.
Do you ever feel too tired to go on trading? Do you feel as though you’re
losing the mental energy to even think about trading? You may be suffering
from burnout. Here are some hints to overcome or avoid the problems that
can come with trading.
By Adrienne Laris Toghraie.
Stocks perform best when interest rates are declining, but rate levels can
make a difference. Here’s how.
By Mark C. Snead.
Robert Krausz, who was featured in Jack Schwager’s The New Market
Wizards, is many things: He is a trader, a student of the market,
and a practicing hypnotherapist as well as a special investment advisor
to the European Bank for Reconstruction and Development. With that background
in mind, STOCKS & COMMODITIES spoke with Krausz about the steps to
successful trading, the role of the subconscious for traders, and other
topics.
By Thom Hartle.
Smarter Trading
Advanced Get, version 6.05
Option Simulator/Real-Time, version 1.0
Tools for Timing.
Moving averages have been used for decades to smooth out the noise in the
prices of tradables. Here’s an entry in the category, one that may
provide a more accurate representation of market trends and turn out to be
a more sensitive indicator of trend changes.
By Patrick E. Lafferty.
High-powered breakouts occur with a strong surge of momentum in the direction
of the price change. Such breakouts may be short-lived, however, occurring
toward the latter stages of a long trend. Sometimes, such breakouts signal
the end of one trend and the beginning of another. In either case, identifying
such market action early is likely to be highly profitable. Here, Contributing
Editor Tushar Chande shows how you can use his original indicators, Vidya
and the dynamic momentum index, to find big market moves.
By Tushar S. Chande.
Choosing an options spread strategy depends in part on individual psychology
about market conditions. By understanding how emotions affect behavior, traders
can add precision to their options spread positions.
By Steven P. Schinke, PhD.
In this increasingly complicated world, it’s a comfort to hear that
indicators don’t have to be complicated to work well, as Andrew Addison
of The Addison Report will tell you. Addison, who edits and publishes
the newsletter, which is aimed at individual investors and stockbrokers,
uses his law-school training to boil down what’s important and eliminate
the peripherals a handy thing for those who subscribe to the Report,
as well as The Institutional View, his publication for professional
fund managers. As Addison points out, he doesn’t just try to find things
that work, as we all do, but also things that are simple as well. STOCKS & COMMODITIES
quizzed him about his views on stocks, bonds, gold and other markets using
technical and fundamental analysis.
By Thom Hartle.
There’s a statistically significant bias in the weekly trading of
the Standard & Poor’s 100 index, in that the week that options
expire is noticeably stronger than the week that follows. Statistics that
check for significantly different means and ratios can help options traders
detect these patterns. Not only that, options expiration patterns can also
be useful neural network inputs.
By David K. Moy.
Here’s how the elements of a successful trading plan profits, losses,
commissions and slippage can be used to quantify performance goals.
By Gene Carey.
How does whipsaw magnitude affect a simple moving average system? Here’s
a common solution for the problems of the SMA.
By Robert Wayman.
This measure of market sentiment uses options trading volume to measure
crowd psychology. Here’s one use of the ratio.
By Lawrence G. McMillan.
Compilation: Books on trading
SuperCharts 3.0
Optionomics OnLine System 2.01.
Here’s a charting technique that’s available in most of today’s
popular software. If you’re not familiar with it, here are some tips
to using it. If you are familiar with it, it’s time for a refresher.
By Barbara Star, PhD.
This well-known money manager believes that managed futures should be a
part of your portfolio. Here’s why.
By Victor Sperandeo.
Are you looking for a trading system that’s elementary by design,
yet effective for trading using entry and exit rules? Were you also thinking
that it should be based on weekly charts? Well, you’ve found it. Take
a look.
By George Panagakis .
Designing a trading system is simply establishing a set of rules and back-testing
them in the market. And there are different approaches and different markets
to trade. Here’s one example of developing a system to time entries
into and exits out of municipal bond funds.
By Dennis Meyers.
This psychiatrist, who teaches strategies for successful trading, discusses
the identification and management of the fear of success.
By Ari Kiev, MD.
What makes a trader a winner? It’s hard to say. Laurence Connors,
who is the co-author of Investment Secrets of a Hedge Fund Manager and
the president of money managers Connors, Bassett & Associates, thinks
it’s all a matter of finding a personal method that works for each
individual. STOCKS & COMMODITIES asked him about trading news reversals,
why he likes to use average directional movement (Adx), why he doesn’t
worry when he has a string of losses, why he doesn’t like mechanical
trading systems and why he doesn’t use oscillators.
By Thom Hartle.
Here’s an indicator developed by J. Welles Wilder Jr. that determines
the true direction of the market by comparing today’s trading range
with yesterday’s activity.
By Bruce R. Faber.
VectorVest ProGraphics, version 1
Personal Hotline, version 6.8
A Private Tutorial with Bill Williams
Aiq TradingExpert for Windows.
What techniques do some of today’s money managers using neural nets
use? Here’s a glimpse.
By Steve Ward and Marge Sherald.
Traders use technical tools in different ways at different times. Here,
then, is one trader’s idea on how to use this technical tool to identify
major market trends.
By Jeanette Schwarz Young.
Markets move from trading ranges to trends and back into trading ranges.
Presented here are methods to identify the trading opportunities based on
identifying trading ranges.
By Joe Luisi.
Here’s what a professional trader believes are important mental skills
to trading.
By Bruce C. Kramer.
There’s nothing like a little perspective to give insight especially
when that perspective comes in the form of trading for nearly four decades.
Trader Joe Ross is one of the rare breed of trader, one who has seen the
world change in front of him and been able to adapt to its changes. Further,
Ross had a mentor long before that word came in vogue to teach him the ropes
of trading. STOCKS & COMMODITIES spoke with Joe Ross on a variety of
topics, among them how to get mentally prepared to make larger trades, why
discipline is important, why seasonality is important, how he started day
trading, how fundamental analysis works into all this and the true way to
make money trading by not going for the big score, just taking from the markets
on a day-to-day basis.
By Thom Hartle.
Here’s an article based on the author’s own research of neural
networks and personal experience developing neural net trading models. These
findings are more from the practical/user-oriented framework rather than
from a scientific research standpoint.
By Kyle M. Druey.
You can’t be a good trader without being a good analyst. But the two
are not synonymous: Just because you’re a good analyst doesn’t
guarantee you’ll be a good trader. To the accomplished analyst, trading
is a mental game 80% of the time, but one for which he or she is poorly prepared.
Here’s how you can hasten the transition from analyst to trader.
By Tushar S. Chande, PhD.
Shiva version 1.0
Dow Jones Private Investor Edition
Quantitative Trading & Money Management
SignalCard
Fundamental Analysis
Stock Prophet version 2.0
Momentum, Direction, and Divergence.