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MOVING AVERAGES AND CYCLES
Editor,Brian J. Millard's February 1999 S&C article "Moving Averages, First Principles" on moving averages fails to address important issues that arise when moving averages (MA) are used in cyclical models. E. Slutsky's 1937 article "Econometrica" told us that the moving average transformation may induce the appearance of cycles where none exist in random data.
One practical approach may be to use a second, different transformation to determine if a cycle with the same characteristics (wavelength, amplitude, phase) can be discerned in the data. Examining the closing price at the end of each week or the average closing price (or first differences, as Millard suggests) in each week are possible alternatives. Another strategy for those with deeper mathematical skills is to apply power spectrum analysis, which decomposes the variation in data into the sum of cycles, each with differing characteristics. Spectral analysis may confirm the existence of cycles with characteristics similar to those shown using the MA transformation.
Further, cycles sometimes appear in data transformed by MAs because of just a few outliers or extreme values above and below the trendline. Plotting the raw data against the moving average data may reveal whether just a few datapoints are involved or whether more pronounced, smoother cycles exist in the raw data. If in fact the cycles are caused by just a few outliers, then entry and exit strategies must be more carefully considered. To the extent that more pronounced cycles can be discerned in the untransformed data, timing may be easier.
Robert Philip Weber, Ph.D. via E-mail
COMMODITY TRADING ONLINE
Editor,Is it possible to trade commodity futures and options online, as I currently do equities?
I counted about 10 advertisements in the latest S&C for trading futures or options online. You may wish to review some of those ads and follow up by calling the brokerages for information, or visit their Websites.-- EditorDanny Markham, via E-mail
INDIVIDUAL INVESTORS
Editor,I am thinking of subscribing. Do you know how many people trade based on their own analysis, or can you point me to any articles on this topic? Are more people starting to actively trade using their own strategies, versus buying into mutual funds or on the advice of brokers or analysts? I am trying to understand if people generally do as well or better on their own (if they really know their stuff) rather than working through professionals. One gauge of this might be whether the overall number of people trading on their own is increasing.
Robert Bell, via E-mail
The number of people trading on their own is increasing due to Internet access to trading. A February 4th article in The New York Times cited that one in seven stock trades placed in fourth-quarter 1998 in the US was entered as an Internet transaction, and online volume has risen since then. For information on individual traders, contact the American Association of Individual Investors at https://www.aaii.org.As to success in trading, so much depends on the experience and skill of the individual trader, as well as whether we're in a bull or bear market. In STOCKS & COMMODITIES, we often carry interviews with traders who've been successful. Their personal stories tell how they got where they are. Of course, technical analysis is an approach that can help you improve your chances for success by helping you determine when to buy and when to sell. -- Editor
NOVICE TRADER'S NOTEBOOK
Editor,The Novice Trader's Notebook area at your Website is very useful. Please expand it as soon as possible. Thanks!
Not only have we added two more topics to the Notebook (the broadening top and the ascending triangle bottom), but we also plan to add a new section to our Website called Traders' Notes, which debuted in the March 1999 S&C. While Novice Trader's Notebook introduces basic concepts, Traders' Notes reviews more advanced topics. Thanks for writing. -- EditorPeter Lucuk, via E-mail
MULTIPLE TIME FRAMES
Editor,Being a novice trader, I have made some costly mistakes when placing orders for commodities. Please set me straight: I have been using a weekly chart for setup and a daily chart for entry. I find that my most solid trades occur when the daily and weekly chart indicators agree, such as stochastics, RSI, %R, and MACD. Do you have further insight on this subject?
You are using a multiple time frame approach. Here are a few articles we've published on trading with multiple time frames:Al Werth, via E-mailDynamic Multiple Time Frames (November 1996) This private trader, who was profiled in The New Market Wizards, discusses one of his techniques to trade the market based on an early signal for trend direction. By Robert Krausz, MH, BCHEIn addition, I'll once again mention one of my favorite books that incorporates multiple time frames into its method, A W.D. Gann Treasure Discovered, published by Fibonacci Trader, www.fibonaccitrader.com. The Fibonacci Trader software also specializes in using multiple time frames. -- EditorTrading Multiple Time Frames (May 1995) 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
Time and Indicator Design (February 1993) Can indicators be improved upon by looking at them using different time frames to smooth and combine? By Gilbert Raff
S&P--DOW JONES SPREAD
Editor,I'm a subscriber and I tried searching your Website for a particular subject, namely, articles that discuss trading the spread between the S&P and Dow Jones futures contracts. Each query returned hundreds of references, but of the few I checked out, none mentioned the spread.
I have two questions: 1) Have you ever featured any articles about trading the spread between the two contracts? 2) Is there any way to enter several words in the search text box on your Website so that the references returned contain all the words in the search string instead of returning all of those references that contain any of the words in the string?
Sorry, we haven't published anything specifically on trading the S&P?Dow Jones spread, although we have published many articles on spreads and spread trading, such as our 1997 series of articles by Scott Barrie, our November 1998 article, "Seasonal Stock Index Trades" by James Greenwood, and our interview with Steve Moore, published in the October 1994 S&C (Volume 12), among other articles.Paul Ponzelli, via E-mailAs for using the new search feature at our Website, this search engine doesn't yet support strings or proximity searches. For basic search instructions, review the search tips given at the site. To view the search tips, click "go" on Search Information, then click on Search Tips. Thanks for writing. -- Editor
BEST MUTUAL FUNDS FOR TRADERS?
Editor,I am looking for an article that compares the best mutual funds for trading. Most of the mutual funds I contact limit trading to four roundtrips a year, and if you trade more, they penalize you.
Where I currently trade funds, whenever I buy a mutual fund, it takes a day to clear before it can be sold, and then it's another day before the cash shows up in my account. This is not unreasonable, but I'd like to find out if another mutual fund would be more suitable for trading.
Have you featured any articles on comparing mutual funds for traders, one that discusses commissions and loads? I like trading international markets, especially Hong Kong, Japan, and Europe.
Sorry, we haven't performed any kind of comprehensive survey of individual mutual funds and their transaction costs. Perhaps someone reading this would be interested in putting together an article on this topic. -- EditorChris J. Bohrer, via E-mail
Twinsburg, OH
ARTICLES VIA INTERNET
Editor,I have just recently subscribed to S&C. Is it possible to gain access to S&C articles over the Internet? After completing a search of your archives listed at your Website, I'm asked for a user name for SCPECIAL and a password. What does this refer to and how much does access cost?
Thank you for a great magazine.
We are currently looking into setting up a system at our Website whereby users would be able purchase articles of their choice in packets of 10; at least, that's where we're currently headed. However, we are looking for reassurance that readers would be interested in using such a system.Nicola Schmiede, via E-mail
St. Ives, AustraliaIn the meanwhile, we offer all our past articles on our CD-ROM ($395), which contains the thousands of articles we've published since 1982. S&C on CD not only contains past articles but also a flexible full-text search feature. This search feature is now offered separately on CD-ROM as a subscription premium for paid subscribers. This S&C on CD Index allows readers to look up past articles.
What's more, we have installed a new Internet search feature at our Website, https://www.traders.com, that we hope will become popular with readers. This search engine allows users to conduct full-text searches of our Website, our past articles, and other Websites in the industry as well.
Thank you for expressing your interest in retrieving articles from our Website.-- Publisher
GOOD RANGE AND SCOPE OF INFORMATION
Editor,I have subscribed to S&C for more than 10 years, which is some indication of my belief in its value. One aspect of the publication that has me continuing my subscription is the range and scope of the material covered.
Over the past few issues, Staff Writer Stuart Evens has done an excellent job of explaining some of the basic elements of technical analysis. Not only are his discussions helpful to the newcomers, but they are also good reviews for the old-timers. I encourage the continuation of his work.
I also welcome and look forward to complex articles, such as William T. Erman's February 1999 "Log Spirals In The Stock Market." Erman's work really caught my interest. I called him immediately about his forthcoming book on the subject. And this is not the first time I have followed up on an S&C article. For example, I am currently using information gleaned from a book I purchased from the author of another complex article you published years ago. Such articles open the door to further study. So I encourage you to continue publishing the more complex material.
Hugh Logan, via E-mail
ERRATA: CLARIFICATION
The charts that appeared in William Erman's February 1999 article "Log Spirals In The Stock Market" contained graphics that were based on charts provided by Topline Investment Graphics. Topline Investment Graphics can be reached at PO Box 2340, Boulder, CO 80306-2340, 303 440-0157, https://www.topline-charts.com.
ERRATA: LOG SPIRALS
In "Log Spirals In The Stock Market" in the February 1999 S&C, several errors appeared. In Figure 2, the following corrections are required:No. Incorrect date Correct date1. 10/10/74 10/04/74 2. 09/09/76 09/22/76 6. 11/24/80 11/26/80 8. 10/10/90 10//11/90When any of these dates appeared in the text or figures, the correct date was used.Further, in Figure 13, the correct total appearing in the lower left-hand corner of the top half of Figure 13 should be 4,028, not 1314.72.
In Figures 8 and 10, the axes' segments were incorrectly labeled and colored. All segments are listed and colored one-quarter turn too early, and should be rotated 90 degrees clockwise. For example, in Figure 8, "XE = 401.73" should read "XF," "XD = 292.6" should read "XE," and so on.
In Figure 10, the axis segment XG, value 757, was omitted from the column totaled in the lower left-hand corner of the top half of the figure. However, since all segments should be rotated 90 degrees, the missing segment is actually "XH." There were no computational errors of any sort, except for the faulty totals in Figures 10 and 13.
We apologize for any extra effort the error may have caused readers, and to the editors of S&C. We hope that readers still found the article interesting and helpful in their trading.
John Balsam
Ermanometry Research
ERRATA: ODDSCALC PRODUCT REVIEW
Editor,Thank you for a very fair and objective review of OddsCalc (S&C, February 1999). John Sweeney is to be commended for doing his homework before setting pen to paper. The only mistake was the Internet address you listed, which should have read https://www.psisolutions.com. Our Website has all the information on OddsCalc that is contained in our eight-page brochure.
Richard Bearse
Professional Solutions, Inc.