December 2001 Letters To The Editor

or return to December 2001 Contents

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

TREND DETECTION INDEX

Editor,

I always look forward to receiving STOCKS & COMMODITIES and seeing what new indicators may be presented. The October 2001 S&C article by M.H. Pee on the trend detection index (TDI) was intriguing and very well written.

The TDI seems to have a lot of promise. I would very much like to compare it head-to-head with other trend measures, such as the ADXR, vertical horizontal filter, polarized fractal efficiency, Chande momentum oscillator, and so on. That is half the fun - to see how a new technique compares with established ones!

Thus, I was most disappointed not to find the TDI in MetaStock format in Traders' Tips in that issue, as is usually the case when a new indicator is presented in your magazine. Will you be presenting this soon, I hope? Please?

 - Richard Sternbach, La Jolla, CA


Equis International presented the code for the trend detection index in the November 2001 STOCKS & COMMODITIES in the Traders' Tips column, page 99.-Editor

VARIABLE AVERAGE FORMULA

Editor,

As I was browsing the 2001 Bonus Issue of STOCKS & COMMODITIES, I came across an article by Tushar S. Chande, "Identifying Powerful Breakouts Early." I use MetaStock 7.2 end of day and I would like to use this indicator, combining a variable-length moving average (Vidya) and a variable-length momentum oscillator (dynamic momentum index, or DMI) with my other indicators, but the issue did not contain the Traders' Tip.

Thanks for a brilliant magazine - I learn new and useful things from every issue.

 - Zulqernain Majeed, via e-mail Berkshire, UK


See also the next letter and response.-Editor

VARIABLE-LENGTH MOVING AVERAGE

Editor,

How can I use the indicator builder in MetaStock Professional to build the variable-length moving average (Vidya) that was discussed in the September 2001 S&C in John Ehlers's article, "MESA Adaptive Moving Averages"?

- Nick Chen, via e-mail


We don't seem to have a Traders' Tips submission from Equis International on implementing Vidya in MetaStock, although we have some Traders' Tips from past years on various other types of variable-length moving averages (use the search engine at our website, Traders.com, to locate these). Please contact Equis at Equis.com for information about the indicator builder in MetaStock.

See also the next letter.-Editor

ADAPTIVE MOVING AVERAGES

Editor,

I read John Ehlers's September 2001 S&C article, "MESA Adaptive Moving Averages," and I would like to know if it's possible to have the formula for MAMA in MetaStock. Thanks for your great work.

- J. Rodrigues, via e-mail


Cheryl Abram from Equis International replies:
The formula for MAMA had to be implemented in C++ through a MetaStock MSX DLL; therefore, the code could not be reprinted in STOCKS & COMMODITIES. However, the DLL can be downloaded from our website at https://www.equis.com/customer/support/formulas/tasctt_8_02.html.

TECHNICAL ANALYSIS DEGREE

Editor,

I am a Portuguese trader and a big fan of your magazine. I'm writing because I'm very interested in obtaining a degree in technical analysis. I would like to ask you if you could advise me on where to go for this (preferably online).

- Afonso Castro, via e-mail


Although we're not aware of any degrees that are awarded specifically in technical analysis, several universities offer degrees in finance or related fields and include technical analysis coursework. However, if it's certification in technical analysis that you're after, see the next letter for information on the Chartered Market Technician (CMT) program, which is administered by the Market Technicians Association (MTA). You'll see some of our authors and advertisers with this designation, and it's a fairly well-respected professional designation in the field of technical analysis in the US.

In the meantime, here's some general information on some university offerings and formal education toward technical analysis. Some universities offer coursework over the Internet, while others may not.

The New York Institute of Finance (NYIF) offers formal or continuing education in finance, trading, and investing. It offers applied training and education in a variety of formats, such as classroom training at a variety of times, seminars and conferences, customized training, independent study, and exam preparation. You can contact NYIF at Two Broadway, 5th Floor, New York, NY 10004, 212 859-5000, 800 227-NYIF (6943), fax 212 344-3469, https://www.nyif.com.

Several other universities in New York City also offer an assortment of finance courses and programs, including Pace University and New York University, among others. Contact the schools for a course listing.

The Chicago Mercantile Exchange, in conjunction with DePaul University, offers a certificate following the successful completion of its futures and options program. Candidates take eight courses (five core courses plus three electives) and must pass a comprehensive examination to earn the certificate. More information is available by contacting the CME Education Department at 312 930-6937 or by sending e-mail to edu@cme.com (or visit the CME Website at www.cme.com/educational/center/).

IIT's Stuart Graduate School of Business in Chicago offers a program that leads to an M.S. in finance. Representative course offerings include: "Financial Modeling Risk Management," "Econometrics and Futures," "Options and OTC Derivatives," and "Quantitative Analysis." For more information, the school's address is 565 W. Adams St., Chicago, IL 60661, 312 906-6500, www.stuart.iit.edu/fin/.

The Institute for Technical Market Analysis of Golden Gate University in San Francisco offers a curriculum of graduate-level classes that lead to a master's degree in finance and also offers a graduate certificate in technical market analysis. Those graduate-level classes include topics such as the writings of John Murphy, Martin Pring, and Richard Wyckoff; trading psychology and trading discipline; building trading systems; investing through the Internet; and behavioral finance. One survey course is offered over the Internet. Contact Henry Pruden at 415 442-6583, fax 415 442-6579, www.hankpruden.com (which includes a link to the university website), or https://teleport.com/~ifta/TSAA/tsaahome.html.

Zoologic offers online courses in futures for financial professionals. All courses incorporate pre- and post-learning tests for assessing learner performance, and all content has been developed by finance professionals with specific expertise in the areas covered. Contact Zoologic in New York City at 212 367-4700, 800 482-2643, fax 212 367-4747, questions@zoologic.com, www.Zoologic.com.

Finally, you could visit our website at Traders.com and navigate to the Courses & Seminars category of our Traders' Resource feature. This is a listing of some courses and seminars offered by different for-profit and not-for-profit organizations, although these won't necessarily lead to a degree or certificate. And don't forget to check the Internet for other online courses from accredited universities that we may not have mentioned here.-Editor

WHAT IS A CMT?

Editor,

I have been a subscriber to your magazine for about a year. In an advertisement, I saw the designation "CMT" after the name of John Bollinger. I was wondering if you could tell me what a CMT is and what I would have to do to become one, and/or where I can find information about the CMT designation. Thank you.

- Dan Byers, via e-mail


A Chartered Market Technician (CMT) is one who has passed two annual exams given by, and submitted an original research paper to, the Market Technicians Association (MTA) (https://www.mta.org), which is a professional association for market analysis professionals with the goal of exchanging information, administering educational programs, and upholding ethics codes and professional standards among technical analysts.

Unfortunately, the MTA was located in the World Trade Center, but their office is currently set up at 74 Main Street 3d floor, Woodbridge, NJ 07095, phone 732-596-9399, fax 732-596-9392. You should be able to reach the organization for more information by contacting Shelley Lebeck at Shelley@mta.org or through https://www.mta-usa.org.-Editor

TRADING AS A CAREER

Editor,

I'm currently a professional stockbroker for a major broker/dealer and am seeking a career change to a full-time trader. Can you provide me with some assistance on how to go about locating a company and what the qualifications are?

- David Briscoe, via e-mail


If you're already a professional stockbroker, you don't need further qualifications. There are several daytrading outfits nationwide that will be happy to accommodate you.

In addition, we've published many interviews over the years with traders who tell how they entered trading and who may provide insight into becoming a trader and what it takes day to day. In case you're interested, those interviews include:
 


 You can find these at the Online Store at our website, Traders.com.-Editor

CODE FOR DIVERGENCE

Editor,

I am looking for some good code for defining divergence. Can you tell me where I could find it? I use MetaStock and also develop my own systems in Visual Basic. I can also work with Fortran or C++.

I currently use the slopes of the regression of the close and the indicator with time as the independent variable, and define divergence as a positive slope for the one and a negative slope for the other. But I'm not sure if this can be used for divergence as used in trading systems. Please advise.

- Jan Vanderpeet, via e-mail


What you're really asking is whether the trends of a momentum indicator and price differ. Because both price and momentum can be noisy, a short-period price or momentum trend measure can give false signals because of retracements. An alternative would be to measure trend strength. R-squared is the best indicator I know of to quickly determine this. Used with the slope, it tells you whether you are trending up or down. A combination of the two is the best I can suggest.-Dennis Peterson, Staff Writer

PORTFOLIO-TRACKING SOFTWARE

Editor,

I am looking for a simple software program I can use to track the performance of my accounts versus the indices. I don't want to manage my portfolio with the software, I just want to use total portfolio values for different time periods to determine performance and compare that performance to the indices. Do you know of any software product that would meet that need?

- Shane Hill, via e-mail


Several programs offer this feature. One free site is MSN Money. You could also check the portfolio management category of our Readers' Choice Awards in our Bonus Issue. The 2002 STOCKS & COMMODITIES Bonus Issue will be automatically mailed to all subscribers around the first of the year.-Editor

STOCK-SCREENING TOOLS

Editor,

After reading your magazine, I finally understand that my ability to screen stocks will determine the height of my trading success. I am a subscriber to S&C and am curious if there is any software available to screen information based on fundamentals (say, a horizontal analysis of 10Q statements) to give an advanced indication about which stocks to begin building a position in. I would then like to use technical analysis software to effectively time my trading in that security.

Love your magazine, especially the interviews. It helps a young trader fill his knowledge gaps.

- Jason Henry, via e-mail


Several websites offer screening based on fundamentals. Yahoo! Finance and MSN Money are probably the two most popular.-Editor

PAIRS TRADING

Editor,

I was wondering if you have ever discussed the strategy of pairs trading (that is, the trading of industry pairs). If so, is there a way I can get hold of the particular article? I am willing to subscribe to get the information I am looking for. I once had a subscription to your magazine and know that you often provide formulas. Have you any formulas for pairs trading?

- Trevor Wisniewski, via e-mail


We published an article on pairs trading in the March 2001 S&C ("Exploiting Closely Related Stocks: Pairs Trading" by Stéphane Reverre). You can purchase this article from our Online Store at Traders.com or call our subscription department at 800-Technical to order the single back issue (if available).-Editor

BALANCE OF MARKET POWER (BMP)

Editor,

In "Balance Of Market Power" (S&C, August 2001), author Igor Livshin constructs an oscillator based on three types of rewards. But I think it lacks one more type of reward: today's open minus yesterday's close; that is, overnight action on digesting news by market participants. Without this, the oscillator may interpret the situation incorrectly.

Suppose the Nasdaq opened down with a gap of 100 points, then rallied from the open 50 points, and closed at the high of the day. Say the situation repeated five days in a row. Calculating the oscillator's value based on the four intraday values (today's open, high, low, close) will indicate a very bullish bias, when in reality the price was dropping like a stone.

 - Anna Mozhaeva, via e-mail Russia


Ivor Livshin replies:
This suggested addition to the BMP formula would cover the after-the-market-close activity (specifically gaps). However, I personally would not include this part in the BMP calculation for the following reasons:

 
1  Gaps happen relatively seldom, and their impact on multiple days' (say 14 days) aggregate value of the Bmp indicator is minimal. I can't ever remember seeing five gaps in a row.

2  Very often, the overnight activity is wrong and has a short-lived impact on the market direction.
 

PROPHET AND BALANCE OF MARKET POWER

Editor,

We enjoyed the discussion on balance of market power (article by Igor Livshin in the August 2001 S&C and discussed in the Letters to S&C column in the October 2001 S&C) and especially appreciated Igor Livshin's reply regarding the philosophy behind the study, which explains why this study is a valuable tool for traders.

Prophet (www.ProphetFinance.com) provides web-based charting and has just added balance of market power (BMP) to the new Prophet JavaCharts. In addition, you'll find the Aroon indicator and Aroon oscillator, also discussed recently, in our library of more than 100 studies. Just thought that fellow readers might enjoy a free, online
source for these indicators.

 - Chi Huang, Prophet Financial Systems, Inc.


TIME-SEGMENTED VALUE

Editor,

Following the interesting article on balance of market power (BMP) in your August 2001 issue, could you perhaps explain the use and calculation of time-segmented volume (TSV) in a future issue? This would be of particular use to users of software other than TC2000, such as MetaStock, SuperCharts, Excel, and so on. Thanks.

 - Mark Berger, via e-mail


Thank you for writing in with your topic suggestion.

PAPERTRADING S&P SYSTEM

Editor,

Where can I find a good paper-trading system with real-time quotes and charts to boot?

- Ralph Morrison, via e-mail

We covered several paper-trading systems in Working Money, The Investors' Magazine. Use the search engine at Working-Money.com to locate them.-Editor

VERTICAL HORIZONTAL FILTER

Editor,

Do you know of any charting systems available to the public that include a Vhf filter?

 - Tom Mcgeachin, via e-mail


Of the products we've reviewed, MetaStock from Equis International (Equis.com) and MarketWarrior 1.2 from Austin Financial Group (Marketwarrior.com) include VHF. Other programs may also have it, but unfortunately, we aren't familiar with every feature of every product .-Editor

PATTERN DAY TRADE

Editor,

I am not very familiar with the new regulation about pattern daytrading, but I know that I was very affected by this new rule. (My account being under $25,000, I can affectuate only three round trades in five days.) I was daytrading and also position trading. It looks like now I have to give up daytrading and be very careful about the number of positions open at any time and the number of trades executed in every last five days.

It would be interesting to find out what the reasoning was behind this regulation and how the small (account) trader was affected. A possible article?

 - Calin Ionita, via e-mail


Thank you for writing in with your story idea. If anyone reading this would be interested in writing on this topic, please let us know at Editor@Traders.com.-Editor

AUTHOR GUIDELINES

Editor,

What a wonderful magazine! I've found a new home to absorb my passion for the artistic side of financial trading. Keep up the great work.

Over the last year, I've been courting the marriage of time-series regression analysis with traditional momentum oscillators. I had tremendous results and would like to share my research with your readers for both academic purposes (contributing to the greater knowledge base of technical analysis), as well as leveraging real-world feedback from your reader base and editorial staff.

It appears that you accept articles from freelance authors. What are your guidelines and terms for article submission? I'm anxious to participate more directly in your magazine and would enjoy contributing.

 - Greg Mihran , Palo Alto, CA


We most definitely welcome articles from outside contributors and readers. We will e-mail you a copy of our writing guidelines, which are also available at our website, Traders.com. We look forward to hearing from you.-Editor

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