December 2003 Letters To The Editor
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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
REGULARIZATION
Editor,
The concept of "Regularization" presented in the July 2003 S&C seems to be very new to the field of technical analysis and is interesting because, it says, it can solve the two main problems of any indicator: smoothing and lag. Can you refer me to any books or websites where I might learn more about this?
Gomu Vetrivel
Chennai, IndiaThe idea of regularization is not used often in technical analysis, or at least not published. However, regularization has frequently been used in the field of statistics. If you are interested in finding out more about the subject I recommend an Internet search. -- Editor
INTRADAY VS. END OF DAY
Editor,
In "Strategies For Daytrading" in the August 2003 S&C, the author mentions the differences between intraday and end-of-day trading. I think intraday trading has traditionally meant closing the positions at the end of day and not carry the position forward. So in what way, according to the author, are intraday and end-of-day different?
Vetrivel, via email
Chennai, IndiaIn the article, the author, Jacob Singer, specifies that intraday trading means trading in and out of trades several times during a trading day. An end-of-day trader can make just one trade during the day. According to the author, such a trader would not be considered an intraday trader. --Editor
Robert Deel Interview
Editor,
In your October 2003 interview with Robert Deel ("Managing Money & Risk: Robert Deel"), you ask him, "How is money management different?" In response, he says he "can tell you within $2,500 or $3,000 ... how much money I'm going to lose next year." Does he mean that he plans to lose money each year and is not profitable overall on an annual basis? Somehow I think something is missing from his answer. Surely Deel is not suggesting that we should all plan for the amount of money we will lose and not ever plan to be profitable. Is he possibly talking about maximum drawdown? Is he profitable in spite of this?
Ron Scott, via emailRobert Deel stresses on the importance of projecting your losses and preserving your capital. In this case he is merely discussing the total amount of his losing trades, not his net returns. -- Editor
OPTIONS EXPIRATION
Editor,
I just read "How Many Options Actually Expire Worthless?" from the January 2001 S&C, which I downloaded from your Online Store at your website. However, the author never answered the question. What he did answer is what percent of options expire worthless on a monthly basis. A percent is not the same as "how many." "How many" is a number, not a ratio.
What I am looking for is where the options expire in relationship to the strike price at the time of purchase, and the relationship to the bid price at the expiration date.
Michael Haggert, via emailI might suggest the options toolbox software available from the Chicago Board Options Exchange's website at www.cboe.com/toolbox, where you can analyze all possible outcomes of options expiration before you place a trade.--Editor
ADVISORY SERVICES
Editor,
Do you write about advisory services and their track records? Can I search your site for advisory firms and how well they do?
Patrick, via emailWe do not cover advisory services and their track records. Our main focus is publishing articles that teach trading techniques and how to use technical analysis. We do provide a listing of various advisories at our website, www.Traders.com, in our Traders' Resource area, but it is a listing, not a ranking or rating.
I'd suggest checking the SEC's website at www.sec.gov and the National Futures Association's website at www.nfa.futures.org for practical information to consumers on selecting advisors.--Editor
MECHANICAL TRADING SYSTEM
Editor,
I am interested in simulating trading on a basket of 100 to 200 stocks using a mechanical trading system intraday. Can you tell me what platforms are available that would facilitate applying an intraday trading strategy to 100 individual stocks automatically?
David Bozkurtian, via emailCheck our Traders' Resource listing at our website, www.Traders.com, for the trading systems category, which lists product features.--Editor
WOLFE WAVE
Editor,
I've gone through several years of back issues searching for an article about the Wolfe wave, but no luck. Can you tell me if you have ever done an article on this methodology and, if so, in which issue can I find it? If you have not published an article on this topic, do you know where might I find some unbiased information?
Adam Boserup, via emailThe Wolfe wave is a proprietary methodology sold by Bill Wolfe at his website, www.wolfewave.com, in the form of a $3,000 course. We have not published anything on this proprietary technique, and we have no plans to review the coursebook. --Editor
DAYTRADING THE E-MINI WITH POINT & FIGURE
Editor,
I just purchased your September 2003 issue to read Eugene Steele's "Daytrading The E-Mini With Point & Figure." On September 22, a point & figure chart configured with a box size of 0.33 and a reversal would have resulted in more than 70 trades. On September 21, this approach would have required more than 60 trades. Even if you have excellent execution and a "self-directed" trading account with low commissions, the brokerage costs still would have been around $377. The distribution of trades for both days would have been around breakeven, and the brokerage costs would have taken care of the two nice trend runs on both days.
The trading example given on page 42 is not helpful at all. What day is this? The ES contract has not traded at 1144 for a long time. This day does not look like a representative ES trading day. It is difficult to say, as there is no date with the example. Is the data real? Or just fantasy levels generated for this article?
STOCKS & COMMODITIES at one time would have not published this article, which is nothing more than shilling for "Daytrading: The Course." I don't wonder why the author did not want to include an email address but rather drive people to his website.
I have subscribed to STOCKS & COMMODITIES magazine for most of the past 10 years, but I canceled my subscription due to weak or completely misleading articles such as this one. I am sure this article will generate more emails such as this one from your readers. File this article in your "Lose Money Fast" folder.
Mike Timmons, via emailI suppose publishing the results of the author's trading system on Figure 4 was misleading. It was included merely to show the power of P&F charting. The intent of the article was to educate readers on using P&F charts, not by any means to sell the author's system. -- Editor
MORE ON THE SUBJECT
Editor,
I read Eugene Steele's article, "Daytrading The E-Mini With Point & Figure," in your September 2003 issue with great interest, as P&F has yet to become a frequently used method in my market analysis tool box. However, I found Steele's presentation of trading results misleading. He claims that he "stayed in the market and allowed only one box to react" (he sets his box size at 0.33 of an S&P e-mini point so as to limit risk at one point). As it takes three boxes to reverse and the three boxes will paint the chart all at once as soon as reversal point is reached, I don't know how he could base his trading on one box. From his P&F chart (Figure 3) and his trading results table (Figure 4), he seems to imply that he captured every reversal at most precise points in these trades. That would be improbable, if not impossible, with such a volatile instrument as e-mini, even if these trades were presented as hypothetical fantasy trades. The author owes the readers of his article an explanation, unless, of course, he intended his article as infomercial for his trading course.
Peter Li Port, via email
Washington, NY
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