April 2007 Letters To The Editor
or return to April 2007 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
EDUCATION IN TECHNICAL ANALYSIS
Editor,
I hope you can help me. I am interested in becoming more knowledgeable in technical analysis. Could you recommend companies or organizations that not only provide educational material but also have a support staff that can answer questions?
Chuck E.
Chicago, ILTechnical Writer David Penn replies:
Various educational websites could help, such as TradingEducation.com. Some websites include forums for questions and discussions with other users. I've written on some of these educational websites in the past in our Websites For Traders column and will continue to write about them in future columns. (Past columns can be viewed at our website, www.Traders.com, in the back-issue archives area.)
Another approach you could take is to purchase or subscribe to some technical analysis software that offers a combination of online support, message boards, peer support, and so on, such as TC2000 or other software that is usable by all levels of traders. Search for other such programs online or by perusing our Traders' Resource database of products at our website, www.Traders.com.
A third option is to listen to technical analysis radio programs over the Internet, like Gary Kaltbaum's program (garyk.com) or The Stock Doctors (stockdr.com). These kinds of programs can provide real-time instruction on technical analysis of stocks and markets. Both of these particular shows are also call-in shows, so you can call up and ask your questions on the air.
Of course, you could also use a combination of these approaches to further your education.
In addition, you might also want to see my review of Foundational Analysis beginning on page 58 of this issue, which is a DVD series from David Nassar of MarketWise, which offers a lot of educational resources for traders.
Editor:
You might also browse the Traders' Resource area of our website in the "Courses & Seminars" section and "Consultants" section, as well as checking our classified ads in the "Educational Services" section for possible tutoring services, and finally, check our Readers' Choice Awards section in our Bonus Issue for the categories of "Trading Centers, Schools, Training" and "Technical Analysis Websites." Our Bonus Issue was mailed to subscribers last month.
FROM NILE TO NYSEEditor,
Congratulations to Radha Panini on her well-written article published in your February 2007 issue. I have a few nitpicking questions for her and a request.
1) On page 46 in the sidebar "Models of stock price behavior," in the first equation, which is for the Brownian model: "m" (the mean, or mu) is paired with time t, suggesting that if m = 0 (which it is for a random fair coin toss 50/50), then time vanishes -- strange! If m = 0.1, time reappears. Is that consistent mathematically?
2) In the same sidebar, in equation 3, if I set m = 0, variance = 1 and H = 0.5 (to compare to equation 2 under the same random conditions), then equation 3 ends up with the last variable as the square root of Wt, whereas equation 2 ends up with W. Should both equations be equal for this narrow case?
3) On page 47 in the sidebar "Brownian motion and fractional Brownian motion," in the equation for Brownian motion, covariance = min (s,t). What is the significance of {s,t}? Is covariance the same thing as autocorrelation?
4) On page 47 in the same sidebar, in the equation for fractional Brownian motion: If I substitute H = 0.5, it reduces to E = s. Is that correct? In addition, you state that it reduces to the standard Brownian motion. Is that correct in view of E = s? If so, is it the same result as in my point 3 above?
5) I wasn't aware one can apply H to a random series as you did in Figure 2 on page 47. Can I do that in Excel, where I can create various random series using just two variables, the mean and standard deviation? If so, how do I introduce the H parameter?
6) Can you send me the three series involved in Figure 2 so I can explore them in using Microsoft Excel?
7) In your very last equation, shouldn't log be LN (natural log)?
Thank you for any help you might give me.
Norman J. BrownRadha Panini replies:
Thank you for your note. I am glad you liked the article. Here are some answers to your questions:
1) If m = 0 (the random case), there is no drift with respect to time but there still is a time-dependence through Wt.
2) In this case, W as it is written is not Wt to the power of H but rather is a notation that represents that Wt is dependent on H. In the case when H = 0.5, the equations are identical.
3) min(s,t) represents the minimum of the two variables s and t. Correlation for any two random variables is the covariance divided by the standard deviation of both variables. Autocorrelation is the correlation between elements of a time series.
4) If you substitute H = 0.5 in the equation, it reduces to E = min(s,t), which is the same as the covariance for the standard Brownian motion.
5) Well, you can calculate the H value for a time series that you create in Microsoft Excel. I am putting together a package of indicators and one of the functions calculates the Hurst exponent for the time series. I will send you the package when it is ready.
On the other hand, if you are trying to create time series with different values of H, you will need to use an algorithm to generate fractional Brownian motion. You can find the algorithm in many textbooks (for example, in the appendix of Edgar Peters' book Chaos And Order In The Capital Markets).
Let me know what you are trying to do and then I can try and point you in the correct direction.
6) If I dig out the files for the time series I used, I will send them.
7) Yes, the log is the natural log.
I hope these answers make sense. Feel free to mail me if you have any further questions.
FUNDAMENTAL SCREENINGEditor,
I am looking for an advanced fundamental screening tool for global stocks. I have seen PowerScreener 3.0 but I find this too limited for my needs in terms of the underlying data you can test, its coverage of only US stocks, and its inability to backtest.
Does anyone know of a fundamental screener that meets my requirements? The only alternative seems to be something like Factset, but they seem to cater more to the institutional market than retail traders.
Jim Simpson
S&C writer Sharon Yamanaka replies:
Getting all three of the criteria you seek in one product doesn't seem like an easy combination to find. In all likelihood, you're going to need two different types of software: one for fundamental screening, and one for backtesting. The screeners I've found that have the ability to scan fundamental data don't also offer backtesting, since backtesting is really more related to technical analysis than fundamental analysis.
Further, it can be difficult to find fundamental data on foreign companies (if that's what you mean by global stocks); or at least, the data is never included in such popular financial information websites such as Ameritrade, Yahoo!, Fidelity, and so on. Thus, I don't know offhand of who would offer that. In addition, the fundamental data that I can find on foreign stocks is usually in the form of annual reports, not quarterly data, and those don't supply adequate information for what I want to know when I'm buying stocks. I believe that foreign companies are not required to submit quarterly reports to the public.
The Kirk Report website keeps a list supplied by its readers of the most popular screeners. Since PowerScreener doesn't fit your needs, you might want to investigate the list at:
https://www.thekirkreport.com/2007/01/stock_screeners.htmlTry also checking the Traders' Resource database of products at our website, www.Traders.com. Search on criteria that are of interest to you.
ANTICIPATING MOVING AVERAGE CROSSOVERSEditor,
I may have spotted an error in Dimitris Tsokakis' article "Anticipating Moving Average Crossovers" (S&C, February 2007). The author correctly arrives at equation [A3] but then I believe makes a mistake in subsequent formulas by using the term MA(K-1) as the previous value for the SMA of period (K-1). The mistake is that the term MA(K-1) represents current (not previous) values for the SMA of period (K-1). The mistake flowed through to MetaStock's code for the formula.
LJ
New York, NYDimitris Tsokakis replies:
There is no mistake in the fundamental formula. The formula [A3] gives the formula of MA(K), the k-days simple moving average, as a function of MA(K-1)-1, which is the previous value of the MA(K-1). In the very next formula, we go to the next day. Every term should go one day ahead.
Thus:
TMA(K) is tomorrow's value for the MA(K)TC is tomorrow's closeandMA(K-1) is tomorrow's value for MA(K-1)-1
I hope this is clear. You probably did not see the small subindex "-1" in the term MA(K-1)-1. Unfortunately, I do not know MetaStock formula language so I cannot follow the code.
DAYTRADING ARTICLES?Editor,
I'm a Brazilian trader and an S&C subscriber for more than a year. I have the intention of forming a study group on technical analysis. I'm interested in daytrading strategies and would like to know what S&C articles and books would be useful in learning the art of daytrading.
Andre Teixeira de Salles
You can search the archives at our website for daytrading articles (www.Traders.com). Here are some articles -- and books (of the many available) -- to mention.
Bright, Don [2003]. "Survival Of The Fittest," Technical Analysis of STOCKS & COMMODITIES, Volume 21: January.
Busby, Thomas L., and Patsy Busby Dow [2005]. Winning The Day Trading Game: Lessons And Techniques From A Lifetime Of Trading, John Wiley & Sons.
Chahin, Roberto [2004]. "Breakeven Analysis For Daytrading," Technical Analysis of STOCKS & COMMODITIES, Volume 22: October.
Chan, Lawrence [2003]. "Daytrading The E-Mini," Technical Analysis of STOCKS & COMMODITIES, Volume 21: August.
Gopalakrishnan, Jayanthi [2004]. Interview: "Daytrading With Toni Turner," Technical Analysis of STOCKS & COMMODITIES, Volume 22: July.
Jones, Donald [2005]. "Daytrading With Market Value," Technical Analysis of STOCKS & COMMODITIES, Volume 23: May.
Nassar, David S. [2004]. How To Get Started In Active Trading And Investing, McGraw-Hill.
Penn, David [2004]. Websites For Traders: "DayTradingCoach.com," Technical Analysis of STOCKS & COMMODITIES, Volume 22: July.
Peterson, Dennis [2001]. Quick-Scan, "Daytrading: The Course," Technical Analysis of STOCKS & COMMODITIES, Volume 19: July.
Singer, Jacob [2003]. "Strategies For Daytrading," Technical Analysis of STOCKS & COMMODITIES, Volume 21: August.
Smith, Gary [2000]. How I Trade For A Living, John Wiley & Sons.
Turner, Toni [2007]. A Beginner's Guide To Day Trading Online, Adams Media.
Velez, Oliver, and Greg Capra [2000]. Tools And Tactics For The Master Day Trader, McGraw-Hill.
READERS' CHOICE AWARDSEditor,
I was wondering when your Readers' Choice Awards will come out. I voted online at your website and would like to see the final results.
Bill T.
Our Readers' Choice Awards appear in our Bonus Issue, which was mailed about two weeks ago to current subscribers of STOCKS & COMMODITIES.
Awards are based on results of a reader poll conducted at our website. Products and services are broken out into more than 20 categories, including data services, brokerages, institutional platforms, online software, standalone technical analysis software, plug-in software, artificial intelligence software, options software, trading systems, trading schools, and technical analysis websites.
Our Bonus Issue also includes a software listing, new articles, and a "bonus" STOCKS & COMMODITIES article from our early years in honor of our upcoming 25th anniversary.
For information on subscribing to S&C and how to get a copy of the Bonus Issue, call 800-Technical or email Circ@Traders.com.--Editor
Back to April 2007 Contents
Originally published in the April 2007 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2007, Technical Analysis, Inc.