August 2001
Letters To The Editor
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
or return to August 2001 Contents
EISENSTADT INTERVIEW
Editor,
Thank you for the wonderful, clear-structured interview with Samuel
Eisenstadt of Value Line in the May 2001 issue. Above all, two important
keynotes stuck in my mind. These keynotes are excellent guidelines for
any rational work in the field of technical or fundamental analysis of
the markets.
First, Eisenstadt stressed that only exact, discernable, and known
information must be rationally arranged and operated on to predict trustable
guidelines of future market behavior. Second, he emphasized the importance
of intersubjectivity, an important factor in all real scientific work.
Two rational-minded people confronted independently with the components
of the work must come to exactly the same decision about which part of
the system the labeled element will belong to. This point highlights the
weakest part of much of the work in technical analysis.
Continue the great work!
Heinz Kock, via e-mail, Germany
RISK/REWARD RATIO
Editor,
I am relatively new to trading and have heard a lot about the importance
of figuring the risk/reward ratio. Could you please explain how this ratio
is computed?
Rob Locascio, via e-mail, Austell, GA
Before you enter any position, you should have a good idea of what price
would prove you wrong in your assumptions. You should also have a good
idea of what price action would prove you correct. The first tells you
the amount of loss (incorrectly termed "risk") you're willing to accept.
The second tells you the amount of gain you expect. Divide the gain by
the loss to get the reward-to-risk ratio. -Editor
FOURIER ANALYSIS
Editor,
I am interested in any information on using Fourier analysis to detect
recent stock price trends. Do you know of anyone who is pursuing this?
David Shedivy, via e-mail
A full-text search of S&C on CD, which contains thousands
of articles published during the last couple of decades in Stocks &
Commodities, produced 124 articles, sidebars, or letters that contain the
term "Fourier." At http://store.traders.com, you'll find 19 references
to Fourier.
Fourier analysis (FFT) is most often used to detect cycles in data over
a period of time. The knowledge of when cycles exist can be used to design
a filter system, such as a moving average.
For possible market prediction, you may also want to look into the maximum
entropy method (MEM) of cycle detection. MEM can be used with a smaller
sample of historical data. Using less data gets you closer to the current
market action. -Publisher
HISTORICAL DATA
Editor,
I am looking for historical data on the number or percentage of stocks
over and under their moving averages. I need this information for the NYSE
and the Nasdaq. Do you know where this information is available?
David Tse, via e-mail, Los Angeles, CA
Check out Worden Brothers' TC2000 service. It shows the percentage of stocks
above and below their averages. -Editor
READERS' CHOICE AWARDS
Editor,
Where can I find the 2000 Readers' Choice Award winners for best
stock software under $200, best stock data, and best data download software,
plus other winners?
Tomas de Matteis, via e-mail
The Readers' Choice Awards are published every year in our Bonus Issue,
which is automatically mailed to paid subscribers. To receive it, you must
subscribe. Contact our circulation department at 800 832-4642 or circ@traders.com
for subscription information.-Editor
MORE ON READERS' CHOICE AWARDS
Editor,
I am a bit curious about the criteria for judging software in your
Readers' Choice Awards. How are the awards chosen?
Sid Marquis, via e-mail
As the name implies, the Readers' Choice Awards are voted on by
our readers. The editors gather a list of products (with spaces for write-in
votes) and mail it with the magazine to a sampling of US subscribers. Subscribers
vote for the products they find most useful in their trading and investing,
then return their ballots to us. Our computer data service tallies the
votes and we publish the results in our annual year-end Bonus Issue.-
Editor
PYRAMIDING POSITIONS
Editor,
I am looking for a well-written, tested, and proven book on the methodology
of adding (pyramiding) existing positions -- whether they are in the stock
or futures markets. Any suggestions?
Bill Collard, via e-mail
The reason there are no books on this subject is that pyramiding
is a well-defined path to disaster. However, building a position is covered
in my book Campaign Trading (John Wiley, 1993).-Editor
ERRATA: OPTIONVUE 5
In the June 2001 issue, the OptionVue 5 product review incorrectly stated
that a free 30-day trial of OptionVue 5 is available. The 30-day trial
is not free; it costs $49. We sincerely regret the error.
ERRATA: TRADERS' TIPS
In the June 2001 Traders' Tips, in one of the tips for Investor/RT on
page 60, we inadvertently duplicated Figure 6 and omitted Figure 8. We
regret any confusion the error may have caused. The correct image can be
found in the July 2001 Traders' Tips at our website, Traders.com.
In addition, in the July 2001 Traders' Tips, we inadvertently left out
a tip on calculating VIMA submitted by Investor/RT. Look for it plus additional
tips in this issue.
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