VOLATILITY IS KEY
Editor,
One of the joys of having created an analytical approach such as Bollinger Bands is seeing what others do with it. Thus, it was with pleasure that I read Stéphane Reverre's "Are Two Channels Better Than One?" in the January 2000 issue of Technical Analysis of STOCKS & COMMODITIES, The Traders' Magazine. Reverre, using relatively short and narrow Bollinger Bands, looked at what is essentially a volatility breakout system. This reminds me of the late Bruce Babcock, publisher of Commodity Consumer Traders Report, who, after exhaustive research into trading systems, concluded that his favorite approach was the volatility breakout.
It is interesting how the same ideas resurface again and again. I remain convinced that volatility is the central issue in investing. Recent academic research suggests that while price is neither cyclical nor forecastable, volatility is both. Maybe they are on to something!
John Bollinger, via E-mail
www.BollingerBands.com
Thanks for writing, John. -- Editor
VOLATILITY STOP SYSTEM
Editor,
Bravo on Mark Vakkur's "The Volatility Stop System" (STOCKS & COMMODITIES, October 1999). I liked this volatility stop system so much that I took the time to define it in MetaStock and add it to my indicator list. I look forward to using it in some of my system work. I'd like to see more articles in S&C that focus on stops, exits, and money management.
Ken Surgenor, via E-mail
Mandeville, LA
Thank you for writing. We've published many articles on stop placement, exit strategies, and money management in the past, and we'll certainly publish many more in the future. After all, it's what you keep that counts. -- Editor
MARKET PROFILE
Editor,
I have been a subscriber (and contributor) to your magazine for many years, and have never felt strongly enough to write you about any subject before. But I must say that the recent article by Jayanthi Gopalakrishnan ("Market Profile Basics," STOCKS & COMMODITIES, December 1999) is the best introductory explanation of this fine technical concept that I have ever seen in print. And that includes both Pete Steidlmayer's writings as well as my own. Good job, and looking forward to the follow-up articles on this subject.
Russell Sands, via E-mail
MARKET PROFILE DATA
Editor,
Thank you for the great article on Market Profile! I'm always on the lookout for different methods to improve my trading, and your magazine provides a steady stream of useful methods, Market Profile being one of them. The article was full of great information and clearly presented. I have a few additional questions. Are there any Market Profile chart/data providers on the Web or as a stand-alone package for stocks and indices? Are there any Traders' Tips planned for TradeStation to generate Market Profile output?
Thanks again and keep up the good work!
Thomas Alexander, via E-mail
Boulder, Colorado
Some Market Profile data providers include:
- CQG (https://cqg.com)
- Cisco-Futures (www.cisco-futures.com)
- WindoTrader (www.windotrader.com)
- Chicago Board of Trade (https://www.cbot.com)
Hope this helps. -- Jayanthi Gopalakrishnan, Staff Writer
WEEKLY S&P SYSTEM IN SUPERCHARTS
Editor,
I was recently looking at a back issue of Technical Analysis of STOCKS & COMMODITIES (June 1995) and was interested in Adam White's article, "A Weekly S&P Trading System."
Using SuperCharts, I tried to write a program that would duplicate his results for the same time period (April 1982 to November 1991) but couldn't get it right. Was there a formula published for SuperCharts for this system? You provided several formulas in your Traders' Tips column in the June 1995 but nothing for SuperCharts. Any help with this would be appreciated. Thanks,
Dave Berryhill, via E-mail
Omega Research submitted the EasyLanguage for the S&P weekly system for our August 1995 Traders' Tips column. That tip contained the EasyLanguage to be entered in the TradeStation and SuperCharts Quick Editor. The code is available from Omega Research's Website at www.omegaresearch.com in the STOCKS & COMMODITIES download section. The name of the file is "WeeklySP.ELA." You can download and transfer this code into the SuperCharts Quick Editor. -- Editor
WYCKOFF METHOD
Editor,
I am currently studying the Wyckoff course through the Stock Market Institute in Arizona and have also read material by Tom Williams, whose software, Vsa5, you reviewed in the August 1999 STOCKS & COMMODITIES. However, I am confused as to the difference between the two approaches; although Williams has based his work on the Wyckoff method, he seems to concentrate largely on individual bars as opposed to the big-picture approach, which the Wyckoff course takes. As information regarding such a specialized area is so hard to obtain in the United Kingdom, I would be very grateful if you could assist me in providing a possible answer to this query.
Mark Quinn, via E-mail
Tom Williams (Tom@TradeToWin.com) replies:
The difference in approach stems from the fact that I have used modern technology in the shape of the personal computer to try to isolate market activity. This technology is a relatively recent development, and as such, many proponents of Wyckoff have yet to make the investment in developing analysis software to apply the principles. As a result, they tend to restrict their analysis to the big picture, as this will not change too often.
Computerized analysis allows more frequent analysis of multiple markets and multiple time frames, something that is just not possible if you are doing the analysis manually. Our software does allow the analysis of all time frames so longer-term scenarios can be assessed. However, if you subscribe to the Wyckoff principles and accept that supply and demand, accumulation and distribution, trending and congestion are market characteristics, then you also believe that the forces generating this activity are present in a variety of time frames in the same market, since several distinct groups of trading populations are present, each with its own time horizon.
We always recommend that a market is analyzed in the longer term first and then the analysis is telescoped down to shorter time periods (perhaps to intraday bars), but that the very short-term bars are used for the tactical application of a strategy derived from the long-term analysis.
Hope this clarifies matters.
DAYTRADING
Editor,
Your December 1999 Opening Position really hit the mark about daytrading. It took me roughly 10 years of part-time trading and nearly a year full-time before I reached a level of consistent success. I have been successfully daytrading stocks for more than three years now as my primary source of income.
I express to everyone I train that the odds are, "You won't make it," and I describe the reasons. I find I have to help them readjust their expected time frame for the learning process. Days and weeks stretch into months and years. Income expectations also go through a reality check. In the end, your equity curve is a map of your learning curve.
Barry Rudd, via E-mail
OPENING POSITION
Editor,
In your December 1999 Opening Position, you suggested that we write to the editors of local newspapers that run irresponsible advertisements with unsubstantiated claims of amazing (and easy) success in trading. I suggest that you look at some of the advertising content of your own publication. Have you ever asked your advertisers for broker statements to support the claims they make? Have you ever done a survey of your readers to ask them if they have bought and traded successfully (backed by broker statements) any of the systems/methods advertised in STOCKS & COMMODITIES? Why is it okay for you to run these adverts but not the local newspaper?
Philip Nixon, via E-mail
Your point is well taken, although I don't see anyone guaranteeing success in STOCKS & COMMODITIES. I'm hoping we'll get more subtle promises in our ads, perhaps for sexy perfume or powerful cars. -- Editor
MASS INDEX
Editor,
The formula and explanation for determining the mass index in the sidebar on page 60 of the November 1999 STOCKS & COMMODITIES was poor; can anyone give me a better definition of this index? It does approach timing from a different viewpoint and I would like to program it into my computer, but as it stands now I would be creating a new formula, not entering the mass index.
Vernon B. Brunelle, via E-mail
The right-hand side of the sidebar refers to Donald Dorsey's original use of the mass index. You use the two moving averages to determine the existing trend once the mass index suggests a reversal. All the formulas are correct; all you need to compute the mass index is the material on the left-hand side of the sidebar. Ignore the right-hand side. -- Editor
Vernon Brunelle replies:
After reviewing it again the next day, I finally saw the relationship. Having programmed it for reviewing MetaStock databases, I found that the stock selected to present the buy and sell signals for this index was one of a very few that it worked on (I review 680 stocks daily). I also found that MetaStock 4.5 includes the mass index as one of the indicators in the MetaStock database with the same defaults.
Thanks again. I do enjoy your magazine.
ERRATA: TRADERS' TIP ON CANDLESTICKS
Editor,
I was entering the TradeStation candlestick code from page 80 of your January 2000 issue and found that all the greater-than symbols (>) were missing. I compared this code with the MetaStock code given in the original November 1999 article, "Coding Candlesticks" by Viktor Likhovidov to verify this. Having been in the computer repair business for 30 years, my best guess is the keyboard that was used to enter this code has a problem. I checked your Website for this coding and found it also to be incorrect. What first put me on to this problem is in the function CandleCode_B. The fourth line is:
Iff(CLOSEOPEN,1,0)* and should be
Iff(CLOSE>OPEN,1,0)*.
I appreciate the inclusion of these Traders Tips in STOCKS & COMMODITIES, so keep up the great work and great magazine.
Gerhard Hertel, via E-mail
Thank you for pointing out this problem in the January TradeStation code for candlesticks. The corrected code can now be found at our Website at https://www.traders.com/Documentation/FEEDbk_docs/backissues.html in the January 2000 Traders' Tips. It will also be available at https://technical.traders.com/sub/sublogin.asp for S&C subscribers. In addition, the author originally posted the code to the Russian Forex Club Website at www.forexclub.ru, although there, it helps if you read Russian. We apologize for the erroneous code. -- Editor
CLARIFICATION ON TRADERS' TIPS AT WEBSITE
Editor,
In the January 2000 Letters to S&C, you mention a section at your Website where subscribers can access and download EasyLanguage code for Omega Research products such as SuperCharts. Well, I went to your Website and couldn't find that area. Is that still under development? I would like to download into SuperCharts the EasyLanguage code for the indicators/systems mentioned in the November 1999 article, "Detecting New Trends Early."
Paul Hnidka, via E-mail
In our last two issues in our Letters column, we've mentioned that Traders' Tips can be found at our Website. To clarify, Traders' Tips for the current month's issue can be found at https://www.traders.com/Documentation/FEEDbk_docs/TradersTips/Traders Tips.html. This link is available from our magazine homepage at https://www.traders.com/S&C_Homepg.html under "This month in S&C." Traders' Tips for past months can be found in the back-issue archive at https://www. traders.com/Documentation/FEEDbk_ docs/backissues.html, which is also a link from our magazine homepage, https://www.traders.com/S&C_Homepg.html, under "Back issue archive." Tips that are originally posted to the current issue area are moved to the back-issue archive the following month.
In addition, we are offering long code and formulas from articles other than Traders' Tips at our Website in a special subscriber area at https://technical.traders.com/sub/sublogin.asp. Login will require your subscriber number and last name. Your subscriber number can usually be found on your magazine label.
See also the next letter. -- Editor
SEARCHING TRADERS' TIPS
Editor,
In the January 1999 S&C, in the Traders' Tip for AIQ TradingExpert, you state that the EDS code can be downloaded from your Website, www.traders. com. Well, I spent 15 minutes looking and still can't find it. Why isn't it linked to the "More Responsive Moving Averages" article, which is the article on which the concept for the tip was based? Why is it so difficult to find?
Jim Stewart, via E-mail
You should have been able to use our Website's search feature to help locate it; unfortunately, we neglected to update our search engine database to include the latest magazine issue. Normally, you should be able to find a reference to most everything published during our past 18 years of Technical Analysis of STOCKS & COMMODITIES, The Traders' Magazine.
Code for the Expert Design Studio (EDS) module of AIQ TradingExpert software, which implements the modified moving average described in Joe Sharp's January 2000 article, "More Responsive Moving Averages," can be found at https://www.traders.com/Documentation/FEEDbk_docs/backissues. html in the January 2000 Traders' Tips. -- Publisher
TRADESTATION CODE FOR MODIFIED MOVING AVERAGE
Editor,
Thanks for a great article by Joe Sharp ("More Responsive Moving Averages," STOCKS & COMMODITIES, January 2000). It sounded like such a good concept, but when I copied the TradeStation code from the Traders' Tips column as it is written on page 81 of that issue, it just doesn't plot the same way as in the examples you gave. In fact, it makes a plot precisely the same as TradeStation's "Custom 1 Line" moving average. I like your idea; however, as this code is written, it's useless. Maybe I'm missing something.
John Bond, via E-mail
MODIFIED MOVING AVERAGE IN EASYLANGUAGE. In the January 2000 Traders' Tips, Gaston Sanchez of Omega Research provided instructions for replicating Joe Sharp's modified moving average in TradeStation. This chart demonstrates that changing the input value used to specify the moving average length to a higher number makes the change in the moving average more pronounced.
Joe Sharp replies:
Since that code was contributed by the developers of the software, and since I use MetaStock for my work, I can't explain what the problem is. However, I did provide the basis for the idea in an Excel spreadsheet in my January article, so my immediate advice is to use that as a basis for your work.
Gaston Sanchez of Omega Research replies:
The difference that the user is seeing between the article and the posted EasyLanguage is a result of the input value that is being used for the length of the modified moving average. The default input value that was published in Traders' Tips was 2. Although this value is valid, because the indicator tends to more precisely represent the underlying price, a value of 2 is not large enough to display any difference between the modified average and the price. That is the reason why the modified moving average was displaying the same value as the Custom 1 Line (which simply plots the close of the underlying). A difference between the underlying price and the modified moving average value can be recognized beginning with a length of 3 and above. Also note that the two averages that were displayed in Figure 4 were 10-bar averages.
As an example, I duplicated the standard series test that Joe Sharp performed in his article. I plotted a four-bar simple moving average and a four-bar modified moving average on the standard series of prices. The results, as displayed in Figure 1 here, were exactly the same as those that were displayed in Figure 3 of the article.