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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Lachesis Atropos who wrote (16431)	6/8/1998 12:17:00 AM
From: Tom Trader	Respond to of 68474

>>Tom's Trading system trades futures or options Futures--no idea whether it would work with index options I suspect that it would work writing index options, but that is more a hunch than anything else

To: Lachesis Atropos who wrote (16431)	6/8/1998 4:22:00 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68474

Hi Lachesis, Sorry for the late reply. It has been a beautiful weekend here in Vancouver and I am trying to enjoy it. It has been a great spring so far. >MCI is bent on coming out with good earnings until the WCOM >merger happens or not, for fear of what happened with the BT case. Do you anticipate some more write downs and layoff in the current Q then or has the bulk of that already happened? >I did notice that an $8.00 stock behaves more like >other $7-$9 dollar stocks than to a $45 dollar stock. >Even if all the stocks are in the same sector. Most institutions will not hold stocks that are less that a certain market capitalization. Most stocks below $10 probably do meet the critieria. Once the institutions hold a large portion of the float the trading characteristics of the stock changes in my experience. >The 200-day moving average and SD measurements are not very reliable. >I'll ruffle a few TA feathers on this explanation. 200, 100 and 50-day >moving averages, head and shoulder patterns are all classic TA portents. >Now one has to ask the cause and effect question. I agree that the support and resistance of specific moving averages is an arbitrary construct.I personally believe they work primarily because these specific indicators are well known and are closely followed. This has been a traditional TA argument. It is the old chicken and egg story. I think the important point is to be aware that other trader are watching these and other indicator and incorporate it to your model. I don't think cause and effect are as important for trading as being able to recognize the beginning of the effect and being able to exploit it. >Overall the 200-day ma shows the direction of the momentum. It is a good >long-term indicator. For long- term trades it is better to buy into the >momentum rather than oppose it on a SD indicator (I see the flames >coming from the Bollinger group). I agree that the fact the price is some many standard deviations away from the 200 day moving average is insufficent to generate a sell signal by itself. I think the point of the Worden Bros. Indicator was that it is very statistically unlikely for a large percent of all the 3000 or more stocks on the exchanges to all be 2 standard deviations above their 200 day moving average at the same time. This would indicate a situation where a majority of stocks have run up very quickly in price. This usually indicates a situation of unsustainable market euphoria. I have not have a chance to see how well the indicator correlates to market corrections. yet. It looked interesting because it is a very simple indicator and I like to keep things simple. >Harry sorry about the last response. I missed a few vowels and the run >on sentences ran away on me. I hope it is readable. No problem, I appreciate the detailed response. >Tom's Trading system trades futures or options? I would think, an >options trading system would be risky. Or is it like trading futures? >The way I understand futures' trading, is that one can loose 4 out of 5 >trades and still come out ahead. Even given this, trading stocks seems >to be more forgiving, you can make a few bad trades and then make up the >difference on the next few days. With the 4 out 5 assumption one can get >runs of 20 bad trades (not uncommon) in a row which could be devastating i>f one did not have a lot of resources. Tom's system is used to trade futures as he indicated in a message to you. I will add a few other points that I have learned about Tom's system through his positings. Hopefully Tom will jump in here if I am being inaccurate. I believe he has said that 50 percent of his trades are wrong on average, but the dollar value of his winning trades more than offsets his lossing trades. He exits his position once he has a 40 point gain. He has strict exit rules that take him out of a lossing trade immediately. He does not let his losses run nor does he average down. Tom does not talk too much about the specifics of his system, but he is usually willing to talk about the general concepts required in constructing a system. He has tried quite a few techniques in his time. >Also, I was told that futures' trading is governed by Technical Analysis >more than Fundamental Analysis. I don't have any experience trading futures. The minimum dollar amount per contract can very expensive. From a risk management point of view I don't like to concentrate that much capital in a single trade. Jim or Tom can probably give you an opinion as both are experienced futures traders. Regards Harry