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Scheier
We don't use moving averages (as such, on things like prices, etc.) however
we do use them in a couple of our own indicators. Again, we're mechanical
traders following our trading signals rather blindly up and down, so we
don't follow bull and bear markets. My dad has been a bear so long, he
hardly comes out of his cave. :) Our signals are of two types. The first
signal, which is a shorter term signal is one that is a compendium of 6 of
our indicators that heavily weights our own momentum. The second signal
(comprised of 2 but possibly expanding to 3 indicators and is triggered by
whichever one comes first) is based on our own overbought and oversold
indicators. Now these OB and OS indicators use a bunch of the same
components included in the first group while the new signal has a completely
different foundation.
Up until now, all of our systems (or subsystems or indicators or however you
want to refer to them) have been based upon the day's price action and how
we've related it to what has happened during different time periods. For
example, our thoughts on our momentum indicators are as follows. On an up
day (a day when the market closes up), our momentum calculations still
contain a downward component. The thought behind this is that rarely do you
ever have a day when all of the momentum is totally up since there are
always market forces in the other direction, just not as powerful. Remember
that old adage about for every action, there is an equal and opposite
reaction. In this case the opposite reaction isn't equal, but it's still
there. Anyway, our momentum indicators contain four components that we call
Up1, Up2, Down1 and Down2 (not too original, but that's what we named them).
Up1 and Down 1 are short-term components (clustered around a 14 day time
period) and Up2 and Down2 are longer-term components (which are around a 50
day time period). By the way, that's 14 and 50 trading days and not
calendar days. We then use these components in developing our momentum
indicators, which are called Mom1 and (you guessed it) Mom2. Again, these
are short term and longer term momentum indicators. Now I'm really
simplifying this calculation, as it was the one component that we were
unable to calculate in MetaStock until v.6.5.2. Our number crunching for
the S&P futures in MetaStock takes about 1.5 minutes on a Pentium II-400
with 196MB RAM for one years data.
Being mathematicians, statisticians, engineers and computer geeks, we have
probably assembled a too complex trading methodology. There are 14 tiers of
calculations and we still don't use charts or any of the "normal" techniques
or even any of the preprogrammed indicators supplied by MetaStock.
Everything is home grown and a majority was developed before there were
computers or even pocket calculators, so we have to take the full credit or
blame for the results.
The SP39 name we gave to our short-term indicator comes from the fact that
it was the 39th formula in MS DOS v.4 and is one of the signals we use in
making our trades. The SP refers to the S&P 500 futures.
Again, I'm not trying to be cryptic but we have almost 50 years invested in
developing these indicators (for three of us) that translates to over
300,000 man-hours and uncounted tens of thousands of computer hours
beginning in 1962. We started our computer work in 1960 and 1961 (way
before most firms on Wall Street) and went through the normal transition to
microcomputers before there were Apples or IBM PCs. When everything is
homegrown, and several methodologies were developed by hand (read that good
old trial and error) in the days before computers, it's sort of hard trying
to explain what we do that is so different than everyone else. It's easier
to say that what we do is unlike everyone else.
Again, I'll repeat that we're trading probabilities. We know that we have a
probability of being right 70-80% of the time. All of our trading decisions
are made with that in mind.
Guy
Paranoia...you only have to be right once to make it all worthwhile!
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of scheier
Sent: Sunday, May 14, 2000 2:51 PM
To: metastock@xxxxxxxxxxxxx
Subject: Long grains/short stocks /was Going Long - NOT!
Guy, was that a moving average sell signal? Although I don't use them, I
noticed a cross over and turn down this last week, and I'm vaguely aware you
use
such things in your system. Patterns still have me in a Nasdaq sell signal
from the last 3 day pullback, targeting 3100. But interestingly, I have a
new
pattern sell signal from Friday with the close below the gap-up opening,
apparently matching this signal of yours.
Coincidentally, that matched a buy signal in beans and corn Friday, both of
which quickly traded above their respective gap-down openings.
Recent 3 day pullback in July Wheat, which triggered last Wed, still targets
291. A close above 291, suggests this is not a simple a-b-c correction in a
down trend, and targets 315. If this happens, the Wheat continuation chart
suggests we're now in the beginning of an Elliott wave 3 of 5, which is
usually
characterized by a fast acceleration to new price levels. Therefore, a
cross
road is now at hand for wheat. Jul Wheat hit both the 78% and gap
resistance
with Friday's high, so stops on longs will now move in close. If Wheat
rejects
current price levels with a pattern reversal down, that would provide a good
set
up for a continuation of the down trend and an excellent shorting
opportunity. Next week, the wheat market speaks. Looks like it may be
time
to listen.
Scheier
Guy Tann wrote:
> List
>
> Well it appears that our buy signal didn't last long and we have a sell
> signal for Monday. This signal is one that we call a signal against our
> intermediate term signal, but we still follow it. Now we haven't
completed
> work on what our actions will be tomorrow, like selling on the open,
selling
> an hour into the day, selling on the close, etc. because we're busy with
> Mother's Day and won't get to that until later.
>
> It appears that our current trade will be a loser, depending upon
tonight's
> action and tomorrow's open. It's currently behind 6 points or $300 a
> contract.
>
> Our equity trade is also behind, but when you consider how much stock
we're
> carrying, we came back quite nicely. Actually this trade was in the black
> on Friday before the sell off. Again, we have to look at strategy here.
If
> I have time tonight, I'll post what we're planning on doing, otherwise I
> post tomorrow after the fact, since I have to go into the office tomorrow.
> I knew I shouldn't have gone back to work because it interferes with our
> other activities. I got greedy when they offered me almost 3% of the
> company at $.10 a share. Now that I see the impact on our trading, I've
> told them I would prefer to quit but they have requested that I stay on
> halftime, only going in 2 mornings and working the other 10 hours at home.
> I'll see how that goes before making a final decision. They also want me
to
> keep my shares, so maybe this will still pay off.
>
> Guy
>
> Paranoia...you only have to be right once to make it all worthwhile!
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