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Past experience would seem to indicate that the prudent strategy would be
to allocate assets on the four rules as laid out in Chapter III. Whether
you have a buy or sell by AIQ's own definitions depends entirely on your
risk reward choices and the consequent confirmation level. We have no
disagreement as far as I can see. You trade stocks, I trade options. With
options you have to be a step ahead and use rules 1 and 2. "Trading on
unconfirmed Expert Ratings is common with traders of of both index and
equity options. These traders have found that, if they wait for signal
confirmation, the option premium has already jumped." A 1% difference in
the results between DD and Telescan is not enough to convince me to switch
from Telescan. In fact as an option trader there are many trades put on
that don't have ER buy or sell ratings. It is just that when they do occur
it is a "load up the boat" time. AIQ also addressed the issue of money
management in just jusing rules one and two. All I am saying is when
someone says AIQ issued a Buy or Sell it has to be taken in the context of
what it is they are trading. The terms have been used too loosely on RT.
BobR
At 08:42 AM 10/20/97 -0500, you wrote:
>Bob:
>There is no contoversy in my mind whether a AIQ Buy/Sell signal is confirmed
>and what is used to confirm the signal. I agree with everything you have
>said. Telescan users got a Sell signal last week which to them is
>confirmed. However, Dial Data users have not gotten a Sell signal. The
>difference between Telescan and DD data is that Telescan reports the high
>and low on the DJIA as ACTUAL HIGH and LOW whereas DD reports it as
>Theoretical High and Low. Theoretical High is calculated as if all the DJIA
>stocks reached their highs for the day at exactly the same time. This
>rarely happens, and what you see on CNBC and other feeds during the day is
>Acutal High/Low numbers.
>
>When AIQ was first developed the WSN reported theorectical h/l numbers and
>the few data services at the time reported the same so that is why AIQ used
>Theorictical h/l. Many users have called AIQ and questioned why Telescan
>users get one signal and DD users get different signals. They are very
>close but not always identical. For example, I believe 3-4 months ago
>Telescan users also got a confirmed Sell signal (no signal on DD) and the
>markets did not drop but advanced. AIQ has done a backstudy on ER signals
>given by DD vs. Telescan in the last issue or two of the Opening Bell
>Magazine. Their study revealed that DD had about a 1% gain over Telescan
>data going back several years.
>
>Since I go with AIQ and their default data of Theoretical H/L via Dial Data,
>there has been no Sell Signal issued. Only time will tell if AIQ will get a
>sell signal using DD over the next couple of days. There is no way to plug
>in numbers and see if when or if a sell/buy signal will occur in the future.
>
>I've looked at other market breadth build systems (ie: OEX with breath built
>numbers from the individual OEX stocks) and there is still nothing
>comparable to market timing than the traditional AIQ market Buy/Sell signals
>based on the DJIA for price action and the NYSE breadth numbers and NYSE
>volume numbers to base a AIQ ER rating.
>
>Officially, if you call AIQ they will tell you AIQ is on a Buy signal at the
>present time. That can change anytime based on DD numbers.
>
>Lee
>-----Original Message-----
>From: bobrabcd <bobrabcd@xxxxxxxxxxxxxxx>
>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>Date: Monday, October 20, 1997 7:02 AM
>Subject: Re: MKT - djia and ER numbers
>
>
>Here are some quotes from the AIQ "Technical Indicators Reference Manual"
>on confirming Expert Rating Signals. Chapter III lays the confirmation
>options out quite clearly. The controversy on RealTraders about whether a
>Sell or Buy signal is given really reduces to the style and instrument of
>trading.
>
>"These rules vary in complexity, in responsiveness, and in risk/reward
>levels.
>
>1. No Confirmation
>2. Price Confirmation
>3. Price/Volume Confirmation
>4. Independent Coroboration by Separate Trading Expert Components"
>
>"AIQ Expert Rating signals are designed to anticipate changes in the
>direction of price movement."
>
>"Rule 1. No Confirmation
>The lowest level confirmation rule is simply no confirmation at all. With
>this rule, Expert Ratings are accepted at face value and trades are entered
>without reliance on other information. This rule has the highest level of
>associated risk, but it is a valid trading strategy and one that is used by
>some AIQ users."
>
>"Since the "no fonfirmation" strategy results in a greater number of trades
>than the more selective confirmation strategies, traders must rely on good
>money management techniques to minimize losses from trades that go against
>them. At the same time, they must not exit too early from trades that are
>working. This type of trading is only for the experienced, nimble trader."
>
>"Trading on unconfirmed Expert Ratings is common with traders of both index
>and equity options. These traders have found that, if they wait for signal
>confirmation, the option premium has already jumped."
>
>This rule and Rule 2, Price Confirmation, make up the majority of options
>and futures traders on RT. Price confirmation "involves the use of
>trend-following indicators to verify a signal." Rules 3 & 4 are used by
>investors/traders that prefer lower risk entries and thus require more
>confirmation.
>
>For example, an option or futures trader using the AIQ ER Rules 1 & 2 the
>last two weeks would have been short NDX, SPX futures and or long put
>options on NDX, OEX. NDX had three back to back 95 to 100 sell signals
>from the group breadth builder a week before it tanked out of a classic
>wedge formation. The OEX and DJIA also had ER signals that were precient.
>Price confirmation was clearly layed out here on RT with various technical
>patterns such as the "wedge", stochastic momentum, and volatility
>indicators. Most likely these traders exited entirely on Friday 10/17 an
>hour and a half before the close. Ten for one gains in such a short time
>are rare and only occur in market crashes or gonzo moves on an occassional
>expiration. Those who use rules 3 & 4 are most likely hoping that Monday
>provides some relief. There is no question in my mind that AIQ issued a
>valid sell signal in the context of rules 1 & 2 and in the context of using
>options and futures as tradeables.
>
>BobR
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