Active Trader Pro® is a platform that has been shaped by Fidelity Active Trader Pro PlatformsSM is available to customers trading 36 times or more in a rolling. PDF | Active stock traders, or day traders, who may account for a sizable proportion of US trading volume, hold stocks for only hours or even minutes. Active Trader Magazine (February)medical-site.info - Download as PDF File .pdf) , Text File .txt) or read online.
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You can display up to 14 columns of data. Stock traders wireless technology. The first column. Pocket PCs. Data and network service price. NET Compact framework pending software version. Figure 1 shows Dell is trending slower. MidCast can run on a variety of handheld devices.
System Internet-compatible wireless handset. Streaming quotes from the time. Texas In response. For each symbol. You can set an alert based on breaking news. The trading menu offers secure wireless links to six brokerage Web sites CyberTrader.
The latest quotes for each symbol in the watch list stream by in ticker format at the bottom of the screen. Figure 2 far right shows a tick-by-tick. Other third-party financial PDA software may offer other useful features. There are several symbols in Figure 1 such as QQQ.
MidCast Pro can stay connected to its server and provide streaming quotes for hours at a time. Each of the 14 price and volume items available in the watch list also appears on the chart screen. MidCast also makes it simple to copy and paste an article into a text editor such as Pocket Word so you can read it offline. In theory. Hollow bars represent unchanged prices and are green or red depending on the last price change. This four-minute. This watch list tracks 10 frequently traded stocks.
HillCast plans to provide seamless trading through its own order management system with a selected online broker. The trend indicator upper right tracks the price movement of the last eight trades. The trend indicator upper right tracks the price action of the last eight trades.
Charles Schwab and Scottrade or places a call to your broker at the push of a button. MidCast Pro does not offer historical charts. A drop-down menu allows you to plot different symbols without having to leave the chart screen.
Of course. Bottom line MidCast Pro takes advantage of the latest wireless networks to bring streaming quotes to an impressive array of handheld devices. Source for both figures: MidCast Pro Charting. The maximum per trade risk allowed in the program is two percent. In addition to the journal.
Entering your trade data is a bit quirky. This may have been cumbersome to add to the program in its current format. This is fine for students who follow his ideas lockstep. The rest of the Organizer is set up to record and view all current and past trades. Alexander Elder. This is simple stuff. Further choices such as Equity Curve. The program first asks for basic parameters such as account balance. Recording numbers is useful to a point. One thing missing from the program is a place to record the reason you entered a trade.
This nifty device automatically calculates how many shares of a given stock you can download given your money management rules. Equity Chart and Performance provide charts that monitor your performance and account growth or decline. Elder has created a software version of a journal available at www. But it has a few limitations and drawbacks for other kinds of traders.
March April 16 Pattern hallmarks Favorable earnings flags have several notable characteristics. Proprietary software Thomas Bulkowski 16 Nov. When the earnings announcement occurs. In a rising price trend. You might think that because I am disclosing the pattern here. A download sig28 nal occurs only when price confirms 27 the pattern by closing above its high.
That may or may not be true. Table 1 right contains identification guidelines for the pattern. The earnings flag is a pattern I discovered a few years ago and have traded since. The rally 36 35 usually continues in straight-line 34 fashion for a few days and then stops. On the day of the mations which are bounded by parallel trendlines and triangular pennant patterns earnings announcement.
Trying to trade a good earnings report in a falling stock market usually means reduced profits or an outright loss. On rare prisingly good earnings announcements.
Both patterns represent consolidations: A flag forms as a rectangle attached to a staff. Figure 1 shows them before the rest of the two examples: The August pennant has world finds out and takes away the a horizontal appearance and the November pennant has a downward slant.
The first is more horizontal. Although it will eliminate the vast majority of announcements. Pattern shape Price shoots up — sometimes gapping higher — and continues rising. Figure 4 emphasizes the need to wait tumbles below Do not trade unconfirmed patterns — that is.
Price gapped higher on the above the pattern top. The March pattern in Figure 3 is valid. The post-announcement rally is usually quick. Event Surprising quarterly earnings. In this case. They may be prime trading candidates. Failed patterns Amgen Inc. After confirmaborders instead of the parallel or converging upper and lower trendlines of a Retracements usually conform to a tion.
Such retracements after a quick rise should be allowed for. Price confirmation. The stock eventually Fibonacci ratio — that is. Price gapped higher after the earnings announcement and continued rallying for four days. After that. In the earnings flag example in Figure 2. This pattern is not an Confirmation Always wait for price to close above the highest high in the pattern. Price then consolidates. As consolidation patterns.
March Look at the November pattern on the Source: Proprietary software Thomas Bulkowski right of Figure 3. The logic behind this rule is simple: In Figure 1. The July pattern also does not qualify stop in place. Price never closed above high was a good clue to abandon the then started to correct at the point a flag the highest high of the flag. Proprietary software Thomas Bulkowski 18 Aug. Of the 73 patterns.
Seventy-three patterns were identified in 50 stocks beginning in There were not enough patterns from the bull market to separate and compare performance for bull and bear conditions. Less than two weeks later. Price climbed after the announcement and formed a flag pattern. Pattern stats Table 2 shows the statistics gathered on the earnings flag for this study. On this chart.
Analyzing performance statistics can improve trading performance by understanding how often the pattern tends to succeed and the size and duration of the typical moves that follow.
The three failure rates are comparatively high. This is the way an earnings flag is supposed to perform. Because gaps repre sent very strong momentum. Waiting for confirmation and using stops solves this problem. Big Lots. Figure 5 shows an earnings flag that performed well. Such rallies before an earnings announcement should make you wary of placing a trade.
If everyone thinks good earnings will be announced. Confirmation line Alpharma ALO. Fourteen percent of the patterns failed to rally more than five percent measured from the confirmation or breakout price — the highest high in the pattern — before a 20 percent downturn. These examples have shown what earnings flags look like on a chart. The other two failed to close above their respective highs. If price drops yield good results. This pat tern confirmed and was followed by a profitable move. Trading Classic Chart Patterns pattern high.
From the day the earnings announceThe best post-breakout gains emerge Additional reading ment occurred. In turbulent times. Description Number of patterns studied Biogen. The average rise was 19 per. April May June July Source: For information on the author see p. Considering bers are probably high because many December Trade carefully. Watch price closely. Although the general public is probably more aware of the unemployment rate.
The first is a survey of approximately Nonfarm payroll reflects the number of jobs that have been added or lost to the economy. The report. The second survey queries businesses more than TradeStation www. T he first Friday of each month typically marks an increase in volatility when.
Department of Labor releases its Employment Report. Market players anticipate the report days in advance. Because these Thursday figures fall right in the middle group of all trading ranges as shown in Table 1. If we start by assuming the employment number causes many shortterm traders to sit on the sidelines on Thursday. Fridays and Mondays around employment releases provides bench marks for what could be considered high-range.
Sorting all the daily ranges for these days into three groups. Daily trading ranges During the analysis period. These ranges are summarized in Table 1 above. To find out if there are any tendencies for the market to behave in a particular way from the day before employment releases to the day after them.
Fridays and Mondays compare to these figures. This places the average For Friday release days. The employment report. The observation period spanned January through September and encompassed 69 employment reports. Come Friday. Thursdays before employment reports are not. Practical application Although the discrepancy between the actual employment numbers and the estimates should ultimately set the stage for how the market reacts in the short term.
A second look So far. The post-employment day tendency was similar. Of the 69 employment releases. For Fridays with larger ranges than Thursday. Day Thursday Friday Monday Average range The two most interesting points are. Do employment Fridays always have wider trading ranges than their preceding Thursdays? This could be an incentive to hold on to a profitable position at the close of an employment day in anticipation of renewed momentum on Monday.
Another trader may have committed to a long position ahead of Friday if the market was making a substantial up move. Scratching beneath the surface. As mentioned previously. Of the 26 times Friday had a smaller range than Thursday. Monday ranges were. There were Minimum range 8. Mondays following Fridays that had ranges wider than Thursdays. The Mondays after employment reports had an average range of These figures indicate Monday.
This implies the market properly anticipated the employment release on Thursday when the range for that day was up approximately 25 points or more. Thursday average range Another interesting tendency is the Monday range expansion after Fridays with smaller ranges than Thursday. The download-and-hold return for this five-year period was a paltry 1. Many funds closed or con. Mutual of market weakness. The mutual fund explosion abruptly stopped and crosses above the moving average and selling when it crosses fund outflows gained momentum.
The total gain for the period shown hurry to get back in. History supports the profitability and advantages of this approach. As a result. Over the past year. The elusive key to this In the bear market that began in spring IRA and pension year moving average crossover system downloading when price accounts.
Mutual fund trading and market timing However. The small-cap funds are usually the most volatile and therefore the best vehicles for this type of trading. The Ease of Movement value determines the rate at which the price of a security is changing by analyzing the amount of volume. Best fit signifies the index that provides the highest R-squared value. URPIX x2. Frequent-trading penalties The day moving average crossover system would not have been subject to any regulatory trading constraints because of the low number of signals it would have generated over the five-year period.
USPIX x2. A fund with a beta of 1. These param eters also are available at MorningStar. The lookback period you use to determine this should encompass at least two complete up-down cycles in the fund. A more aggressive frequent-trading strategy. For a definition of these terms. The best-fit index of this fund is the Russell index. Glossary est received for the 2. But some funds modify this privilege to deter frequent trading by delaying the exchange or requiring a three-day settlement period between the sale and subsequent download.
The goal is to provide optimum protection for the fund during times of general market weakness. Most funds allow their shareholders to exchange shares of one fund for shares of another fund in the same fund family. RYVNX x2.
Examples of this type of fund and their parent indices are shown in Table 1. Instead of selling the mutual fund position during a period of market weakness.
Short funds: Hedging and trading alternative Short funds usually have a direct inverse relationship to an underlying market index and have no frequent-trading restrictions. The steps required for initiating and managing the trade are: The formula is: The beta of the benchmark index is 1. There is a way around these penalties. RYTPX x2. Balancing act In this case we will work with a trading-day period Jan. We will assume we are preparing to initiate this investment on Jan.
Although it is a no-load fund. Changes in the inverse hedge fund are presumed to occur at the same time as. A download signal occurs when the EMV is positive. It should also be noted that because SHPIX was nonexistent during the early years of this illustration.
Short funds are relatively new — no short funds for the Russell were around then. It is appropriate to recalculate the hedge coefficient at regular intervals because of changing market conditions and possible fund management or strategy adjustments.
The trade summary of using an inverse fund as a proxy for selling illustrates the effect of hedging a long-side fund position. The indicator and its system is not the focus of the study. Table 2 shows the results of this system — downloading SHPIX hedge on margin whenever a sell signal is generated — from through Brokerage and margin fees are not included in this analysis.
Instead of trading completely in and out of mutual funds with a timing system.
Late trading Mutual funds have been in the news recently because of alleged fraud on the part of fund managers. Rather than focus on the final percentage gain.
These hedges are calculated to neutralize the drawdown risk while capturing the superior appreciation inherent in the higher volatility of these funds. Figure 3 is a percent-change chart that compares the performance of the Russell 9-percent gain. This ambivalence could be removed by having a market-timing strategy that would allow bull-market profits to accumulate and decrease drawdown risk during periods of market weakness.
Active Trader does not recommend downloading or selling any market. In other words. Active Trader provides this data in good faith. See the legend right for explanations of the different fields. The indicator readings are NOT trade signals. There is a high level of risk in trading.
If both conditions are not met. ETF Snapshot Legend: Ticker symbol. Overbought and oversold signals are NOT trade signals. Whether a day momentum indicator registers the market as overbought OB. Long-term trend direction. This information is for educational purposes only. The reader assumes all responsibility for his or her actions in the market. Short-term trend direction. Intermediate-term trend direction. The percentile rank of the current trend strength read ing compared to those of the past three months.
The percentile rank of the current volatility reading compared to those of the past three months. Active Trader assumes no responsibility for the use of this information. Exit 1. The system does not sell short. Test data: If these two conditions are met. Glitch Index 0. Starting equity: General Motors GM. This prevents the system from entering when prices snap back from an extremely overbought level. These strategies share a common timing technique — they attempt to take advantage of minor extreme price movements.
The formula for calculating the Glitch Index is: Walt Disney DIS. Apple Money management: Hewlett28 www. The theory is price will move back to its norm. Citigroup C.
The Glitch Index must be less than —2. Dark green bars indicate a GI of greater than 2 the sell zone. Equity Cash 2. This system was inspired by the more successful stock systems that have appeared in the Trading System Lab. Deduct 1 cent per share commission per trade round turn. Boeing BA. Glitch Index Markets: Caterpillar CAT. Cisco CSCO. Wealth-Lab Inc. Light green bars indicate a GI greater than 5. The annualized return of 6. Microsoft MSFT.
There are several ways to run a Monte Carlo analysis. Coke KO. International Paper IP. This new result represents a potential outcome of the system based on the historical trading dynamics and has its own unique net profit and drawdown. Monte Carlo simulation: Before trading a system. For each bar.
Packard HPQ. Maximum drawdown in this period was only Each run randomizes either the equity curve data or the underlying trades to create a new equity curve and performance result set. The system. Intel INTC. A Monte Carlo analysis can answer questions such as: Profit factor: Payoff ratio: Recovery factor: The Trading System Lab is intended for educational purposes only to provide a perspective on different market concepts.
Sharpe Best Worst Percentage Max. Test period: November through November The low exposure of the system indicates there is still room to increase the position size and squeeze out more performance. Bottom line: The Glitch Index system is conservative and achieves good results considering the low exposure and low drawdown.
More than 98 percent of the Monte Carlo runs resulted in a net profit. Traders are advised to do their own research and testing to determine the validity of a trading idea. It has seen some rough times since then. Wal-Mart WMT. It is not meant to recommend or promote any trading system or approach.
Net profit — Profit at end of test period. The distribution is compiled over the entire historical testing period. This method can effectively capture the dynamics of the historical testing period. The system was created in May Longest flat days: This analysis supports the idea that the Glitch Index is a robust system that performs well over time.
Past performance does not guarantee future results. System results: The equity curve in Figure 2 results shows the system returned Figure 3 shows a distribution of net profit from all of the Monte Carlo simulations.
One method to gauge this is a Monte Carlo simulation. Sears S. We see no reason why the market should not overcome the inevitable adversities of the pres- The market moves between booms and busts. Results from show after a decline of 7. Our response is that you may not be around in a century.
As the typical move after any day is only 0. My collaborator beats the market with great consistency when he stays out of Southeast Asia. You two advocate the download-and-hold philosophy. How do you reconcile these two conflicting pieces of advice? The conflict is more apparent than real. I had a table showing what happens in the market after declines. Yet the 20th century suffered through two world wars. No other class of investments came anywhere near those results.
I performed the same study with Dow Jones Industrial Average data for the 70 years before In the subsequent seven years. As with all of our other trades.
Tables 1 and 2 below show the results. Paul Marsh and Mike Staunton The one investment book we recommend to all traders and investors. People also argue the circumstances of the 20th century were exceptionally favorable to the market. The data covered the years Many investors gave up on download-and-hold during the market crash.
Can you improve on download-and-hold? Sure you can. Both results are highly significant from a statistical standpoint. No comparable survey of global markets had ever been done. Triumph of the Optimists. I have since updated the study. Princeton University Press. Education of a Speculator 30 Source: Niederhoffer Investments www. Holding onto your shirt while others are throwing in the towel. The Education of a Speculator.
In my first book. In both periods. I would disagree with Henry Clews in one respect: Rather than putting the overplus into real estate. The public is always leaning the wrong way during these times. For more information on the authors see p. Then they always download good stocks to the extent of their bank balances. This helps oil the vast machinery of Wall Street: If you can make just 3 or 4 percentage points a year above and beyond the usual download-and-hold by downloading in panics.
Trader Victor Niederhoffer and finan cial writer Laurel Kenner. It is from an book by Henry Clews. When this time comes. Twenty-Eight Years in Wall Street: But few gain sufficient experience in Wall Street to command success until they reach that period of life in which they have one foot in the grave.
The reason this kind of method holds up is the market moves between booms and busts. Send questions to gbuch bloomberg. How to reconcile this with download-and-hold? Everybody should keep a reserve for opportunistic investments — or. For more information. The CME. That means they will specifically look at any illegal or suspicious trading activities in those markets.
No one will go on record about the possibility. The two exchanges are fighting a lawsuit by Eurex stating they are in violation of the Sherman Act. ECN-like way of hosting trades. In short. Likewise for the CBOT?
At the forefront for the CBOT Futures Exchange. How long the scenario remains behind the scene remains to be seen. Beyond the current common efforts. With its electronic i. It seems so distant. The two exchanges that have long dominated the U. If — or more accurately. The case is currently pending. The CBOT was once an exchange that some thought might go public.
Eurex moved closer to its goal of launching its U. It does more volume than the CBOT. It has all those issues ironed out. The minority members sought a court injunction to prevent a vote on demutualization.
The CME has already successfully demutualized. S exchanges are fearful of new competition. He has no concerns about the quality of the application and says that in the four-week comment period.
Ferscha is still committed to beginning Feb. While Newsome said there is no target date for a decision. He also finds it ironic that while Eurex claims the U. While the NFA provides self-regulatory functions for many futures exchanges. Many exchanges choose to do those services themselves. As for the transatlantic link. Chicago Board of Trade chairman Charles Carey echoed those concerns and also criticized what he sees as a potential lack of transparency in the Eurex model.
Also present at the hearing was James Newsome. Michael McErlean. Futures Exchange will operate as a U. The agreement is for three years. McErlean added that the payment scheme was no different than volume discounts given by U. They know all the steps down to the end customers extremely well. According to Ferscha. He also said the U. Chicago Mercantile Exchange chairman Terry Duffy voiced concerns about the Eurex exchange application in three different areas — payment for order flow and internalization.
The U. Futures Exchange board of directors will consist of 12 members. They have a deep resource and know-how in that sphere. Anything other than that had to be treated as a separate product. Less than one percent of financial options are traded electronically. But I think it will grow. EuronextLiffe has already worked with 53 firms who chose that option. Once the netting was cut in half. Durkin believes the real-time capabilities of the new system will increase volume dramatically.
A pricetime algorithm fills orders on a firstcome. The CBOT already trades 85 percent of its financial futures electronically. Durkin says the new system. The remainder of the products switched over Jan. A pro rata algorithm looks at all the composition of orders in the marketplace and disperses those on an even basis. Durkin says that allows the system to maintain an orderly marketplace.
That will cut down on processing time and will allow users to send more messages. There is also a pro rata with priority algorithm in which traders providing stronger levels of liquidity will get a higher quantity of the positions available at that price. The CBOT eclipsed its all-time volume record set in by trading Both exchanges saw a record volume decrease.
Minisized soybean. The QQQ. C u r re n c y traders at JP Morgan Chase. In some cases. The CME saw its interest rate products. DIA and PeopleSoft. The ISE remained the No. In reality. SBC Communication. The New York Board of Trade had another strong month as year-to-date volume was up 17 percent to Societe Generale.
In return. The CBOE claimed 32 percent of all options volume. In addition. New York Mercantile Exchange volume as of Nov. According to the FBI. General Electric topped the list with 5. Most brokers arrested were charged with fraud. Year-to-date totals for the ISE increased by 77 percent from the same period in The ISE traded 27 percent of the volume. Metro Goldwyn Mayer and Wal-Mart rounded out the top five volume contracts.
In just a few months. E-mini Russell futures Juniper Networks. The FBI raided several Wall Street currency brokers in an month sting operation that netted almost 50 arrests. With a total monthly volume of 6. Under the plan. The agreement pertains to futures markets affiliated with options exchanges that clear through OCC.
The initial markets will be on tea tree oil. The new fees on Eurodollar. E-Mini and foreign exchange futures and options will be 44 cents per contract. Timber Hill had 40 floor traders in but only nine in late For the year. The CME also said it would make sure its audit. The exchange also plans to change the structure of its board of directors to include seven non-industry representatives — three more than currently serve.
While there was speculation a few months ago that Eurex was interested in downloading BrokerTec rather than going through the process of applying for exchange status. The DCE is the largest futures exchange in China. Under the agreement. The second phase of the rollout creates several opportunities for increasing liquidity among members and market makers and also has a more efficient order facilitation.
The agreement runs for three years. The firm said it wanted to focus its attention on exchanges with a greater electronic presence.
More than option classes are trading through the hybrid system. In early November. For information on specific Globex contracts and trading hours see www. The company uses a similar set There are two aspects of overnight trading to address: For hours. Getting the data Generally. Most high-volume U. Should you trade these periods or include them in your analysis? For more information on specific trading hours. In late November During this time traders can initiate new positions or close out existing ones.
In New York. Day session and night session data is typically distinguished by different ticker symbols. Historical data is also segregat Pawlicki has found that relying on the composite price bar for T-bond futures gives him more accurate support and resistance price levels. For this reason. If it is German bunds.
Figure 1 is a five-minute chart that shows trading in January crude oil futures from the end of the Tuesday. Volume talks John Bollinger. CT on Monday and ends at 3: LLC in Chicago. CT except on Sunday and settles at 3: The same goes for evening crude oil trading in New York. But because of the typically lower volatility and volume big moves and heavy trading mostly occur when a huge news event rocks the markets.
Although the charts are very similar overall. Be sure to check the overnight volume figures for any markets you are interested in. Trading activity dropped off noticeably during the overnight session. Overnight trading sessions can be useful. Tom Pawlicki. Bollinger argues. To analyze or not to analyze Even though volume is much lighter in overnight electronic trading sessions.
T-bond and Dow futures markets he watches. But I also spent years testing trad- probability trade; let me see if I can make sell at the market when I want to get out. We be working an offer ahead of time: If I tested a million patterns and tendencies, AT: Do you routinely reverse positions?
But I offer out there at 1, But if you have something that ceptions about short-term trading. On an hourly chart, those may develop over a two- or three-day period.
First, if ing. The systems have as a floor trader? In a high- points, then rally another four points. Even the T-bonds all at once. Indicators are just deriva- risk. Once you see that spot, you might tives of price.
So the actual price action is AT: How long is your average short- as well get in and put your whole posi- always going to be one step ahead of any term trade? When you average a tum highs or lows, which signals contin- with Nasdaq positions two weeks or so. Averaging is a really bad habit — At least you can quantify indicators.
So, for assessing market tenden- LBR: I trade at the market on 90 percent the position on in two parts. How do you manage your highs on the day. Can we test the volume in that direction. I monitor two-day high? Can we pull back to the everything by whether short-term con- moving average. That gives a pretty some momentum, there are usually good road map. The market should continue good most of the time. The minute you see it As far as getting out of trades, if the the levels intraday, and the TICKs the give back more than it should, you get market reaches a price objective and difference between up-ticking NYSE stocks out on the first reaction or pause.
I try to stay with a position as AT: Is your trading based more on direct long as I can and take half off. I usually price action or on the indicators or sys - AT: What specifically are you looking for? But you need that In Bottom of For a longer TICK readings But it also depends on volatility.
If the market is really swinging around, you Rally For tertrend than I am now. The age you can in the index futures. The TICKs behave almost exactly the same way. But I use them to confirm a trend as one step ahead of any indicator.
Unfortunately, I can honestly say to scale into trades all the time. My account had upside than they do to the downside. The bottoms of sell-offs will be accompa- Internet game laughs.