Professional Documents
Culture Documents
www.technicalanalyst.co.uk
TA in Spain
Preview IFTA Conference 2004
Outlook for the Nasdaq
DeMark Indicators
US Presidential Elections
WELCOME
Editor: Matthew Clements (MSTA)
Managing Editor: Jim Biss
Editorial Board:
Mikael Bask, Umea University, Sweden
Tai-Leung Terence Chong,
The Chinese University of Hong Kong
Wing-Keung Wong,
National University of Singapore
Marketing: Vanessa Green
Sales: Christopher Leigh
Design: Paul Simpson
The Technical Analyst is published by
Clements Biss Economic Publications Ltd,
Matthew Clements
Editor
September/October 2004
CONTENTS
SEPTEMBER/OCTOBER 2004
Special preview of the IFTA CONFERENCE 2004
page 13
Industry News
05
32
39
Book Review
Technical Trading Tactics by John Person
Software Review
40
MTPredictor RT 4.0
44
Long-Term Technicals
46
48
Contents continue overleaf
September/October 2004
DeMark Indicators
20
The US Presidential
Election Cycle
25
Market Views
Nasdaq - weak IPO confidence dents technical outlook
EUR/USD - a new challenge to a two-year trend
US Treasuries - bears may soon be back in control
07
09
11
14
16
18
Techniques
Impressive signals from DeMark
The US Presidential Election Cycle - fact or fiction?
Introduction to Kagi Charts
20
25
28
Subject Matters
Backtesting predictors of the S&P 500
When does technical analysis work and when doesn't it?
September/October 2004
34
36
Industry News
Berghorst:jberghorst@futuresource.com
THOMSON FINANCIAL
TARGETS HEDGE
FUNDS
Industry News
Meanwhile, CQG
has opened new
offices in Yerevan,
Aremia, Samara
UPDATA INTRODUCES
ADVANCED TECHNICAL
ANALYSIS FOR BLOOMBERG
TRADESTATION
ANNOUNCES SELFCLEARING FOR EQUITIES
www.tradestation.com
September/October 2004
Market Views
NASDAQ
WEAK IPO CONFIDENCE DENTS TECHNICAL OUTLOOK
by Karen Griffiths
he time line remains a tough nut to crack when technically forecasting movements in any market.
Establishing direction and range is relatively easy by
comparison. When using technical tools to provide answers
to questions which are wholly impacted by fundamental
events, the fact that your analysis is based on a study of historical pricing allows you to relax in the knowledge that the
anticipation of these events is built into the current price
action. All of this fundamental information is therefore
built into your technical indicators. Accordingly, you may
feel comfortable that you have a grip on the direction and
how far in that direction you are heading. However, this still
leaves open the matter of how long it will take to reach
your objective. The following suggestion may
go against the grain in
certain technical analysis
camps but a calendar
marking the key upcoming fundamental events
is going to be our best
friend in this area.
The NASDAQ, unlike
the other American
stock markets, may have
anticipated benefiting
over the past 3 months
from a seasonal spate of
IPO's. Despite the nervous trading pattern prevailing post the dot com
bubble and 9/11, the NASDAQ has continued to attract
new business to the market with mixed results. Market conditions have been unfavourable since the beginning of the
year with a reported average drop of 4% since issue price.
This alone is likely to apply a sharp handbrake to the
approach of any encouraging and potentially profitable new
issues. The technical resistance in this market, which lines
up well with those gloomy fundamental results, is looking
firm in the 1450 area as marked on Figure 1.
The extremely discouraging signs highlighted on this chart
suggest the technicals are matching the caution currently
being exercised by those banks who are in a position to lead
further IPO's. NASDAQ in particular is a market which can
September/October 2004
Market Views
Figure 1.
September/October 2004
Market Views
EUR/USD
A NEW CHALLENGE TO A TWO-YEAR TREND
by Michael Trefel
September/October 2004
Market Views
Figure 2.
10
September/October 2004
Market Views
US TREASURIES
BEARS MAY SOON BE BACK IN CONTROL
by Thomas Anthonj
10-year Treasury
30-year Treasury
Figure 1.
September/October 2004
11
Market Views
Figure 2.
12
September/October 2004
Marc Michiels
Conference Chairman, 2004
September/October 2004
13
Marc Michiels
September/October 2004
Fernando Bolvar,
AEAT vice-chairman &
CEO Expert Timing Systems
Marc Michiels,
AEAT General Secretary &
Conference Chairman
Mara Pardo,
AEAT Marketing Manager
Jorge Prez,
AEAT IT Manager
TTA: What is the best way to register for the conference and what would
you say to a potential attendee?
MM: The best way is through the web site www.aeatonline.com. We have
already sold three-quarters of passes so if someone is really interested in
attending the conference, he or she should book early to avoid disappointment.
To all professionals involved in Technical Analysis I strongly recommend
not missing the chance to listen to and meet specialists from all over the
world and of keeping up-to-date with new developments in this discipline.
Mercedes Martnez,
AEAT Administration Manager
Welcome to Madrid!
September/October 2004
15
I F T A
C O N F E R E N C E
THURSDAY NOVEMBER 4
TA & PORTFOLIO MANAGEMENT
All passes
09.00 Opening
Global pass
14.00 Spanish lunch
09.30 Walkabout
Daily pass
09.30 Talk by Fernando Bolvar (SP),
CEO Expert Timing Systems Int,
"Quantitative asset allocation for fund of
funds"
10.30 Talk by Jorge Bentu (SP),
Finance Professor, TechRules School of
Finance, "TA Strategies for options"
All passes
FRIDAY NOVEMBER 5
TA & TA & RISK CONTROL
All passes
09.00 Talk by Gerald Butrimovitz (US),
President of Gerald Butrimovitz and
Associates Advisory Service, What
indicators worked post 2003
10.00 Talk by John Bollinger (US),
President of Bollinger Capital
Management, Inc, "Bollinger Bands
around the world"
11.00 Coffee break
11.30 Talk by Matthieu Gilbert (CH),
Head of Currency Overlay Department,
La Compagnie de Trsorerie Benjamin
de Rothschild "The integration of quantitative models in a currency overlay
approach"
Global Pass
12.30 Visit to Segovia province, 6 hour
excursion
Daily Pass
Paella!
16
September/October 2004
P R O G R A M M E
2 0 0 4
SATURDAY NOVEMBER 6
TA & MARKETS
All passes
09.00 Japan Hour: Hiroshi Okamoto,
Chairman of the Board of Directors of
Nippon Technical Analysts Association,
"Enhanced trend Analysis using a special triangle ruler"
Yoshito TED Tetsuda, Deputy General
Manager, Investment Strategist, Fixed
Income Research Department, Daiwa
Securities SMBC Co. Ltd. (JP),
"Technical tools of active portfolio
management"
Segovia Province
17
A SHORT HISTORY OF
IFTA CONFERENCES
The International Federation of Technical Analysts,
Inc. (IFTA) was incorporated in 1986 and is a global
organization of market analysis societies and associations in 26 countries. This not-for-profit federation
has four main goals, one of which is to "provide
meetings and encourage the interchange of material,
ideas and information". It was with this goal in
mind, that IFTA held the first conference back in
1988 and it has continued to do so every year since.
So how have the conferences varied over the 16
years? Michael Smyrk, IFTA Business Manager
1993-2003, tells us more about what is now the
most prestigious TA event of the calendar year.
good, sometimes non-existent - and the final night party/celebration, which has sometimes been highly memorable.
Unusual parties have included a "Pirate Ship" in Amsterdam, a
cruise around Manhattan Island & the Statue of Liberty, and
dinner at the Sydney Opera House, for example. And special
side visits for delegates and partners have also been well
received - such as a reception in the NYSE Directors
Boardroom.
What have been the best things about the IFTA
conferences?
Traditional parts of the Conference that I hope will always be
there include the "Japan Hour", which has helped many people
to accept and study those special methods, and Ian Notley's
"Walkabout", which is both a terrific ice-breaker and a most
useful way of finding out other people's favoured TA tools on which subject, I would suggest that methods discussed
have not reflected linear progress, but more a circular re-visiting of recurring methodologies - P&F has come and gone and
come and gone again over the years, Chaos Theory was briefly
in favour, ditto Artificial Intelligence. Last year I think we were
back to very traditional tools like RSI, MACD and Stochastics.
A beneficial side-effect of the Conferences, not often mentioned, is the availability of high-level TA authors and experts,
who are willing to talk to anyone - there is enormous goodwill.
And a further spin-off is the impact of these "important"
people on local data providers, who are made to realise the
importance of what they produce.
September/October 2004
ESSENTIAL FACTS
DATES
Thursday 4 November to Saturday 6 November
inclusive.
LOCATION
Hotel Castellana InterContinental, Madrid
GETTING THERE
If you fly with Iberia, the official conference carrier,
you will receive a 30% discount on the full ticket
price. Quote code OSI IB BT4IB21MPE0313 when
making your reservation at any Iberia office or
through your local Iberia phone number.
COST
Attendees can choose to go for one day (450) or
for the complete program (1,100 for IFTA colleagues and 1,250 for non-IFTA colleagues).
Special events (welcome dinner with David Krell,
Trip to Segovia and Gala dinner with Bernard
Lietaer) are only for those with complete program
passes.
ACCOMODATION
Discounted accommodation is available at the conference headquarters, Hotel Castellana
InterContinental. The Castellana InterContinental is
a distinguished hotel in the heart of the city, with
comfortable lounges, rooms and other facilities as
well as fine cusinie. The Castellana InterContinental
supports the conference through special room rates
for attendees. To receive these special rates, reservation must be made at www.aeatonline.com
CANCELLATION POLICY:
Hotel cancellation policy: A refund of 85% of the total payment will be returned to
those who notify, in writing, by October 1, 2004. A refund of 50% of the total payment will be returned to those who notify, in writing, by October 30, 2004 .After
this date no refunds will be given unless there are exceptional circumstances
September/October 2004
19
Techniques
September/October 2004
Techniques
around 70% accurate. DeMark is essentially a risk-reward strategy and its stoploss positioning means that even when
the indicators occasionally underperform, losses are cut to a minimum. In
my experience, the TD Sequential
Indicator is more than 70% reliable; it
is closer to 90%.
Kurt Magnus
September/October 2004
21
Techniques
22
Figure 1. is a daily chart of the Dow from mid-2003 showing how the DeMark Sequential
Indicator appears with price bars. The numbers in green and red represent TD Setups and TD
Countdowns respectively. The purple dotted lines are the DeMark stop loss levels automatically
generated by the software.
Figure 2.
September/October 2004
Techniques
TD Countdown
TD Setup
Duration
9 price bars
Unlimited
Buy signal
Perfection - buy
Sell signal
Perfection - sell
Table 1.
September/October 2004
23
Techniques
IN MY EXPERIENCE, THE TD
SEQUENTIAL INDICATOR IS
MORE THAN 70% RELIABLE;
IT IS CLOSER TO 90%.
KURT MAGNUS, WESTPAC
Figure 3.
24
September/October 2004
Techniques
The impact of the US presidential election on the financial markets is a subject that has
traditionally been the territory of economists. Nevertheless, that hasn't stopped technical
analysts from attempting to find repeatable patterns. The most noteworthy and oft cited
example is that of Yale Hirsch's Presidential Election Cycle Theory. In 1967, he showed
that stock markets performed better in the second half of the four-year term than the first
half in around 70% of cases going as far back as the mid-1800's.
since 1967.
Recent research by Wing-Keung
Wong and Cehn Dujuan at the
University of Singapore looked at the
behaviour of the S&P500 in the years
leading up to and following an election.
Wong and Dujuan's analysis of the previous ten elections dating back to
Lyndon Johnson in 1966 showed
THE TECHNICAL ANALYST
25
Techniques
Election year
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
Table 1.
26
September/October 2004
Techniques
12.0%
10.0%
8.0%
8.4%
7.8%
7.5%
11.5%
6.8%
6.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
All Years Rep Pres Dem Pres Rep Cong Dem Cong Rep P/
Rep C
Rep P/
Dem C
-1.2%
Rep P/ Dem P/
Split C Dem C
Dem P/
Rep C
Rep
Pres
Dem
Pres
Rep
Con
Dem
Con
Rep Pres
Rep Con
Rep Pres
Dem Con
Rep Pres
Split Con
Dem Pres
Dem Con
Dem Pres
Rep Con
7.5
6.0
9.1
10.0
7.8
9.3
6.8
-1.2
8.4
11.5
September/October 2004
27
Techniques
28
September/October 2004
B a l a n ce d fo rce
S e ll fo rce
Center
B uy fo rce
Techniques
Buy
Double
Window
Double
Window
Sell
Tengu
b
a
c
Sell
Sell
Okame
b
Waist
Shoulder
Sell
(negative turn)
Buy
(positive turn)
Sell
c
d
Sell
Figure 4. Sanson
Buy
Center
Inverse
Center
Sell
Inverse Tengu
Buy
Buy
Inverse Okame
Buy
Buy
September/October 2004
29
Techniques
3
4
Center
3
Buy goken
30
Center
2
5
5
2
3
3
4
5
2
1
September/October 2004
(4) Goken
As Figure 6 shows, in the buy goken
the outer waist goes up (1, 2, 3), and so
does the inner waist (4, 5), surpassing
these five points. The closing price following the high (5) (shoulder) represents a buy signal. The selling goken
goes in the reverse order. This form is
completed when the closing price
declines below the low (5) (waist). In
the buying goken, the pattern (3) (higher than the center line) is stronger than
the pattern (3') (dip buying force is
strong). In the selling goken, the pattern (3) (lower than the center line) is
Sell Goken
9
8
3rd - stage
rise
1
1
2
3
5
6
4
5
6
7
8
3rd - stage
fall
2
1
7
6
Bottom
1/3 drop
1/2 recovery
Top
1/2 recovery
Bottom
1/2 drop
Techniques
September/October 2004
Conclusion
The world of technical analysis is
strewn with different charting techniques. They often provide the same
information, but in various formats.
Kagi is no different in this respect. But
the way in which kagi charts illustrate
price action means they are effective in
filtering out distracting market noise,
while remaining sensitive enough to
provide clear trading signals. The very
fact they have survived since the nineteenth century is testimony to their elegant power as a trading tool.
Ikutaro Gappo is an adviser for the
Nippon
Technical
Analysts
Association
31
Interview
Nina Cooper
Nina Cooper is president of the American Association of
Professional Technical Analysts (AAPTA). She has been
advising clients, trading and managing money in the capital
markets since 1980, in both the United States and London.
In 1995, Nina set up Pendragon Research Inc., an independent research firm. Her other undertakings include teaching
Elliott Wave Theory, phi analysis and advanced stochastics
at the Chicago Mercantile Exchange and writing for Elliott
Wave International.
tions from a mean. Technical analysts don't talk in mathematical terms but if you investigate the underlying
processes, you'll find that TA is seriously mathematical.
Terms that sound quantitative or academic seem to make
the concepts more palatable to the fundamentally oriented.
Another factor in the acceptance of TA is its ready
availability because of the broad use of computers and
technology. TA might have seemed more mysterious
when analysts drew charts by hand. Now with a computer on every desk, charts and technical studies are readily
available to everyone. Of course, with those tools at
hand, younger investment professionals whip through
the graphics programs and trading platforms without a
second thought. Older financial pros face the dilemma of
not knowing what their juniors take for granted. It's a
generational problem too.
TTA: You're known for teaching Elliott Wave analysis.
Why did you choose this as your preferred tool?
NC: I have found that Elliott Wave is a remarkable tool.
Actually it is more of a concept or system than a tool per
se. Elliott's research explains that all market price action
is systematic - cyclical - in a predictable way. The most
persuasive fact for me is that Elliott Wave explains all of
the features in mainstream TA, especially patterns.
TTA: In what ways have you developed your TA over
the years?
September/October 2004
Interview
September/October 2004
33
Subject Matters
BACKTESTING
PREDICTORS OF THE S&P 500
by David Whitaker and Chun Wang
34
September/October 2004
Subject Matters
Valuation Measures: Perhaps not surprisingly, the traditional measures of valuation - earnings yield, cash flow yield, and
book to market - performed best in the
value oriented sectors. Materials,
Industrials, Energy, and Consumer Staples
all show positive returns to these factors.
Conversely, these factors had little or no
value in the growth oriented sectors, such
as Health Care and Technology. Figure 3
compares the cumulative return to earnings yield in the Industrials sector to that
in the Technology sector. Clearly, earnings
yield has been a good predictor of excess
returns for Industrials but a poor one for
Techs.
Other Findings: One of the more interesting results concerns the distribution of
cash to shareholders. Repurchase yield
(the sum of stock repurchases by the
company over the prior 12 months divided by total market capitalization) was a
consistent predictor of excess returns for
several sectors: Materials, Industrials,
Health Care, and Financials. In contrast,
dividend yield was not a significant factor
for any sector. In the US, capital gains are
taxed more favorably than dividends. Our
results may reflect a preference by US taxable investors to receive cash via repurchases rather than dividends. It may also
indicate that company managers correctly
recognize when their stock is undervalued
and initiate repurchase programs at these
times.
Examples
22 Fundamental Factors, e.g.:
Earnings Yield, Dividend Yield and
Debt/Equity
17 Technical Factors, e.g.:
Momentum 1, 2, 3, 6 & 12M; RSI 26 & 52W
and Stochastic 26 & 52W
References
Jegadeesh, Narasimhan (1990). Evidence of
Predictable Behavior of Security Returns, Journal of
Finance 45, 881-898.
Likhovodov, Viktor (1999). Coding Candlesticks,
Technical Analysis of Stocks & Commodities
November 1999, 38-46.
Box 1.
September/October 2004
35
Subject Matters
36
Subject Matters
not.
Figure 1: Significant C and H Windows for South Asian Stock Returns Series
September/October 2004
37
Subject Matters
Graphical Illustration
A graphical depiction of the results could
provide a closer examination of the precise time periods during which the series
deviate from a random walk. The histograms in Figure 1 show those windows
(sub-periods) in which the series are nonrandom, either due to a significant C or H
statistic, or both. Since the windowed
testing procedure breaks the full sample
into equal-length and non-overlapped
windows, it is possible to identify the
exact dates when the series under study
departs from a random walk movement.
For instance, in the case of BSENAT,
there are 6 windows or sub-periods that
the series move in a significantly non-random and dependent pattern. In particular, this occurs in window-8 (11/12/9028/1/91),
window-21
(8/9/9226/10/92), window-45 (28/11/9515/1/96), window-59 (14/10/971/12/97), window-79 (20/6/00-7/8/00)
and window-97 (19/11/02-6/1/03). As a
whole, Figure 1 clearly demonstrates that
BSENAT
CSEALL
KSE100
104
104
104
Window length
35
35
35
Number of lags
Significant C windows
2
(1.92%)
20
(19.23%)
6
(5.77%)
Significant H windows
4
(3.85%)
6
(5.77%)
7
(6.73%)
6
(5.77%)
25
(24.04%)
12
(11.54%)
38
September/October 2004
appear only sporadically, and hence suggest that predictability is mainly a shorthorizon phenomenon.
Kian-Ping Lim is a lecturer at the
Labuan School of International
Business and Finance, Universiti
Malaysia Sabah, Malaysia.
References
Ammermann, P.A. and Patterson, D.M. (2003). The
cross-sectional and cross-temporal universality of nonlinear serial dependencies: evidence from world stock
indices and the Taiwan Stock Exchange. Pacific-Basin
Finance Journal, 11, 175-195.
Andrada-Flix, J., Fernadez-Rodriguez, F., GarciaArtiles, M.D. and Sosvilla-Rivero, S. (2003). An empirical evaluation of non-linear trading rules. Studies in
Nonlinear Dynamics and Econometrics, 7(3), Article 4.
Cochrane, J.H. (1999). New facts in finance. Economic
Perspectives, 23, 36-58.
Fama, E.F. (1965). The behavior of stock market prices.
Journal of Business, 38, 34-105.
Hinich, M.J. (1996). Testing for dependence in the
input to a linear time series model. Journal of
Nonparametric Statistics, 6, 205-221.
Hinich, M.J. and Patterson, D.M. (1985). Evidence of
nonlinearity in daily stock returns. Journal of Business
and Economic Statistics, 3, 69-77.
Hinich, M.J. and Patterson, D.M. (1995). Detecting
epochs of transient dependence in white noise. Mimeo.
University of Texas at Austin.
Hood, D.C., Andreassen, P. and Schachter, S. (1985).
Random and non-random walks on the New York
Stock Exchange. Journal of Economic Behavior and
Organization, 6, 331-338.
Lim, K.P. and Liew, V.K.S. (2004). Nonlinearity favours
nonlinear TA techniques. The Technical Analyst, May
issue, 38-40.
Schachter, S., Gerin, W., Hood, D.C. and Andreassen, P.
(1985). Was the South Sea bubble a random walk?
Journal of Economic Behavior and Organization, 6,
323-329.
Book Review
A COMPLETE GUIDE TO
TECHNICAL TRADING TACTICS
John Person's new book falls into two parts; a basic introduction to technical analysis techniques and methods for the
novice, and more interesting sections looking at trading strategies that use well know and some lesser well known TA techniques. Unlike many of the numerous books published on
technical analysis, Person's book is well written with clear
charts and easy to follow examples. It is also written purely
from a trader's perspective and contains much that will be of
interest to the professional analyst and trader. Perhaps the
most interesting section regarding trading techniques is
Person's presentation of pivot point analysis which, he says, is
widely used amongst day traders, brokerage firms and market
professionals in the US. Pivot point analysis is essentially a
method for calculating major support and resistance levels.
A pivot point number (P) is the sum of the high, low and
closing price of a period divided by three. From this number
support and resistance levels are derived. For example, the primary resistance level in the next period of trading (ie, day,
week, month etc.) is calculated by multiplying P by 2 and subtracting the low price for the period. The major support level
is calculated by multiplying P by 2 and subtracting the high
price for the period. The reasoning behind these calculations is
that the pivot point represents an equilibrium around which
trading occurs in any given period and so the support and
resistance levels contain the range of prices when trading veers
either side of this equilibrium in subsequent periods.
As an example, Person uses a monthly sugar futures chart
from September 2002 to forecast the low of the next month,
October. In September, the high was 7.80, the low was 6.40
and it closed at 6.63. This produces a pivot point number of
6.943 with a corresponding support number of 6.09. The low
for October was in fact 6.11, just two ticks away. The support
level of 6.09 therefore produces the optimal entry point for
October. However, Person suggests that these levels are best
used in conjunction with conventional chart analysis and goes
on to present his own version of pivot point analysis called
P3T (Person's pivot Point Trade signal) that incorporates candlesticks and stochastics.
His sections on pyramiding, scale trading and options strategies prevents much of the book from going over familiar
ground. This together with the clarity of writing and presentation means that Person's book is, without doubt, a notch
above the average TA publication. Furthermore, techniques
such as pivot point analysis will be relatively unfamiliar to
many non-US traders and so the book will offer an insight
into a new and exciting technique to these professionals.
September/October 2004
39
Software Review
TS2 - is where the ABC correction is part of a Wave 4 correction. The trade set-up aims to take advantage of an ensuing
Wave 5. (Figure 2).
TS3 - identifies an ABC correction of unknown context. The
trade set-up aims to take advantage of an ensuing wave of
unknown count, but probably a Wave C or Wave 3 of larger
degree. (Figure 3).
The software is able to scan at three Elliott Wave timescales minor, intermediate and major. It also gives the option to
search for ABC corrections where Wave C is terminating or
has terminated in a predicted Wave Price Target (WPT), calculated using Fibonacci retracements/projections.
To add further comfort, the software can scan the markets
for the above ABC patterns, but with the added requirement
that the last bar on the chart is a red (sell) or blue (buy) bar.
These reversal bars are derived from several standard reversal
patterns plus an MTPredictor proprietary oscillator.
Compatibility options and availability should grow
At present, RT 4.0 is a stand-alone system that relies on an
eSignal datafeed. The company is also in the process of making the software compatible with Townsend Analytics'
RealTick data.
Figure 1.
September/October 2004
Software Review
But exposure to the professional market is ultimately dependent on having its software distributed through the likes of
Bloomberg and TraderMade. In this regard, MTPredictor is
already making some headway - it is planning to link up as a
"partial plug-in" with TradeStation. This means that
MTPredictor will offer two of the key modules ('Show Elliott
Waves' & 'Trade set-ups') as an optional extra for TradeStation
users.
In terms of the data available, there is no problem.
Everything you would expect is available through eSignal,
including stocks, indices, mutual funds, futures, options, forex.
The data is real-time and supplied on a tick-by-tick basis,
although the MTPredictor software aggregates the tick data
into time bars down to a 1-minute minimum. There have been
a few niggles with the interface between eSignal and
MTPredictor but these, we have been told, have been resolved.
Easy to use package
The software comes on a CD Rom with a hefty training manual, which is very clear, if slightly repetitive. It could easily have
been half the weight it is (though it is now also available in
downloadable colour PDF format). But those new to Elliott
Wave Theory will appreciate the assumption of no prior
knowledge.
Once up-and-running, the software can be used at its most
basic level with ease. This means running scans for the three
trade set-ups and analysing those set-ups with the risk/reward
module. But the advanced functions are also fairly intuitive,
allowing the trader to do their own manual analysis of graphs,
go back in time, put their own Elliott Wave counts onto charts,
find likely areas for waves to end and so on.
In addition to these Elliott Wave related functions, RT 4.0
also includes other indicators and studies. These include
Bollinger Bands, moving averages, RSI, stochastics and volume
data. But even Tony Beckwith, MTPredictor director of sales
and marketing, admits they are there to keep people happy.
They can be used to give further comfort for the trades that
the software suggests, but they are, he said, 'peripheral nice to
haves'.
Thorough software and support
The software is clearly well thought out. Both Beckwith and
Griffiths use it to trade on their own account and because of
this, they have addressed almost every detail or problem that a
trader is likely to encounter - either in the software itself, in the
manual or on the website.
The trading manual emphasises their practical and down-toearth approach further. It doesn't promise miracle returns, but
simply says that disciplined risk trading is a means of earning
an income, albeit a volatile one. MTPredictor say their trades
typically win 40-50% of the time, but that the winning ones
Figure 2.
are at least two to three times the size of the losing ones. Plus
there are the occasional big winners that come along to make it
all worth while. Used in conjunction with the sensible risk and
money management techniques outlined in the manual, RT4.0
seems to offer a sound and complete system for trading.
The developer as trading king
In essence, the MTPredictor software tries to mimic the successful trading style of its developer, Steve Griffiths. This
explains the eclectic mix of extras that can be scanned for DOJIs, inside days, 80/20 days and minor pullbacks,
Figure 3.
September/October 2004
41
Software Review
RT 4.0 Test: Trade Record for US index and ETF trading, 26 July to 25 August 2004
Number of
Trades
Number of
Winning
Trades
TS3 Set-up
38
11
32
18
4
15
Total
81
37
TS1 Set-up
TS2 Set-up
Number of
Losing
Trades
Profit on
wining
trades
(units of risk)
Loss on
losing
trades (one
unit of risk
per trade)
Total P/L
20
7
17
46.75
22
46
-20
-7
-17
26.75
15
29
44
114.75
-44
70.75
Table 1. Note: 1) Securities ES (E-mini S&P 500); NQ (E-mini Nasdaq-100); YM (mini-Dow futures); SPY (Exchange Traded Fund tracking S&P 500);
QQQ (Exchange Traded Fund tracking Nasdaq-100); DIA (Exchange Traded Fund tracking Dow Jones Industrials). 2) Timeframes 3min. and 5 min. 3) No
account has been taken of slippage and commissions. 4) P/L risk units rounded to nearest 0.25. 5) No trades left open overnight (closed at session end if necessary) 6) No trades were actually taken
September/October 2004
MTPredictor
TM
A Profit of approximately 7x the initial risk required to take the trade, ignoring
slippage and commissions, in the UK stock GKN (October 2003)
Source: CBOT
10-yr Treasury
5-year US Treasury
Spot
Source: CBOT
5-yr Treasury
-250000
5.00
Spot
300000
4.20
4.80
4.00
-200000
250000
4.60
3.80
-150000
4.40
200000
3.60
-100000
4.20
3.40
4.00
-50000
150000
3.20
3.80
0
100000
3.00
3.60
50000
2.80
3.40
50000
100000
2.60
3.20
150000
3.00
May-25
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Aug-31
2.40
May-25
Source: CBOT
Jun-08
Jun-22
Jul-06
Jul-20
Aug-31
Source: CME
Swiss franc
11000
Aug-17
Swiss franc
Spot
-6000
Aug-03
Spot
30000
1.29
25000
-5000
1.28
10800
20000
-4000
1.27
10600
15000
-3000
1.26
10400
10000
-2000
1.25
10200
5000
-1000
1.24
0
10000
1.23
-5000
9800
1000
1.22
-10000
2000
9600
May-25
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Pound sterling
1.21
May-25
Source: CME
Pound sterling
-15000
Aug-31
Jun-08
Jun-22
Jul-06
Jul-20
Aug-31
Source: CME
Japanese yen
1.88
Aug-17
Yen
Spot
35000
Aug-03
Spot
10000
125
5000
120
115
-5000
110
-10000
105
1.86
30000
1.84
25000
1.82
20000
1.80
1.78
15000
1.76
10000
1.74
5000
1.72
1.70
0
May-25
44
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Aug-31
100
-15000
May-25
September/October 2004
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Aug-31
Euro
3-month eurodollar
Source: CME
Euro
Source: CME
Spot
3-month eurodollar
40000
1.25
600000
1.24
400000
1.23
200000
1.22
1.21
-200000
1.20
-400000
1.19
-600000
1.18
-800000
Spot
2.00
1.80
35000
1.60
30000
1.40
25000
1.20
20000
1.00
0.80
15000
0.60
10000
0.40
5000
0.20
0
May-25
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Nasdaq
Aug-31
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Nikkei
Source: CME
Nasdaq
0.00
May-25
Source: CME
Spot
Nikkei
-14000
2100
-12000
2050
Aug-31
Spot
4500
12000
4000
11800
3500
-10000
11600
2000
3000
-8000
11400
1950
2500
11200
-6000
1900
-4000
1850
-2000
1800
1750
2000
1700
4000
1650
2000
11000
1500
10800
1000
10600
500
10400
10200
-500
May-25
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Gold
Aug-31
10000
May-25
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
US dollar index
Spot
Aug-17
Aug-31
US dollar index
Source: CEI
Gold
-1000
Source: NYCE
Spot
90000
415
80000
410
117
6000
116.5
4000
405
70000
116
400
60000
2000
115.5
395
50000
390
115
40000
385
114.5
30000
-2000
380
114
20000
375
-4000
10000
113.5
370
365
May-25
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Aug-31
-6000
113
May-25
September/October 2004
Jun-08
Jun-22
Jul-06
Jul-20
Aug-03
Aug-17
Aug-31
45
Long-Term Technicals
LONG-TERM TECHNICALS
Provided by Thomas Anthonj, ABN Amro, Amsterdam
EUR-USD
USD-JPY
GBP-USD
S&P 500
46
September/October 2004
Long-Term Technicals
Nikkei
Dow Jones
Nasdaq
September/October 2004
47
OCTOBER
OCTOBER
OCTOBER
8-10
13
25/26
Course:
AAPTA 1st annual conference,
Phoenix Arizona
Organiser:
AAPTA
Contact:
admin@aapta.us
Event:
STA meeting
Organiser:
Society of Technical Analysts
Contact:
info@sta-uk.org
Course:
Technical analysis and charting
Organiser:
Chartwatch
Contact:
ken@chartwatch.com
28/29 4-6
Course:
Advanced technical analysis
Organiser:
Chartwatch
Contact:
ken@chartwatch.com
Event:
IFTA Conference, Madrid
Organiser:
AEAT
Contact:
info@aeatonline.com
10
Event:
STA meeting
Organiser:
Society of Technical Analysts
Contact:
info@sta-uk.org
10
15
25/26
Course:
Introduction to technical analysis
Organiser:
7city
Contact:
s.sycamore@7city.co.uk
Course:
Introduction to technical analysis
Organiser:
Quorum Training
Contact:
courses@quorumtraining.co.uk
Course:
An introduction to charting &
technical analysis
Organiser:
International Petroleum Exchange
Contact:
training@theipe.com
48
September/October 2004