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Reader question: Color Rules

by Adam on 09/08/2012 in General Comments, Individual Self-Directed Traders, Institutional Mangers/Traders, Uncategorized with No comments

Reader Jayram asks, “Can you tell what is the significance of the blue & red bar coloring in your charts on the blog?”

Sure, Jayram. I use various color rules on my charts, but I do not use them in any systematic fashion (for the simple reason that I have not found any systematic trend indicators that give an edge to my discretionary trading.) This particular rule set does actually have a small quantitative edge, but it is mostly there to provide another layer of structure on the chart. Chart setup is something I discuss in detail in The Art & Science of Technical Analysis, and one of the overriding principles is consistency—I think it is important to use the same indicators on all charts and to change them as rarely as possible. (An important exception to this rule might be if you were using something like Alexander Elder’s Triple Screen system, as described in his excellent book Trading for a Living, which requires different indicators on different timeframes.) Having said that, I do change the colors displayed (e.g., red/blue, orange/green, purple/blue, etc.) from time to time to keep the eye fresh.

There are many ways to set up these color rules. A simple one might be blue above a moving average and red below. A more complicated rule set could be a gradient depending on where the close or midpoint of a bar is in a set of channels or bands. The particular rule set I use is adapted from Linda Raschke’s work, and has its roots in Welles Wilder’s Parabolic system. Specifically, it looks back over 40 bars and marks a “trend change” (flipping colors) when price moves 2.6 ATR’s off the highest high or lowest low of that lookback period. Don’t get too caught up on specific rules, but consider if adapting the concept of some kind of trend indicator wrapped into color rules might help you see charts more clearly. If so, use it. If not, go for clarity and keep things as simple as possible.


The Art and Science: A Deeper Look (2/2)

by Adam on 10/10/2011 in Individual Self-Directed Traders, Institutional Mangers/Traders, The Book, Uncategorized with 2 Comments

This is the second post in a two-part series, taking a deeper look at the contents of my new book, The Art and Science of Technical Analysis, to be published early 2012. The first post can be found here.

PART IV: THE INDIVIDUAL, SELF-DIRECTED TRADER

CHAPTER 12: THE TRADER’S MIND

Much of the book was written to be as applicable to the individual trader as to the trader/manager in an institutional setting. However, Part IV is specifically addressed to the individual trader, focusing on issues of psychology and trader development. (These may be relevant to the institutional trader as well, but in a slightly different context.) This Chapter covers some ground that will be familiar to readers who know the trader psychology literature, beginning with how very useful evolutionary adaptations actually mutate into cognitive biases and actively work against us in the marketplace. The subject of intuition, initially introduced in Chapter 2, is revisited, along with a substantial section on the Flow experience and its relationship to learning and skill development. The Chapter ends with some very useful tips for managing the psychological stresses of the trading process.

CHAPTER 13: BECOMING A TRADER

In some ways, this was the most difficult Chapter to write, as the challenges and developmental stages will differ from trader to trader. However, my argument is that most traders who fail do so because they do not understand the nature of the process or the challenges they will face. This Chapter provides a realistic perspective on these challenges and, hopefully, better equips the developing trader to endure and, eventually, to succeed. Perhaps even more importantly, this Chapter concludes with an in-depth look at some tools and specific techniques for performance analysis. Very, very few individual traders, whether at home or in a prop environment, do this analysis, and it is important for a trader’s growth and development..

PART V: THEORY AND QUANTITATIVE ANALYSIS

CHAPTER 14: ACADEMIC THEORIES OF MARKET BEHAVIOR

 Most individual traders tend to ignore the work of academic researchers, perhaps because they are uncomfortable with the conclusions or they don’t understand the perspective from which most of these researchers begin. This Chapter surveys some of the important milestones in academic thought, and connects them to some schools of though that explain why traders may be able to profit.

CHAPTER 15: TOOLS FOR QUANTITATIVE ANALYSIS OF MARKET DATA

Quantitative techniques are nothing more than tools to understand how the markets usually move. This Chapter presents a few simple techniques that anyone with a good grasp of high school-level math can understand and begin to apply to their own trading. It is a misconception that quantitative analysis has to be complex or involve advanced math; many times, a simple average or count is all that is needed. However, tools and techniques must be deeply understood, so this Chapter concludes with some warnings against sloppy quantitative thinking.

CHAPTER 16: CASE STUDIES

This Chapter, in some ways, is the heart and soul of the book. All of the trading techniques, patterns, and ideas rest on price tendencies that can be verified through quantitative studies. Using a technique called Pythia™, I first examine several ideas that are commonly used (moving averages, Fibonacci ratios, and the Opening Range), and find little or no evidence that they provide any edge beyond what could be achieved by a coin flip. The Chapter ends with a look at several ways to quantify the two underlying forces of price action: mean reversion and range expansion. Again, there is information here that I have never seen in print, and significant evidence of trading edges that you can adapt for your own work.

 


The Art and Science: A Deeper Look (1/2)

by Adam on 09/10/2011 in Individual Self-Directed Traders, Institutional Mangers/Traders, The Book, Uncategorized with 10 Comments
TheArtAndScience_Cover5

This is a continuation of this blog post, in which I shared a table of contents and a first look at The Art and Science of Technical Analysis: Market Structure, Price Action and Trading Strategies, to be published in early 2012 by Wiley. Today, I want to dig a little deeper into the structure of the book and the ideas presented.

FORWARD by Linda Raschke

PART I: THE FOUNDATION OF TECHNICAL TRADING

CHAPTER 1: THE TRADER’S EDGE

Most losing traders lose because they do not truly understand the nature of the challenge before them. They do not understand the market, how it works, or the task of creating a profitable trading system. Sadly, much of the literature and many of the educational programs out there reinforce this problem, rather than making it better. How many times have you heard about “high probability trading” or listened to someone sing the praises of “high risk/reward ratio” trades? (They actually mean high reward/risk or low risk/reward trades, but I suppose that doesn’t make sexy marketing copy.) In reality, the task is to create a positive expectancy environment, which can be accomplished in many ways.  Essential to this understanding is a good grasp of random walks, and the problems a trader would face trying to profit in a random environment. The chapter moves on to cover some concrete ideas for investigating trading patterns, and ends with a look at the framework that sets the stage for everything that is to come: that all market action can be seen as the result of two forces. My theme here, and throughout the book is this: drive out error and imprecision in your thinking. Be precise in your understanding and thinking about concepts.

CHAPTER 2: HOW TO READ A CHART

Traders are also remarkably imprecise in their use of charts. A chart is nothing more than a visual representation of market data, but there are good and bad ways to use them. This Chapter presents a very structured approach to understanding the market structure and the forces at work at any point. Also, the critical question of trader intuition is addressed up front and early, as many of the choices traders make in their development can help or hurt the development of intuition. (In the worst cases, traders can actually program faulty intuition, in which case they are probably doomed to failure.) The chapter ends with a look at what might seem to be an anachronistic and quaint suggestion: to maintain charts by hand. I know of no better technique to build a deep understanding of market patterns, but it requires real focus and dedication to get the maximum benefit.

PART II: MARKET STRUCTURE

CHAPTER 3: THE MARKET CYCLE AND THE FOUR TRADES

Many books on technical analysis include sections on either Wyckoff or Dow Theory. I did not want to parrot what has been done before, or to trivialize the issues in market analysis, but the Wyckoff cycle is a good tool for understanding developing market structure. This chapter focuses on the psychological drivers of the standard four stage cycle, with a deeper look at the mechanics behind classical accumulation / distribution. It concludes with a system for classifying any technically motivated trade into one of four categories: trend continuation, trend termination, support / resistance holding or support / resistance breaking. That is all there is; every trade fits into one or more of those categories. Understanding this helps to put trades in the context of overall market structure, so we can move toward not trading patterns, but trading the underlying buying and selling conviction that sometimes creates these patterns.

CHAPTER 4: ON TRENDS

Here’s where my study of classical trend structure departs from that in most books. This chapter features a very in-depth look at the issues and potential complications of trading trends, and at various ways to quantify the strength of trend. Though still from a high level structural perspective, these patterns are put in the context of real market action. Patterns associated with successful and failed pullbacks are examined in-depth, as are the pitfalls associated with standard tools such as indicators, trendlines, and levels. How many times have you heard someone say if a certain level is broken a trend will either begin or end? This is rarely true, and trades made around such naive approaches are probably not, on balance, profitable. This chapter explains why.

CHAPTER 5: ON TRADING RANGES

 Of the major market phases, trends are the easiest to understand the easiest to read because they are driven by real buying and selling imbalances. This chapter tackles the serious issues of trading in trading ranges and around support and resistance levels, and also puts these patterns into a multi-timeframe context.

CHAPTER 6: INTERFACES BETWEEN TRENDS AND RANGES

As much as possible, I tried to avoid creating new jargon for this book, because I think that confuses and hides issues rather than clarifying. However, I made an exception here and used the term interfaces to describe the critical points where trends and trading ranges become “something else.” We investigate the transition from trading range to trend, which drives the classic breakout trade, and consider the patterns around both successful and failed breakouts. Next, a deep look at the ways trends end, with transitions from trend to trading range, from trend to opposite trend, and from trend to same trend (through a failed attempt at trend termination) are covered. Most traders learn to think about these issues when they suffer losses; this chapter forces the reader to think about them early on.

PART III: TRADING STRATEGIES

CHAPTER 7: PRACTICAL TRADING TEMPLATES

It would have been very easy to write a book on trading and market theory, but my main goal was to make a book that would be useful to practical traders. Presenting actual trading patterns is difficult, because the selection of patterns, the issues in managing them, and the timeframes involved is largely a matter of personal preference. In the end, I chose to put all my cards on the table, and essentially laid out all of the patterns I find useful in actual trading. This chapter shows each of them from setup, entry, initial stop placement, and the perspective of active trade management.

CHAPTER 8: TOOLS FOR CONFIRMATION

I can pretty much guarantee you’ve never seen anything like this chapter in print. It features an exhaustive look at several indicators, working from the approach of feeding them simplified data sets to see how they react to inflections in real market data. Do you know how your favorite indicator reacts to large spikes, slow accelerations, or long flat periods in the market? Do you understand how the behavior of different types of moving averages is different? This is an extension of my admonition to think precisely and to truly understand the tools you are using. This chapter also takes a look at tools and issues in trading relative value plays, and ends with an explanation of why volume does not feature prominently in any of my work.

CHAPTER 9: TRADE MANAGEMENT

 Successful trading goes far beyond simply having patterns for entry. We all know this, but many of the issues related to trade management are not adequately examined in the literature. This Chapter takes a deep look at the impact decisions have on developing trades. What is the effect of taking partial profits vs. partial losses? Where do you add to trades? How do you tighten stops? Do you ever widen stops? Issues like initial stop placement, price targets, and how positions move together are also considered. The Chapter ends with a look at some practical tools you can create for monitoring your positions, and some tips on executing large orders that will be relevant as your trading size grows. These trade management tools and concepts are far more important than entry techniques for your ultimate success as a trader.

CHAPT 10: RISK MANAGEMENT

In some sense, the job of a trader really can be reduced to risk management. This chapter takes a look at many of the ideas behind tactically managing risk, starting with the critical issue of position sizing moving to the impact of changing risk on various trades. (Not surprisingly, the correct answer is to be consistent.) Next, the Chapter moves into some theoretical perspectives on risk that will be familiar to portfolio managers, as well as some simple tools to quantify risk. The Chapter ends with the challenging proposition that most traders struggle because they do not understand the true nature of risk.

CHAPTER 11: TRADE EXAMPLES

This Chapter includes approximately 30 trade examples, most illustrated with a before and after chart, of the patterns in Chapter 7. Most of these examples were trades I actually made while writing the book, or published in my daily research report. (Originally, I had intended to limit this Chapter to only trades I actually executed, but there were several good examples I missed in real trading. I thought the pedagogical value of the examples outweighed my desire to only print actual trades.) There are many, many examples of pattern failures and discussion of the decisions that might have been made at various points in the trade’s life cycle. A trade is a process, not an event: from context to entry trigger to trade management, every part of the process must be mastered.

 I will followup soon with a look at the last two parts of the book.

So You Want To Be a Trader? (reading list 3/3)

by Adam on 08/10/2011 in Individual Self-Directed Traders, Institutional Mangers/Traders, Trader Development, Uncategorized with 15 Comments

This is the third post in a series. Please read part 1 and part 2 first.

So if you’ve gotten this far you see the title of this series maybe should have been So You Really Want to be a Trader? I don’t mean to be intimidating or to set a bar too high, but the reality is that this is a ultracompetitive business. Very few self-directed individual traders will succeed, so why not give yourself the best chance possible?

Everything up to this point has laid a foundation. Now it is time to turn to some books that focus specifically on trading.

Market-specific Education

General knowledge:  Alexander Elder’s Trading for a Living: Psychology, Trading Tactics, Money Management is one of the best-selling trading book of all time, and with good reason.  There is no other book that covers the subjects of trading psychology, technical analysis, and specific trading techniques as clearly as Dr Elder does.  If you can only read one book, it probably should be this one.

Technical Analysis:  Most books on this subject, frankly, are full of garbage.  Too many books rely on untested claims from previous books, and many of those that include research use incomplete or poorly constructed studies. If I was hiring or training traders I would demand that they have cover-to-cover knowledge of Schwager on Futures: Technical Analysis – Jack Schwager and would frankly prefer that they not be familiar with any of the other common books on the subject. (Even though the book was written specifically for futures markets, it applies equally well to stocks and currencies.) Edwards and Magee, and any books on Elliott Wave and Gann theory are deliberately excluded from this list. I also cannot help but plug my book here, as this is specifically why i wrote it:  The Art and Science of Technical Analysis: Market Structure, Price Action and Trading Strategies is unique in the trading literature. It addresses the theoretical support behind price patterns and technical trading, shows many examples of actual patterns with emphasis on trade and risk management, and then considers the psychological issues of applying these patterns in actual trading.

Applied Statistics:   So, now you have a good grasp of math and statistics and need to begin to think about how to apply those to the market.  My forthcoming book will also address this subject in considerable depth, but Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals – David Aronson gives another valuable perspective.  (Also, this book contains the clearest and most succinct explanation of inferential statistics I have ever seen in print.  Exceptionally well done.)  Some people may take issues with the specific trading signals that Professor Aronson tested in the last part of the book, but that in no way compromises the importance of the message or the clarity of his writing.

Options:  A good grasp of options is essential for all traders, whether you trade options or not.  In particular, understanding options pricing (how volatility, time, etc play into the premium) and the potential payoffs that can be structured give insights that extend into other areas of trading.  Option Volatility & Pricing: Advanced Trading Strategies and Techniques - Sheldon Natenberg is standard and absolutely required reading, while Options Trading: The Hidden Reality - Charles Cottle provides a good next step.  The Cottle book, in particular, deals with very practical issues of trading like execution and adjusting positions dynamically.

Trading Psychology:  There are many good books on psychology, but developing traders should make sure they actually have an edge in the market before focusing too much energy on psychology and performance issues.  If you don’t have that edge, all the psychology in the world is not going to help.  Brett Steenbarger’s books, in particular Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology or The Psychology of Trading: Tools and Techniques for Minding the Markets are fantastic.  Mark Douglas’s Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude is a classic, for good reason.  The late Ari Kiev’s Trading to Win: The Psychology of Mastering the Markets is written with a slightly more institutional focus, but it includes some excellent insights that are relevant to any trader in any setting.

As you have time…

And here are a few more, without specific comments.  They wouldn’t be here if I didn’t think they were important, but they could wait until after you have absorbed most of the preceding books. These cover a wide range of subjects and styles, so do some research and see if they are interesting / relevant to you.

Practical Speculation – Victor Niederhoffer
The Alchemy of Finance (Wiley Investment Classics)   – George Soros
Trader Vic: Methods of a Wall Street Master, Trader Vic II: Principles of Professional Speculation by Victor Sperandeo
The Misbehavior of Markets: A Fractal View of Financial Turbulence – Benoit Mandelbroit
The Hedge Fund Edge: Maximum Profit/Minimum Risk Global Trend Trading Strategies - Mark Boucher
Street Smarts: High Probability Short-Term Trading Strategies – Raschke and Connors
Analysis of Financial Time Series – Tsay

Knowledge alone will not make you a successful trader; you must also develop the skills of trading (which are primarily psychological), but, without a firm background, your chances of success are much smaller. A two-year program of education, covering the topics in these posts, would give aspiring traders a much stronger foundation and better chance of eventually becoming a successful trader.

( I also want to give a shout out to my friend Jordan Terry – Founder & Managing Director, Stone Street Advisors LLC. We kicked some of the ideas for accounting, valuation, and economics texts back and forth a few times before settling on the recommendations here. Thanks, Jordan.)


Domestic Stock Index Analysis (10/6/11)

by Adam on 06/10/2011 in Failure Test, Individual Self-Directed Traders, Institutional Mangers/Traders, Pullback, Relative Strength, Technical Patterns, Uncategorized with 3 Comments

I am still trying to figure out how to incorporate Twitter and other social media into my work. One thing that has become very clear is that tweeting each trade or position just doesn’t make sense. For me, I don’t necessarily want the world to be able to figure out where my stops might be, and there’s no point creating potential liquidity problems on entries and exits. For the reader, I also don’t really see the point. You cannot hope to be successful following some else’s trades. (Furthermore, I suspect the vast majority of trades tweeted are mostly for ego purposes.) I share my market opinions every day in my Waverly Advisors work, and I work very, very hard to eliminate as much bias and ego from my analysis and trading–being involved in the Twitter stream actually works against that goal. In addition, I see this blog evolving to focus more on trading concepts rather than specific, current trading setups. However, I know it also will be useful to occasionally look at some current market situations; some lessons are best learned in real-time as patterns evolve. With that in mind, let me share some thoughts on the current situation in US stock indexes, using the S&P 500 as a proxy for the broad market.

First, a little history is in order. I instituted a bullish bias on US Equities in my Waverly research near the end of the third quarter 2010. A bias like this is primarily a backdrop and context–perhaps most useful from an allocation standpoint, but we are comfortable trading both with and against the bias as dictated by short-term patterns. We maintained that bias, with various callouts for spots to increase and reduce exposure along the way, until 8/4/11 when we made the following bearish call:

The video shows a little bit of my analytical approach to markets, and how simple patterns can sometimes give an edge to market direction much further out. (Also, not emphasized in the video is that fact that the pattern has implications for volatility in addition to direction.)

Next, let’s consider the money flows in and out sector indexes. A good way to visualize this is to look at the spread of cash sector indexes against the cash S&P. You can use ETF’s (XLE/SPY, XLB/SPY, etc), but there are some nasty issues with dividend timing. it is best to avoid doing any analytical work on ETF products; stick to cash or futures and make sure to always be comparing apples to apples. The following chart shows nine major sectors against the S&P. When the lines go up, the sector is outperforming the market on a relative basis. It is completely possible for the index to go down, but to outperform the S&P, so the line can go up. Lastly, note that these are weekly charts. Each dot represents one week’s trading.

Click to enlarge

From this, I draw a few interesting points. (Refer to numbered areas on the chart):

  1. The 2009-2011 rally was led by the triumvirate of Industrials, Energy and Basic Materials. Strength rotated between those three (an interested study for another day perhaps), but they were the clear leaders. We can get a lot of information about the integrity of the trend by monitoring the leaders: when the Generals fall, the charge is in jeopardy. Industrials broke first, and have broken sharply enough that we do not believe the sector is a candidate for leadership on the next rally.
  2. Incredible technical damage has also been done to Basic Materials over the past few weeks. This is not all Gold and Mining as would be expected, but broad weakness through the sector.
  3. Energy has held up comparatively well. Though we do not look for a rally anytime soon, it pays to consider where we might allocate when that rally does eventually emerge. (That is the point of much of this analysis.) Energy is still a potential candidate for leadership. Do not take this talk of leadership as a reinforcement of the retail bullish bias. The clean uptrend is broken and it is not appropriate to focus on buying dips yet.
  4. It is amazing how many times you hear this line parroted: “The market cannot rally without the participation of Financials.” False. Absolutely, completely false. The 2009-2011 rally (over 100%) featured persistent underperformance from Financials. However, we believe that continued weakness in Financials represents a risk factor for the market, considering that the technical picture has shifted significantly. We have a short-term call out warning of a possible bounce in the sector, but that is only a warning to heavy shorts.
  5. Technology is definitely a candidate for leadership on the next rally. Good strength in some individual names and industry indexes there.
  6. (not labeled on chart) The bottom line on the chart are defensive sectors. They are behaving as expected: outperforming on market declines (see stocks such as SO, DUK, EP, ED over the past 2 months), and giving up that strength as the market rallies. This is a confirming indicator that the psychology has shifted into bearish mode. That might not seem to be useful information, but it is additional context that can make a difference.

Next, consider the very high-level technical picture. This is a weekly chart of the S&P Cash index, with lines drawn according to a proprietary rule set I call Algo Swings. The details of the methodology are not important; it simply delineates the major swings in the market. (Note also that this chart is log-scaled. Anytime you are looking at a chart that includes a large price change (say > 50%), it should be log-scaled.) The most important thing to notice here is that recent downswing is large enough to break the established trend pattern. It is longer than any downswing in the trend in terms of both price and time. Sometimes, simple analysis is enough.

The next level is to look at an actual chart of the weekly timeframe. What stands out here, to my eye, is the large downthrust and subsequent consolidation. This is a pattern that should generate another downswing. This is a big part of the reason why I consider the over-arching technical backdrop to be quite bearish.

Lastly, a look at the daily chart shows some interesting patterns. Four trades are marked, with decisions I made in real-time. (Note that these decisions were filtered into individual Equities, except for the last, which was a long in the S&P futures. Regardless, the index structure drove much of the decision process in the individual issues.) The first, a possible short at the first downturn after the selloff I skipped. Why? Because volatility was so elevated and the bounce was not long enough or far enough to provide a good consolidation for further downside. My sense was that any move down at that point would be likely to fail. (The discussion of how to manage trading positions in high volatility conditions is a subject for another blog. The short answer is trade less and trade smaller. Large price swings and low liquidity (= large spreads) create a treacherous environment. Some traders become more aggressive in these environments, but it is almost always the wrong choice.)

Two shorts are marked next on the chart. In both of these, note that the market had three to four days of downside follow through, and then it was bought. At both of these inflections, I entered short positions that, frankly, did not pay off very well (with the exception of a short in ANR that worked very well.) This is a good reminder that all we can do is to identify the inflections, put on the positions, and manage the risk. Don’t be a hero and don’t be stubborn because even the best setups fail at times. The Long trade at the end of the chart, I already discussed in this blog written early today.

At this point, this market has entered a complex and complicated state. Many times (80%+) there is simply no strong technical edge in any given market, and it is equally possible to make a case for up, down, or sideways action. (“I don’t know” is a valuable phrase for short and intermediate-term traders to learn.) We are still long a couple of individual names, and the long S&P trade is within a few handles of its first (1X initial risk) profit target, but it is difficult to justify new positions at this point–there is still a bearish overhang and context in this market; any long trade is only a countertrend trade, not an allocation decision. If more strength comes in, the bearish edge can be further eroded, but, if the bounce fails around current levels, many individual names and sectors will be painting attractive bear flags near recent lows, which could presage a turn into another significant downleg.

In conclusion, some points to think about:

  • Simple technical patterns can provide a bigger-picture edge for major market direction.
  • Relative strength and sector flows provide additional context for equity traders.
  • Step back in high volatility conditions. Reduce position size, risk, and trade less.
  • Simple technical patterns are only useful in context. The best approaches synthesize a number of factors and influences. (This post has certainly not been exhaustive. Though I hit on the major factors, there have been many other influences to consider at various points.)
  • Even correctly identifying inflections does not guarantee profits. At least two of the four trades above (the jury is still out on the long as I write this) were nearly ideal entries, but there was no payoff.
  • Many times, it is not possible to derive a strong technical edge in any market.
  • Beware of the retail bias to buy every dip. Temper that with an awareness of the bigger technical picture.


Hello

by Adam on 29/09/2011 in Uncategorized with 2 Comments

It has been many months since I’ve blogged actively.  During that time, I have been working on several projects. One of my main focuses has been continuing to grow and refine our business at Waverly Advisors. Our work is primarily aimed toward institutional investors or money managers who want a tactical (i.e. technical) input into their decision making process, and frankly probably will not be that relevant for individual traders. However, we do offer a free trial period so you’re welcome to kick the tires and see what you think. (I ask one thing, if you sign up, please use a real email address and contact info. We regularly delete signups from nobody@notarealemail.com with phone numbers like (123) 123-1234. We will not spam you or sell your contact info, but we also do ask common courtesy on the contact. We want to know who our readers are and we care.)

We also have been working on a number of asset management products, a few of which are being actively traded at this point. We eventually will offer futures (in the CTA mold), a tactical equities fund, and most likely a number of complementary allocation models (e.g. equity sector tilt). More info on these to follow soon.

Of course, what has really absorbed my time has been the book. For those of you who don’t know, I have just finished The Art and Science of Technical Analysis: Market Structure, Price Action, and Trading Strategies to be published by Wiley in the first part of next year. I’m excited about this project, and in many ways, thanks to the input and constructive discussion with a number of people, it has exceeded my expectations. The process of writing a large book in less than six months was exciting, painful, grueling, discouraging, exhilarating, tedious… fill in the blank… I’ve been through it all in the past months.

I will be blogging regularly here, and plan to focus on four specific areas:

  • I want to create a series of posts that are essentially an Introduction to Technical Trading. Many of my readers of early drafts of my book commented that it was an “advanced” book, but as I looked around I realized that there isn’t a great intro to technical analysis out there. I think I can do this in a format here that will be useful and interesting to many readers.
  • I’m excited about the topics and contents of the book. I’ll share a table of contents soon, and will be happy to discuss some of the concepts in these blogs.  I was able to make some good changes to the book in response to input and discussions with other people, so my hope is that this can lead to some productive discussions with readers.
  • To support both of those topics, I will look at examples drawn from actual market conditions. I cannot be, nor do I want to be, in the business of offering market calls or trades through Twitter. I know there are some people who do that, but it doesn’t make sense for me. I will, however, use actual examples from closed trades, either from our research or from actual trades we have done.
  • I do think it will be interesting and useful to look at some developing trades and market conditions, so there will be the occasional “live” example of something that is playing out. These will be relatively infrequent and not the focus of my work here.

So, that’s it for now. Check back for regular updates.